Question 1

Marginal utility is

Accepted Answer

A)  the utility received from consuming one unit of a good. 
B)  the change in total utility due to a one-unit change in the quantity of a good consumed. 
C)  the total utility received from consuming a certain quantity of a good divided by the quantity. 
D)  the utility received by the last consumer of a good. 
A)  the utility received from consuming one unit of a good. 
B)  the change in total utility due to a one-unit change in the quantity of a good consumed. 
C)  the total utility received from consuming a certain quantity of a good divided by the quantity. 
D)  the utility received by the last consumer of a good.

Question 2

According to the substitution effect, if the price of a product goes down

Accepted Answer

A)  the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve. 
B)  the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve. 
C)  the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line. 
D)  the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve. 
A)  the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve. 
B)  the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve. 
C)  the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line. 
D)  the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve.

Question 3

What is marginal utility? Why is the term "marginal" important in utility analysis?

Accepted Answer

Marginal utility is the change in total

Question 4

A consumer's optimum is found when

Accepted Answer

A)  prices of goods go down. 
B)  the consumer is achieving the maximum level of utility given market prices and their limited income. 
C)  the marginal utility of the last dollar spent equals 0 for every good. 
D)  the consumer saves part of their income. 
A)  prices of goods go down. 
B)  the consumer is achieving the maximum level of utility given market prices and their limited income. 
C)  the marginal utility of the last dollar spent equals 0 for every good. 
D)  the consumer saves part of their income.

Question 5

If your guest is serious when he said that he just could not get enough of the lasagna you cooked and that the more he ate the more he wanted, you would conclude that the marginal utility of lasagna for him was

Accepted Answer

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

Question 6

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

Accepted Answer

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

Question 7

In economics, the term "marginal" refers to

Accepted Answer

A)  total. 
B)  a change in the total. 
C)  average change. 
D)  inverse. 
A)  total. 
B)  a change in the total. 
C)  average change. 
D)  inverse.

Question 8

The marginal rate of substitution measures

Accepted Answer

A)  the impact of product substitution. 
B)  the changes in marginal utility along the indifference curve. 
C)  the consumer's willingness to substitute one product for another so that total utility will remain unchanged. 
D)  the consumer's willingness to substitute one product for another so that marginal utility will remain unchanged. 
A)  the impact of product substitution. 
B)  the changes in marginal utility along the indifference curve. 
C)  the consumer's willingness to substitute one product for another so that total utility will remain unchanged. 
D)  the consumer's willingness to substitute one product for another so that marginal utility will remain unchanged.

Question 9

The consumer optimum for consuming two goods is achieved when

Accepted Answer

A)  the total utility from each good is equal. 
B)  the price of each good is equal. 
C)  the price multiplied by the marginal utility is equal for the two goods. 
D)  the marginal utility per last dollar spent is equal for the two goods. 
A)  the total utility from each good is equal. 
B)  the price of each good is equal. 
C)  the price multiplied by the marginal utility is equal for the two goods. 
D)  the marginal utility per last dollar spent is equal for the two goods.

Question 10

The substitution effect shows that

Accepted Answer

A)  if the price of a good increases, consumers buy more of that good and less of all others. 
B)  if the price of a good falls relative to all other goods, consumers buy less of that good and more of all others. 
C)  if the price of a good falls, consumers buy less of all goods. 
D)  if the price of a good rises, consumers buy less of that good and more of others. 
A)  if the price of a good increases, consumers buy more of that good and less of all others. 
B)  if the price of a good falls relative to all other goods, consumers buy less of that good and more of all others. 
C)  if the price of a good falls, consumers buy less of all goods. 
D)  if the price of a good rises, consumers buy less of that good and more of others.

Question 11

A rational individual will never consume a unit of a good if its

Accepted Answer

A)  marginal utility is diminishing. 
B)  marginal utility is greater than the price of the good. 
C)  marginal utility is increasing. 
D)  marginal utility is negative. 
A)  marginal utility is diminishing. 
B)  marginal utility is greater than the price of the good. 
C)  marginal utility is increasing. 
D)  marginal utility is negative.

Question 12

The marginal rate of substitution is

Accepted Answer

A)  the change in the quantity of one good that just offsets a one unit change in the consumption of another such that the total satisfaction remains constant. 
B)  the additional satisfaction from consuming an additional unit of a good or service. 
C)  positively related to the level of income. 
D)  the set of goods and services that are available to the consumer given his income. 
A)  the change in the quantity of one good that just offsets a one unit change in the consumption of another such that the total satisfaction remains constant. 
B)  the additional satisfaction from consuming an additional unit of a good or service. 
C)  positively related to the level of income. 
D)  the set of goods and services that are available to the consumer given his income.

Question 13

Observations of real-world situations that appear to violate a consumer optimum could be offered as evidence favoring

Accepted Answer

A)  utility analysis. 
B)  bounded rationality. 
C)  diminishing marginal utility. 
D)  zero marginal utility at a utility-maximizing point. 
A)  utility analysis. 
B)  bounded rationality. 
C)  diminishing marginal utility. 
D)  zero marginal utility at a utility-maximizing point.

