Question 1

Utility analysis helps economists understand

Accepted Answer

A)  how people make decisions about what they buy and how much. 
B)  how to eliminate opportunity costs. 
C)  how to eliminate scarcity. 
D)  none of the above. 
A)  how people make decisions about what they buy and how much. 
B)  how to eliminate opportunity costs. 
C)  how to eliminate scarcity. 
D)  none of the above.

Question 2

Your annual review is given to you at your place of employment, and you get a raise of 3 percent for the next year. On the subway home though, you read an article stating the price of homes in the area you are looking to buy will increase by 6 percent during the coming year. You determine from the article that if you buy in your favorite neighborhood

Accepted Answer

A)  your purchasing power declines. 
B)  consumer optimum is reached. 
C)  your real income actually increases. 
D)  quantity demanded will increase. 
A)  your purchasing power declines. 
B)  consumer optimum is reached. 
C)  your real income actually increases. 
D)  quantity demanded will increase.

Question 3

The indifference curve between eggs and dozens of eggs would be

Accepted Answer

A)  bowed in to the origin. 
B)  bowed out from the origin. 
C)  a rectangular hyperbola. 
D)  a downward sloping straight line with a slope of -12. 
A)  bowed in to the origin. 
B)  bowed out from the origin. 
C)  a rectangular hyperbola. 
D)  a downward sloping straight line with a slope of -12.

Question 4

If an individual's total utility from consuming two goods increases, then there must be

Accepted Answer

A)  a downward rotation of the individual's indifference curve. 
B)  an inward rotation of the individual's indifference curve. 
C)  an outward shift of the individual's indifference curve. 
D)  an inward shift of the individual's indifference curve. 
A)  a downward rotation of the individual's indifference curve. 
B)  an inward rotation of the individual's indifference curve. 
C)  an outward shift of the individual's indifference curve. 
D)  an inward shift of the individual's indifference curve.

Question 5

According to utility theory, consumer purchase decisions are made such that

Accepted Answer

A)  the value of the ratio of marginal utility to price for the last units purchased and consumed is equal. 
B)  the difference between the value of the marginal utility of the last unit purchased and the price paid is maximized. 
C)  the total utility of the last unit purchased is equal to the price of that unit. 
D)  the total utility from consuming the good is less than the marginal utility of the last unit consumed. 
A)  the value of the ratio of marginal utility to price for the last units purchased and consumed is equal. 
B)  the difference between the value of the marginal utility of the last unit purchased and the price paid is maximized. 
C)  the total utility of the last unit purchased is equal to the price of that unit. 
D)  the total utility from consuming the good is less than the marginal utility of the last unit consumed.

Question 6

-According to the above table, Hillary's marginal utility from watching the 4th movie is

Accepted Answer

A)  140 units of utility. 
B)  40 units of utility. 
C)  60 units of utility. 
D)  30 units of utility. 
A)  140 units of utility. 
B)  40 units of utility. 
C)  60 units of utility. 
D)  30 units of utility.

Question 7

-Refer to the above table. The marginal utility of the 8th movie for Rosie is

Accepted Answer

A)  30 units of utility. 
B)  20 units of utility. 
C)  420 units of utility. 
D)  5 units of utility. 
A)  30 units of utility. 
B)  20 units of utility. 
C)  420 units of utility. 
D)  5 units of utility.

Question 8

If a consumer chooses a combination of goods that are inside of her budget line, than

Accepted Answer

A)  the consumer is maximizing her satisfaction. 
B)  the consumer is spending more than her current income. 
C)  the consumer has a constant marginal rate of substitution for the two goods. 
D)  the consumer is not maximizing her satisfaction. 
A)  the consumer is maximizing her satisfaction. 
B)  the consumer is spending more than her current income. 
C)  the consumer has a constant marginal rate of substitution for the two goods. 
D)  the consumer is not maximizing her satisfaction.

Question 9

-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 $128, what is the consumer optimum?

Accepted Answer

A)  2 hamburgers and 2 concerts 
B)  2 hamburgers and 3 concerts 
C)  3 hamburgers and 2 concerts 
D)  4 hamburgers and 2 concerts 
A)  2 hamburgers and 2 concerts 
B)  2 hamburgers and 3 concerts 
C)  3 hamburgers and 2 concerts 
D)  4 hamburgers and 2 concerts

Question 10

-Use the above figure. Last week Joe consumed combination "A" of goods "X" and "Y." This week he purchased combination "B." The reason for this change is that the

Accepted Answer

A)  price of good X has increased. 
B)  price of good X has decreased. 
C)  price of good Y has decreased. 
D)  price of good Y has increased. 
A)  price of good X has increased. 
B)  price of good X has decreased. 
C)  price of good Y has decreased. 
D)  price of good Y has increased.

Question 11

If Frank has been consuming 10 tacos per week at a consumer optimum, and the price of tacos falls, how will Frank respond?

Accepted Answer

A)  He will save more income. 
B)  He will buy more of everything. 
C)  He will buy more tacos. 
D)  He will buy more of everything except tacos. 
A)  He will save more income. 
B)  He will buy more of everything. 
C)  He will buy more tacos. 
D)  He will buy more of everything except tacos.

