Question 1

If a consumer is initially at an optimum, and then the price of Y decreases, 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 2

-In the above figure, if the budget line is originally line DE and the price of coffee decreases, the consumer will

Accepted Answer

A)  drink less coffee and increase bagel consumption slightly. 
B)  drink more coffee and increase bagel consumption slightly. 
C)  drink more coffee and decrease bagel consumption slightly. 
D)  leave consumption of both coffee and bagels unchanged. 
A)  drink less coffee and increase bagel consumption slightly. 
B)  drink more coffee and increase bagel consumption slightly. 
C)  drink more coffee and decrease bagel consumption slightly. 
D)  leave consumption of both coffee and bagels unchanged.

Question 3

John is currently spending all of his income. For the last unit of Good X consumed John gets 20 utils and for the last unit of Good Y consumed he gets 10 utils. The price of Good X is $10. The price of Good Y is $1. If John wants to maximize his utility he should

Accepted Answer

A)  continue to purchase the same amount of Good X and Good Y. 
B)  increase the consumption of Good X and decrease the consumption of Good Y. 
C)  decrease the consumption of Good X and increase the consumption of Good Y. 
D)  decrease the consumption of Good X and decrease the consumption of Good Y. 
A)  continue to purchase the same amount of Good X and Good Y. 
B)  increase the consumption of Good X and decrease the consumption of Good Y. 
C)  decrease the consumption of Good X and increase the consumption of Good Y. 
D)  decrease the consumption of Good X and decrease the consumption of Good Y.

Question 4

A consumer is buying the optimal amount of goods when

Accepted Answer

A)  the total utility from the purchases on all the goods purchased is the same. 
B)  the marginal utility from the purchases of all the goods purchased is the same. 
C)  the marginal utility per last dollar spent on all of the goods purchased is the same. 
D)  the marginal utility from the purchases of all the goods is equal to 1. 
A)  the total utility from the purchases on all the goods purchased is the same. 
B)  the marginal utility from the purchases of all the goods purchased is the same. 
C)  the marginal utility per last dollar spent on all of the goods purchased is the same. 
D)  the marginal utility from the purchases of all the goods is equal to 1.

Question 5

If a consumer concludes that the marginal utility of the last dollar spent on vegetables exceeds the marginal utility of the last dollar spent on junk food, he will respond by

Accepted Answer

A)  consuming relatively more junk food and fewer vegetables. 
B)  consuming relatively more vegetables and less junk food. 
C)  consuming equal amounts of vegetables and junk food. 
D)  halting consumption of junk food altogether. 
A)  consuming relatively more junk food and fewer vegetables. 
B)  consuming relatively more vegetables and less junk food. 
C)  consuming equal amounts of vegetables and junk food. 
D)  halting consumption of junk food altogether.

Question 6

Explain how utility analysis can be used to derive a downward sloping demand curve.

Accepted Answer

Given the law of diminishing marginal ut

Question 7

The reason that diamonds cost more than water is

Accepted Answer

A)  the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase. 
B)  most consumers consume little water. 
C)  diamonds are more beautiful than water. 
D)  water is a necessity. 
A)  the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase. 
B)  most consumers consume little water. 
C)  diamonds are more beautiful than water. 
D)  water is a necessity.

Question 8

A representative unit by which utility is measured is

Accepted Answer

A)  a util. 
B)  utility. 
C)  marginal utility. 
D)  ordinal utility. 
A)  a util. 
B)  utility. 
C)  marginal utility. 
D)  ordinal utility.

Question 9

A consumer with unlimited income will continue consuming goods until

Accepted Answer

A)  the marginal utility of each is equal to zero. 
B)  the marginal utility of each is negative. 
C)  total utility rises. 
D)  marginal utility equals total utility. 
A)  the marginal utility of each is equal to zero. 
B)  the marginal utility of each is negative. 
C)  total utility rises. 
D)  marginal utility equals total utility.

Question 10

-Refer to the above table. If a consumer's optimum consists of 3 magazines and 6 novels, then

Accepted Answer

A)  the price of a magazine is six times more than the price of a novel. 
B)  the price of a magazine is three times more than the price of a novel. 
C)  the price of a novel is more than five times more than the price of a magazine. 
D)  the price of a novel is six times more than the price of a magazine. 
A)  the price of a magazine is six times more than the price of a novel. 
B)  the price of a magazine is three times more than the price of a novel. 
C)  the price of a novel is more than five times more than the price of a magazine. 
D)  the price of a novel is six times more than the price of a magazine.

Question 11

A higher price for a good implies that

Accepted Answer

A)  the marginal utility of the good has declined. 
B)  the total value of the good to the consumer has increased. 
C)  the sacrifice of utility of another good has increased. 
D)  the marginal utility of another good has decreased. 
A)  the marginal utility of the good has declined. 
B)  the total value of the good to the consumer has increased. 
C)  the sacrifice of utility of another good has increased. 
D)  the marginal utility of another good has decreased.

Question 12

For most goods, the real-income effect of a price change is

Accepted Answer

A)  small because the good accounts for a small part of the consumer's budget. 
B)  small because the decision to buy a good depends only on the income of a consumer. 
C)  large because the price of the good is in terms of the currency and the income of the person is also in terms of the currency. 
D)  zero because the real-income effect only applies to durable goods. 
A)  small because the good accounts for a small part of the consumer's budget. 
B)  small because the decision to buy a good depends only on the income of a consumer. 
C)  large because the price of the good is in terms of the currency and the income of the person is also in terms of the currency. 
D)  zero because the real-income effect only applies to durable goods.