Question 14

-Use the above figure. The consumer's choice changes from YB to YA. Which of the following statements about good Y is TRUE?

Accepted Answer

A)  price has increased and the quantity demanded has risen. 
B)  price has decreased and the quantity demanded has risen. 
C)  price has decreased and the quantity demanded has fallen. 
D)  price has increased and the quantity demanded has fallen. 
A)  price has increased and the quantity demanded has risen. 
B)  price has decreased and the quantity demanded has risen. 
C)  price has decreased and the quantity demanded has fallen. 
D)  price has increased and the quantity demanded has fallen.

Question 15

Which of the following statements is TRUE with respect to total utility and marginal utility?

Accepted Answer

A)  Marginal utility always rises as total utility increases. 
B)  Marginal utility can decline as total utility rises. 
C)  Total utility is not related to marginal utility. 
D)  Total utility can decline while marginal utility rises. 
A)  Marginal utility always rises as total utility increases. 
B)  Marginal utility can decline as total utility rises. 
C)  Total utility is not related to marginal utility. 
D)  Total utility can decline while marginal utility rises.

Question 16

Suppose a consumer is currently buying 5 goods so that utility is maximized. The price of one of the goods falls while the prices of the other 4 goods do not change. The consumer should

Accepted Answer

A)  buy less of all goods being consumed to get to the optimal position. 
B)  buy more of all of the goods but the one that experiences the decline in price, to get to the optimal position. 
C)  buy more of all goods being consumed to get to the optimal position. 
D)  buy more of the good that has experienced the fall in price to get to the optimal position. 
A)  buy less of all goods being consumed to get to the optimal position. 
B)  buy more of all of the goods but the one that experiences the decline in price, to get to the optimal position. 
C)  buy more of all goods being consumed to get to the optimal position. 
D)  buy more of the good that has experienced the fall in price to get to the optimal position.

Question 17

Marginal utility equals the change in total utility divided by

Accepted Answer

A)  the number of units consumed. 
B)  the price of the product. 
C)  the change in the number of units consumed. 
D)  the consumer's subjective level of preference. 
A)  the number of units consumed. 
B)  the price of the product. 
C)  the change in the number of units consumed. 
D)  the consumer's subjective level of preference.

Question 18

-Refer to the above table. Assume the consumer spends his entire income. If the consumer's optimum at the current price of a movie is at 4 hotdogs and 4 movies, and the price of a hotdog is $1, what is the consumer's income?

Accepted Answer

A)  $28 
B)  $20 
C)  $16 
D)  $40 
A)  $28 
B)  $20 
C)  $16 
D)  $40

Question 19

In a map showing three indifference curves a consumer is most well off on

Accepted Answer

A)  the curve which is closest to the origin of the coordinate axes. 
B)  the curve which is most farther away from the coordinate axes. 
C)  the curve that is in the middle. 
D)  none of the above. 
A)  the curve which is closest to the origin of the coordinate axes. 
B)  the curve which is most farther away from the coordinate axes. 
C)  the curve that is in the middle. 
D)  none of the above.

Question 20

Observations of violations of consumer optimum predicted by consumer choice theory could provide support for I. utility analysis
II) bounded rationality
III) behavioral economics

Accepted Answer

A)  I only. 
B)  III only. 
C)  both I and II. 
D)  both II and III. 
A)  I only. 
B)  III only. 
C)  both I and II. 
D)  both II and III.

Exam 20: Consumer Choice

Marginal utility is

According to the substitution effect, if the price of a product goes down

What is marginal utility? Why is the term "marginal" important in utility analysis?

A consumer's optimum is found when

If your guest is serious when he said that he just could not get enough of the lasagna you cooked and that the more he ate the more he wanted, you would conclude that the marginal utility of lasagna for him was

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

In economics, the term "marginal" refers to

The marginal rate of substitution measures

The consumer optimum for consuming two goods is achieved when

The substitution effect shows that

A rational individual will never consume a unit of a good if its

The marginal rate of substitution is

Observations of real-world situations that appear to violate a consumer optimum could be offered as evidence favoring

-Use the above figure. The consumer's choice changes from YB to YA. Which of the following statements about good Y is TRUE?

Which of the following statements is TRUE with respect to total utility and marginal utility?

Suppose a consumer is currently buying 5 goods so that utility is maximized. The price of one of the goods falls while the prices of the other 4 goods do not change. The consumer should

Marginal utility equals the change in total utility divided by

-Refer to the above table. Assume the consumer spends his entire income. If the consumer's optimum at the current price of a movie is at 4 hotdogs and 4 movies, and the price of a hotdog is $1, what is the consumer's income?

In a map showing three indifference curves a consumer is most well off on

Observations of violations of consumer optimum predicted by consumer choice theory could provide support for I. utility analysis II) bounded rationality III) behavioral economics

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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