Question 1

When the price of a good that a person is consuming falls, other things being constant, there is

Accepted Answer

A)  a decline in real income. 
B)  a decline in purchasing power. 
C)  a real income effect. 
D)  no change in purchasing power. 
A)  a decline in real income. 
B)  a decline in purchasing power. 
C)  a real income effect. 
D)  no change in purchasing power.

Question 2

The real-income effect is typically small because

Accepted Answer

A)  the change in price of one particular item has little effect on total purchasing power. 
B)  income has no relation to consumption. 
C)  price changes tend to balance out over time. 
D)  real-incomes are always rising. 
A)  the change in price of one particular item has little effect on total purchasing power. 
B)  income has no relation to consumption. 
C)  price changes tend to balance out over time. 
D)  real-incomes are always rising.

Question 3

Let the quantity of hamburgers be measured along the vertical axis and the quantity of movies be measured along the horizontal axis. If the price of a hamburger is $1.50 and the price of a movie is $6, then the slope of the budget line is

Accepted Answer

A)  -6. 
B)  -4. 
C)  -3. 
D)  -0.25. 
A)  -6. 
B)  -4. 
C)  -3. 
D)  -0.25.

Question 4

-Using the above table, what is the maximum number of slices of pizza a rational consumer would buy?

Accepted Answer

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

Question 5

The additional utility or satisfaction that one derives from consuming one more unit of any good or service is referred to as

Accepted Answer

A)  total utility. 
B)  diminishing utility. 
C)  average utility. 
D)  marginal utility. 
A)  total utility. 
B)  diminishing utility. 
C)  average utility. 
D)  marginal utility.

Question 6

According to the principle of diminishing marginal utility

Accepted Answer

A)  total utility always falls with additional consumption. 
B)  total utility is usually negative. 
C)  the consumer will never tire of additional units of a good. 
D)  the rate at which utility increases diminishes as more of a good is consumed. 
A)  total utility always falls with additional consumption. 
B)  total utility is usually negative. 
C)  the consumer will never tire of additional units of a good. 
D)  the rate at which utility increases diminishes as more of a good is consumed.

Question 7

The consumer optimum is defined as

Accepted Answer

A)  the set of goods and services that maximizes marginal utility for each good. 
B)  the set of goods and services such that the marginal utility of each good equals zero. 
C)  the set of goods and services that maximizes the marginal utility of each good consumed. 
D)  the set of goods and services, subject to the limited income of the consumer, that maximizes the total utility of the consumer. 
A)  the set of goods and services that maximizes marginal utility for each good. 
B)  the set of goods and services such that the marginal utility of each good equals zero. 
C)  the set of goods and services that maximizes the marginal utility of each good consumed. 
D)  the set of goods and services, subject to the limited income of the consumer, that maximizes the total utility of the consumer.

Question 8

Marginal utility

Accepted Answer

A)  at first rises and then declines as a person consumes more of a good or service. 
B)  can be thought of as being the equivalent to total utility. 
C)  equals the total satisfaction from consumption of goods and services. 
D)  is stable, but then as a person consumes more of a good or service, has a propensity to increase. 
A)  at first rises and then declines as a person consumes more of a good or service. 
B)  can be thought of as being the equivalent to total utility. 
C)  equals the total satisfaction from consumption of goods and services. 
D)  is stable, but then as a person consumes more of a good or service, has a propensity to increase.

Question 9

The term marginal means

Accepted Answer

A)  total. 
B)  average. 
C)  subjective. 
D)  additional. 
A)  total. 
B)  average. 
C)  subjective. 
D)  additional.

Question 10

Juan and Lauren have decided to stop studying economics and get a bite to eat. Juan wants to go for a pizza and Lauren wants a hot dog They decide to go for pizza. What can we conclude from this?

Accepted Answer

A)  Juan always gets more utility from pizza than Lauren does. 
B)  Lauren gets less utility from pizza than she could from a hot dog. 
C)  Lauren will get negative utility from the pizza. 
D)  Utility analysis does not work here since Lauren did not eat a hot dog. 
A)  Juan always gets more utility from pizza than Lauren does. 
B)  Lauren gets less utility from pizza than she could from a hot dog. 
C)  Lauren will get negative utility from the pizza. 
D)  Utility analysis does not work here since Lauren did not eat a hot dog.

Question 11

A budget constraint shows

Accepted Answer

A)  all of the combinations of sets of goods that yield the same level of satisfaction. 
B)  all of the possible combinations of goods that can be purchased with a specific budget. 
C)  all of the goods the consumer gets positive marginal utility from when the goods are consumed. 
D)  all of the goods that a consumer substitutes for other goods when prices fall. 
A)  all of the combinations of sets of goods that yield the same level of satisfaction. 
B)  all of the possible combinations of goods that can be purchased with a specific budget. 
C)  all of the goods the consumer gets positive marginal utility from when the goods are consumed. 
D)  all of the goods that a consumer substitutes for other goods when prices fall.

Question 12

The change in people's purchasing power that occurs when the price of a good they purchase changes, assuming all else is held constant is known as

Accepted Answer

A)  the substitution effect. 
B)  the real income effect. 
C)  the elasticity effect. 
D)  the multiplier effect. 
A)  the substitution effect. 
B)  the real income effect. 
C)  the elasticity effect. 
D)  the multiplier effect.