Question 13

-According to the above table, how much total utility does Carl get from 3 hotdogs?

Accepted Answer

A)  30 utils 
B)  85 utils 
C)  115 utils 
D)  130 utils 
A)  30 utils 
B)  85 utils 
C)  115 utils 
D)  130 utils

Question 14

An indifference curve shows

Accepted Answer

A)  the combinations of goods that a consumer does not like very much. 
B)  the combinations of goods that generate the same ratio of marginal utilities. 
C)  the set of consumption alternatives that yield the same amount of total utility. 
D)  the set of consumption alternatives that yield the same amount of marginal utility. 
A)  the combinations of goods that a consumer does not like very much. 
B)  the combinations of goods that generate the same ratio of marginal utilities. 
C)  the set of consumption alternatives that yield the same amount of total utility. 
D)  the set of consumption alternatives that yield the same amount of marginal utility.

Question 15

An indifference map shows

Accepted Answer

A)  that money income is constant, but product prices may change. 
B)  that utility is at a maximum at the origin. 
C)  that curves closer to the origin represent higher levels of utility. 
D)  that curves further from the origin represent higher levels of utility. 
A)  that money income is constant, but product prices may change. 
B)  that utility is at a maximum at the origin. 
C)  that curves closer to the origin represent higher levels of utility. 
D)  that curves further from the origin represent higher levels of utility.

Question 16

A curve that shows a set of consumption alternatives that give the same level of satisfaction is

Accepted Answer

A)  a substitution curve. 
B)  a budget line. 
C)  an indifference curve. 
D)  an income curve. 
A)  a substitution curve. 
B)  a budget line. 
C)  an indifference curve. 
D)  an income curve.

Question 17

-Based on the information in the above table, what is the total satisfaction Lauren can achieve if she is a rational consumer?

Accepted Answer

A)  111 utils 
B)  82 utils 
C)  74 utils 
D)  30 utils 
A)  111 utils 
B)  82 utils 
C)  74 utils 
D)  30 utils

Question 18

The substitution effect argues that a consumer

Accepted Answer

A)  will always use the additional purchasing power from a price decrease to purchase more of both goods. 
B)  will not purchase more of a good when its price falls. 
C)  will purchase more of a good that has become relatively cheaper, and less of a good that has become relatively more expensive. 
D)  will purchase less of both goods if his or her real income increases. 
A)  will always use the additional purchasing power from a price decrease to purchase more of both goods. 
B)  will not purchase more of a good when its price falls. 
C)  will purchase more of a good that has become relatively cheaper, and less of a good that has become relatively more expensive. 
D)  will purchase less of both goods if his or her real income increases.

Question 19

The price of a piece of pizza is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 pieces of pizza and 2 movies, receiving 25 units of utility for the second pizza and 100 units of utility for the second movie. The set of goods

Accepted Answer

A)  is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. 
B)  is an optimum since the entire income is spent and total utility is minimized. 
C)  is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies. 
D)  is not an optimum because the consumer has not spent all of his money. 
A)  is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. 
B)  is an optimum since the entire income is spent and total utility is minimized. 
C)  is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies. 
D)  is not an optimum because the consumer has not spent all of his money.

Question 20

The budget constraint shows that

Accepted Answer

A)  the consumer faces a trade-off in the consumption of goods. 
B)  the consumer can have as many goods as he wants. 
C)  as consumers spend more on one good, they spend more on others. 
D)  total income equals total spending on one good. 
A)  the consumer faces a trade-off in the consumption of goods. 
B)  the consumer can have as many goods as he wants. 
C)  as consumers spend more on one good, they spend more on others. 
D)  total income equals total spending on one good.

Exam 20: Consumer Choice

If a consumer is initially at an optimum, and then the price of Y decreases, then

-In the above figure, if the budget line is originally line DE and the price of coffee decreases, the consumer will

John is currently spending all of his income. For the last unit of Good X consumed John gets 20 utils and for the last unit of Good Y consumed he gets 10 utils. The price of Good X is $10. The price of Good Y is $1. If John wants to maximize his utility he should

A consumer is buying the optimal amount of goods when

If a consumer concludes that the marginal utility of the last dollar spent on vegetables exceeds the marginal utility of the last dollar spent on junk food, he will respond by

Explain how utility analysis can be used to derive a downward sloping demand curve.

The reason that diamonds cost more than water is

A representative unit by which utility is measured is

A consumer with unlimited income will continue consuming goods until

-Refer to the above table. If a consumer's optimum consists of 3 magazines and 6 novels, then

A higher price for a good implies that

For most goods, the real-income effect of a price change is

-According to the above table, how much total utility does Carl get from 3 hotdogs?

An indifference curve shows

An indifference map shows

A curve that shows a set of consumption alternatives that give the same level of satisfaction is

-Based on the information in the above table, what is the total satisfaction Lauren can achieve if she is a rational consumer?

The substitution effect argues that a consumer

The price of a piece of pizza is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 pieces of pizza and 2 movies, receiving 25 units of utility for the second pizza and 100 units of utility for the second movie. The set of goods

The budget constraint shows that

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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