Question 12

A rational person will NEVER consume a product when its

Accepted Answer

A)  marginal utility is negative. 
B)  total utility is increasing at a decreasing rate. 
C)  marginal utility is decreasing. 
D)  total utility is decreasing at an increasing rate. 
A)  marginal utility is negative. 
B)  total utility is increasing at a decreasing rate. 
C)  marginal utility is decreasing. 
D)  total utility is decreasing at an increasing rate.

Question 13

When the price of a normal good decreases, people increase their consumption of the good. The reason is

Accepted Answer

A)  the law of diminishing marginal utility. 
B)  the substitution and income effects. 
C)  the substitution effect only. 
D)  the income effect only. 
A)  the law of diminishing marginal utility. 
B)  the substitution and income effects. 
C)  the substitution effect only. 
D)  the income effect only.

Question 14

When economists refer to people making decisions at the margin, they mean that we compare ________ benefits with ________ costs.

Accepted Answer

A)  total; total 
B)  total; incremental 
C)  additional; additional 
D)  additional; marginal 
A)  total; total 
B)  total; incremental 
C)  additional; additional 
D)  additional; marginal

Question 15

The fact that the price of diamonds is higher than the price of water

Accepted Answer

A)  cannot be explained by behavioral economics or consumer choice theory. 
B)  is an outcome of irrational behavior in consumer choice theory. 
C)  can be explained only by behavioral economics but not by consumer choice theory. 
D)  can be explained as the outcome of a consumer optimum in consumer choice theory. 
A)  cannot be explained by behavioral economics or consumer choice theory. 
B)  is an outcome of irrational behavior in consumer choice theory. 
C)  can be explained only by behavioral economics but not by consumer choice theory. 
D)  can be explained as the outcome of a consumer optimum in consumer choice theory.

Question 16

After consuming what quantity of donuts does the consumer in the table below experience diminishing marginal utility?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 17

When marginal utility is positive, total utility is

Accepted Answer

A)  increasing. 
B)  zero. 
C)  at its minimum. 
D)  decreasing. 
A)  increasing. 
B)  zero. 
C)  at its minimum. 
D)  decreasing.

Question 18

At a ball game we can observe people eating hot dogs, french fries, and hamburgers. If all are priced the same and we observe Michelle eating a hot dog and David eating a hamburger, we can conclude that

Accepted Answer

A)  Robert will be eating french fries. 
B)  Michelle likes hot dogs better than David does and David likes hamburgers better than Michelle does. 
C)  Michelle derives the same amount of utility from eating a hot dog as David derives from eating a hamburger. 
D)  at this time Michelle derives more utility from eating a hot dog than from eating either a hamburger or french fries, while David derives more utility from eating a hamburger than from eating either a hot dog or french fries. 
A)  Robert will be eating french fries. 
B)  Michelle likes hot dogs better than David does and David likes hamburgers better than Michelle does. 
C)  Michelle derives the same amount of utility from eating a hot dog as David derives from eating a hamburger. 
D)  at this time Michelle derives more utility from eating a hot dog than from eating either a hamburger or french fries, while David derives more utility from eating a hamburger than from eating either a hot dog or french fries.

Question 19

"As an individual consumes more units of a good, her total utility falls because of the law of diminishing marginal utility." Do you agree or disagree? Explain.

Accepted Answer

Disagree. The law of diminishing margina

Question 20

Why does a price increase of a product result in a decrease in the quantity demanded of that product, according to utility analysis?

Accepted Answer

There are two effects associated with a

Exam 20: Consumer Choice

Utility analysis helps economists understand

The indifference curve between eggs and dozens of eggs would be

If an individual's total utility from consuming two goods increases, then there must be

According to utility theory, consumer purchase decisions are made such that

-According to the above table, Hillary's marginal utility from watching the 4th movie is

-Refer to the above table. The marginal utility of the 8th movie for Rosie is

If a consumer chooses a combination of goods that are inside of her budget line, than

-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 $128, what is the consumer optimum?

-Use the above figure. Last week Joe consumed combination "A" of goods "X" and "Y." This week he purchased combination "B." The reason for this change is that the

If Frank has been consuming 10 tacos per week at a consumer optimum, and the price of tacos falls, how will Frank respond?

A rational person will NEVER consume a product when its

When the price of a normal good decreases, people increase their consumption of the good. The reason is

When economists refer to people making decisions at the margin, they mean that we compare ________ benefits with ________ costs.

The fact that the price of diamonds is higher than the price of water

After consuming what quantity of donuts does the consumer in the table below experience diminishing marginal utility?

When marginal utility is positive, total utility is

At a ball game we can observe people eating hot dogs, french fries, and hamburgers. If all are priced the same and we observe Michelle eating a hot dog and David eating a hamburger, we can conclude that

"As an individual consumes more units of a good, her total utility falls because of the law of diminishing marginal utility." Do you agree or disagree? Explain.

Why does a price increase of a product result in a decrease in the quantity demanded of that product, according to utility analysis?

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

Filters

When economists refer to people making decisions at the margin, they mean that we compare benefits with costs.