Question 1

-Refer to the above table. If the price of a movie download is $2 and the price of an apple pie is $5 and the consumer has $19, the rational consumer will purchase

Accepted Answer

A)  2 movies and 2 apple pies. 
B)  2 movies and 3 apple pies. 
C)  5 movies and 6 apple pies. 
D)  6 movies and 6 apple pies. 
A)  2 movies and 2 apple pies. 
B)  2 movies and 3 apple pies. 
C)  5 movies and 6 apple pies. 
D)  6 movies and 6 apple pies.

Question 2

If two units of a good provide 8 utils and the marginal utility of the third unit of the good is 2 utils, what is the total utility from consuming three units of the good?

Accepted Answer

A)  2 utils 
B)  8 utils 
C)  10 utils 
D)  6 utils 
A)  2 utils 
B)  8 utils 
C)  10 utils 
D)  6 utils

Question 3

The state of consumer optimum is reached when the consumer's

Accepted Answer

A)  total utility/marginal utility ratio for all items is equal. 
B)  total utility/price ratio for all items is equal. 
C)  marginal utility for a product is zero. 
D)  marginal utility/price ratios for all items are equal. 
A)  total utility/marginal utility ratio for all items is equal. 
B)  total utility/price ratio for all items is equal. 
C)  marginal utility for a product is zero. 
D)  marginal utility/price ratios for all items are equal.

Question 4

-Refer to the above table. If the price of a hamburger is $2, the price of a concert ticket is $60, and the consumer has $190, what is the consumer optimum?

Accepted Answer

A)  4 hamburgers and 2 concerts 
B)  5 hamburgers and 3 concerts 
C)  6 hamburgers and 0 concerts 
D)  0 hamburgers and 6 concerts 
A)  4 hamburgers and 2 concerts 
B)  5 hamburgers and 3 concerts 
C)  6 hamburgers and 0 concerts 
D)  0 hamburgers and 6 concerts

Question 5

If a consumer is at an optimum, consuming X and Y, and the price of Y increases, then to get to a new equilibrium the consumer must

Accepted Answer

A)  purchase less X. 
B)  purchase less of both X and Y. 
C)  purchase more X. 
D)  purchase more of both X and Y. 
A)  purchase less X. 
B)  purchase less of both X and Y. 
C)  purchase more X. 
D)  purchase more of both X and Y.

Question 6

-Refer to the above figure. Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  either points A or B. 
A)  point A. 
B)  point B. 
C)  point C. 
D)  either points A or B.

Question 7

An increase in consumer income will

Accepted Answer

A)  shift the budget constraint and increase its slope. 
B)  reduce consumption of all normal goods. 
C)  pivot the budget constraint on the axis with the good that has the higher price. 
D)  shift out the budget constraint and increase the consumption of both goods, if they are normal goods. 
A)  shift the budget constraint and increase its slope. 
B)  reduce consumption of all normal goods. 
C)  pivot the budget constraint on the axis with the good that has the higher price. 
D)  shift out the budget constraint and increase the consumption of both goods, if they are normal goods.

Question 8

A consumer has been buying 3 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will

Accepted Answer

A)  buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books. 
B)  buy more books because they are now relatively more valuable than they were before. 
C)  buy the same number of books and magazines as before because they provide different types of utility. 
D)  buy fewer books than before because they are relatively more expensive than they were before. 
A)  buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books. 
B)  buy more books because they are now relatively more valuable than they were before. 
C)  buy the same number of books and magazines as before because they provide different types of utility. 
D)  buy fewer books than before because they are relatively more expensive than they were before.

Question 9

-Refer to the above table. If the consumer's equilibrium consists of 4 movies and 4 apple pies, then we know that

Accepted Answer

A)  the price of a movie download is 5 times more than the price of an apple pie. 
B)  the price of a movie download is 6 times more than the price of an apple pie. 
C)  the price of an apple pie is 5 times more than the price of a movie download. 
D)  the price of an apple pie is 3 times more than the price of a movie download. 
A)  the price of a movie download is 5 times more than the price of an apple pie. 
B)  the price of a movie download is 6 times more than the price of an apple pie. 
C)  the price of an apple pie is 5 times more than the price of a movie download. 
D)  the price of an apple pie is 3 times more than the price of a movie download.

Question 10

An indifference curve

Accepted Answer

A)  must be convex to the origin. 
B)  must be concave to the origin. 
C)  may be convex or concave to the origin. 
D)  depends on the prices of the products and the consumer's income. 
A)  must be convex to the origin. 
B)  must be concave to the origin. 
C)  may be convex or concave to the origin. 
D)  depends on the prices of the products and the consumer's income.

Question 11

The marginal rate of substitution is measured along

Accepted Answer

A)  the demand curve. 
B)  the total utility curve. 
C)  a given indifference curve. 
D)  a given budget line. 
A)  the demand curve. 
B)  the total utility curve. 
C)  a given indifference curve. 
D)  a given budget line.

Question 12

When an individual's purchasing power changes due to a change in the price of a good or service, this is referred to as

Accepted Answer

A)  marginal effect. 
B)  real-income effect. 
C)  substitution effect. 
D)  utility effect. 
A)  marginal effect. 
B)  real-income effect. 
C)  substitution effect. 
D)  utility effect.