Question 13

Along an indifference curve, as the consumer reduces the quantity of Good A in favor of more Good B the marginal rate of substitution of Good A for Good B will

Accepted Answer

A)  fall. 
B)  rise. 
C)  stay the same. 
D)  fall and eventually turn negative. 
A)  fall. 
B)  rise. 
C)  stay the same. 
D)  fall and eventually turn negative.

Question 14

Along an indifference curve,

Accepted Answer

A)  the marginal utility of all items is equal. 
B)  the total satisfaction is the same. 
C)  the prices of all goods are equal. 
D)  the marginal utility/price ratios of all items are equal. 
A)  the marginal utility of all items is equal. 
B)  the total satisfaction is the same. 
C)  the prices of all goods are equal. 
D)  the marginal utility/price ratios of all items are equal.

Question 15

The statement that "as more of a good is consumed, its extra benefit declines" refers to

Accepted Answer

A)  the law of demand. 
B)  the law of diminishing marginal product. 
C)  the law of diminishing marginal utility. 
D)  the law of comparative advantage. 
A)  the law of demand. 
B)  the law of diminishing marginal product. 
C)  the law of diminishing marginal utility. 
D)  the law of comparative advantage.

Question 16

The price of a piece of pizza is $1 and the price of a movie is $6 and the consumer has $14. A consumer has purchased 2 pieces of pizza and 2 movies, receiving 20 units of utility for the second piece of pizza and 100 units of utility for the second movie. When the consumer spends all her income, 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 maximized. 
C)  is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies and the consumer is not spending all of his income. 
D)  is not an optimum because the marginal utility for each good is not equal. 
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 maximized. 
C)  is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies and the consumer is not spending all of his income. 
D)  is not an optimum because the marginal utility for each good is not equal.

Question 17

If Mary complains that she doesn't feel very well because she ate too many hotdogs, we would conclude that the marginal utility of the last hotdog eaten was

Accepted Answer

A)  positive. 
B)  zero. 
C)  very large. 
D)  negative. 
A)  positive. 
B)  zero. 
C)  very large. 
D)  negative.

Question 18

When the marginal utility per dollar of good A exceeds the marginal utility per dollar of good B,

Accepted Answer

A)  the consumer should consume more of good A. 
B)  the consumer is consuming too much of good A. 
C)  good B must have a negative marginal utility. 
D)  the consumer is in an optimal situation if the price of good A exceeds the price of good B. 
A)  the consumer should consume more of good A. 
B)  the consumer is consuming too much of good A. 
C)  good B must have a negative marginal utility. 
D)  the consumer is in an optimal situation if the price of good A exceeds the price of good B.

Question 19

-According to the above table, Hillary's marginal utility from watching the 5th movie is

Accepted Answer

A)  170 units of utility. 
B)  50 units of utility. 
C)  30 units of utility. 
D)  20 units of utility. 
A)  170 units of utility. 
B)  50 units of utility. 
C)  30 units of utility. 
D)  20 units of utility.

Question 20

-Use the above figure. When the budget line rotates from "c" to "b"

Accepted Answer

A)  fewer units of J and fewer units of K will be purchased. 
B)  more units of J and more units of K will be purchased. 
C)  fewer units of J and more units of K will be purchased. 
D)  more units of J and fewer units of K will be purchased. 
A)  fewer units of J and fewer units of K will be purchased. 
B)  more units of J and more units of K will be purchased. 
C)  fewer units of J and more units of K will be purchased. 
D)  more units of J and fewer units of K will be purchased.

Exam 20: Consumer Choice

When the price of a good that a person is consuming falls, other things being constant, there is

The real-income effect is typically small because

Let the quantity of hamburgers be measured along the vertical axis and the quantity of movies be measured along the horizontal axis. If the price of a hamburger is $1.50 and the price of a movie is $6, then the slope of the budget line is

-Using the above table, what is the maximum number of slices of pizza a rational consumer would buy?

The additional utility or satisfaction that one derives from consuming one more unit of any good or service is referred to as

According to the principle of diminishing marginal utility

The consumer optimum is defined as

Marginal utility

The term marginal means

Juan and Lauren have decided to stop studying economics and get a bite to eat. Juan wants to go for a pizza and Lauren wants a hot dog They decide to go for pizza. What can we conclude from this?

A budget constraint shows

The change in people's purchasing power that occurs when the price of a good they purchase changes, assuming all else is held constant is known as

Along an indifference curve, as the consumer reduces the quantity of Good A in favor of more Good B the marginal rate of substitution of Good A for Good B will

Along an indifference curve,

The statement that "as more of a good is consumed, its extra benefit declines" refers to

If Mary complains that she doesn't feel very well because she ate too many hotdogs, we would conclude that the marginal utility of the last hotdog eaten was

When the marginal utility per dollar of good A exceeds the marginal utility per dollar of good B,

-According to the above table, Hillary's marginal utility from watching the 5th movie is

-Use the above figure. When the budget line rotates from "c" to "b"

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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