Question 13

Suppose Lois usually buys two cups of coffee for two dollars each and one scone for two dollars each. If the price of scones falls to one dollar each and she now buys two cups of coffee and two scones, this illustrates the

Accepted Answer

A)  substitution effect. 
B)  marginal rate of substitution. 
C)  total utility effect. 
D)  real-income effect. 
A)  substitution effect. 
B)  marginal rate of substitution. 
C)  total utility effect. 
D)  real-income effect.

Question 14

Which of the following is FALSE?

Accepted Answer

A)  A consumer is maximizing total utility when he or she gets the same amount of marginal utility from the last dollar spent on each good purchased. 
B)  As additional units of a good or service are consumed, marginal utility diminishes. 
C)  Utility is want-satisfying power. 
D)  Assuming that the law of diminishing marginal utility holds, the demand curve must be upward sloping. 
A)  A consumer is maximizing total utility when he or she gets the same amount of marginal utility from the last dollar spent on each good purchased. 
B)  As additional units of a good or service are consumed, marginal utility diminishes. 
C)  Utility is want-satisfying power. 
D)  Assuming that the law of diminishing marginal utility holds, the demand curve must be upward sloping.

Question 15

What is consumer optimum according to utility theory?

Accepted Answer

Consumer optimum is the set of goods and

Question 16

If total utility is decreasing, then marginal utility is

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  increasing. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  increasing.

Question 17

-Refer to the above table. The marginal utility of the 5th movie for Rosie is

Accepted Answer

A)  400 units of utility. 
B)  50 units of utility. 
C)  60 units of utility. 
D)  70 units of utility. 
A)  400 units of utility. 
B)  50 units of utility. 
C)  60 units of utility. 
D)  70 units of utility.

Question 18

If a consumer is initially at an optimum, and then the price of X falls, then

Accepted Answer

A) MUX/PX > MUY/PY. B) MUX/PX < MUY/PY. C) MUX/PX = MUY/PY. D) MUX/MUY < PY/PX. A) MUX/PX > MUY/PY. B) MUX/PX < MUY/PY. C) MUX/PX = MUY/PY. D) MUX/MUY < PY/PX.

Question 19

Your allergies are bad this summer so your allergist writes you a prescription to relieve your symptoms. When you get to the pharmacy, you notice the name brand allergy medicine is more expensive than its generic equivalent. You purchase the generic equivalent and demonstrate all of the following EXCEPT

Accepted Answer

A)  the principle of substitution of one product for another. 
B)  the principle of diminishing marginal utility. 
C)  when price decreases, the quantity demanded increases. 
D)  a price change may affect consumer optimum. 
A)  the principle of substitution of one product for another. 
B)  the principle of diminishing marginal utility. 
C)  when price decreases, the quantity demanded increases. 
D)  a price change may affect consumer optimum.

Question 20

Which of the following is NOT consistent with the law of diminishing marginal utility?

Accepted Answer

A)  Newspaper vending machines are not as secure as soft drink machines. 
B)  A student selects to eat at an all-you-can-eat restaurant rather than at a restaurant that charges for refills. 
C)  A student's enjoyment of a movie increases the more she watches it. 
D)  A symphony has free throat lozenges in their lobby. 
A)  Newspaper vending machines are not as secure as soft drink machines. 
B)  A student selects to eat at an all-you-can-eat restaurant rather than at a restaurant that charges for refills. 
C)  A student's enjoyment of a movie increases the more she watches it. 
D)  A symphony has free throat lozenges in their lobby.

Exam 20: Consumer Choice

-Refer to the above table. If the price of a movie download is $2 and the price of an apple pie is $5 and the consumer has $19, the rational consumer will purchase

If two units of a good provide 8 utils and the marginal utility of the third unit of the good is 2 utils, what is the total utility from consuming three units of the good?

The state of consumer optimum is reached when the consumer's

-Refer to the above table. If the price of a hamburger is $2, the price of a concert ticket is $60, and the consumer has $190, what is the consumer optimum?

If a consumer is at an optimum, consuming X and Y, and the price of Y increases, then to get to a new equilibrium the consumer must

-Refer to the above figure. Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

An increase in consumer income will

A consumer has been buying 3 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will

-Refer to the above table. If the consumer's equilibrium consists of 4 movies and 4 apple pies, then we know that

An indifference curve

The marginal rate of substitution is measured along

When an individual's purchasing power changes due to a change in the price of a good or service, this is referred to as

Suppose Lois usually buys two cups of coffee for two dollars each and one scone for two dollars each. If the price of scones falls to one dollar each and she now buys two cups of coffee and two scones, this illustrates the

Which of the following is FALSE?

What is consumer optimum according to utility theory?

If total utility is decreasing, then marginal utility is

-Refer to the above table. The marginal utility of the 5th movie for Rosie is

If a consumer is initially at an optimum, and then the price of X falls, then

Which of the following is NOT consistent with the law of diminishing marginal utility?

The Nature of Economics

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