Question 1

According to utility theory, a consumer is in equilibrium when:

Accepted Answer

A) total income is spent. 
B) marginal utility per dollar spent for a good is maximized. 
C) total utility per unit of a good is maximized. 
D) total utility per dollar spent is equal for all goods. 
E) marginal utility per dollar spent is equal for all goods. 
A) total income is spent. 
B) marginal utility per dollar spent for a good is maximized. 
C) total utility per unit of a good is maximized. 
D) total utility per dollar spent is equal for all goods. 
E) marginal utility per dollar spent is equal for all goods. E

Question 2

The table given below depicts the total utility derived from the consumption of a good. Table 6.1
  According to Table 6.1, the total utility from consuming all 5 units is _____.

Accepted Answer

A) 13 
B) 55 
C) 64 
D) 188 
E) 303 
A) 13 
B) 55 
C) 64 
D) 188 
E) 303 B

Question 3

The law of diminishing marginal utility states that:

Accepted Answer

A) the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed. 
B) as more of a good or service is consumed, ceteris paribus, its marginal utility relative to the marginal utility of other products increases. 
C) as more of a good or service is consumed, its marginal utility decreases. 
D) as more of a good or service is consumed, its marginal utility relative to other products remains the same. 
E) the marginal utility of all products consumed must be equal. 
A) the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed. 
B) as more of a good or service is consumed, ceteris paribus, its marginal utility relative to the marginal utility of other products increases. 
C) as more of a good or service is consumed, its marginal utility decreases. 
D) as more of a good or service is consumed, its marginal utility relative to other products remains the same. 
E) the marginal utility of all products consumed must be equal. C

Question 4

_____ is the lack of satisfaction yielded after consuming too much of the same product.

Accepted Answer

A) Diminishing marginal utility 
B) Disutility 
C) Total utility 
D) Marginal utility 
E) Cardinal utility 
A) Diminishing marginal utility 
B) Disutility 
C) Total utility 
D) Marginal utility 
E) Cardinal utility

Question 5

If total utility increases by smaller and smaller amounts as more units of a product are consumed, then marginal utility is:

Accepted Answer

A) decreasing and is a negative amount. 
B) decreasing and is a positive amount. 
C) zero. 
D) increasing and is a negative amount. 
E) increasing and is a positive amount. 
A) decreasing and is a negative amount. 
B) decreasing and is a positive amount. 
C) zero. 
D) increasing and is a negative amount. 
E) increasing and is a positive amount.

Question 6

Jen spent her weekly allowance of $110 on clothes and cosmetics.Assume that she had allocated $100 to shoes and $10 to lipsticks and is in equilibrium.What can you conclude from her purchase decisions?

Accepted Answer

A) She likes shoes ten times as much as she likes lipsticks 
B) Jen liked the last pair of shoes ten times as much as the last tube of lipstick 
C) Jen purchased ten pairs of shoes for each tube of lipstick 
D) She likes lipsticks ten times as much as she likes shoes 
E) She purchased ten pairs of shoes for each tube of lipstick 
A) She likes shoes ten times as much as she likes lipsticks 
B) Jen liked the last pair of shoes ten times as much as the last tube of lipstick 
C) Jen purchased ten pairs of shoes for each tube of lipstick 
D) She likes lipsticks ten times as much as she likes shoes 
E) She purchased ten pairs of shoes for each tube of lipstick

Question 7

_____ is the understanding that perfect information is not likely to be available, and that as a result people make decisions that in hindsight look irrational, but in reality are the rational results of a brain that is economizing.

Accepted Answer

A) Reasoning 
B) Parametric determinism 
C) Rational ignorance 
D) Bounded rationality 
E) Dynamic inconsistency 
A) Reasoning 
B) Parametric determinism 
C) Rational ignorance 
D) Bounded rationality 
E) Dynamic inconsistency

Question 8

According to Table 6.2, marginal utility is positive _____.

Accepted Answer

A) for any number of avocados 
B) for up to five avocados 
C) for one or two avocados 
D) only after five avocados are consumed 
E) for the first four avocados 
A) for any number of avocados 
B) for up to five avocados 
C) for one or two avocados 
D) only after five avocados are consumed 
E) for the first four avocados

Question 9

If the consumer purchases only two goods, X and Y, and if (MUx / Px)= (MUy / Py)then the consumer cannot reallocate her expenditures on X and Y to increase her utility, unless she has more money to spend.

Accepted Answer

A) True 
 B)False

Question 10

When the budget line is just tangent to the highest achievable indifference curve, then _____.

Accepted Answer

A) the consumer is in equilibrium 
B) the consumer should purchase more of good X 
C) the consumer should purchase more of good Y 
D) the consumer cannot afford the combination represented by the tangency point 
E) the consumer should purchase less of both goods 
A) the consumer is in equilibrium 
B) the consumer should purchase more of good X 
C) the consumer should purchase more of good Y 
D) the consumer cannot afford the combination represented by the tangency point 
E) the consumer should purchase less of both goods

Question 11

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3   Refer to Figure 6.3.What combinations of X and Y are attainable by the consumer?

Accepted Answer

A) All combinations that lie on or above I2 
B) All combinations that lie above I1 
C) All combinations that lie below I3 
D) All combinations that lie on or below the budget line. 
E) Only the combination of 10 units of good X and 15 units of good Y 
A) All combinations that lie on or above I2 
B) All combinations that lie above I1 
C) All combinations that lie below I3 
D) All combinations that lie on or below the budget line. 
E) Only the combination of 10 units of good X and 15 units of good Y

Question 12

One explanation for the status quo bias is an aversion to loss.

Accepted Answer

A) True 
 B)False

Question 13

The below indifference map shows the various combinations of hours of music and apples that yield different levels of utility. Figure 6.1   According to Figure 6.1, which of the following is incorrect?

Accepted Answer

A) The consumer prefers B to A 
B) The consumer is not indifferent between A and B 
C) The consumer is indifferent between D and E 
D) Indifference curve I2 should cross indifference curve I1 as shown 
E) The consumer is indifferent between B and C 
A) The consumer prefers B to A 
B) The consumer is not indifferent between A and B 
C) The consumer is indifferent between D and E 
D) Indifference curve I2 should cross indifference curve I1 as shown 
E) The consumer is indifferent between B and C

Question 14

In effect, people feel that driving is safer than flying and also prefer to do so because of _____.

Accepted Answer

A) anchoring 
B) overconfidence 
C) status quo 
D) loss aversion 
E) familiarity 
A) anchoring 
B) overconfidence 
C) status quo 
D) loss aversion 
E) familiarity

Question 15

If the marginal utility of a product is diminishing relative to the marginal utility of other products, then _____.

Accepted Answer

A) the consumer is in equilibrium 
B) the consumer has been purchasing relatively less of the product 
C) the consumer has been purchasing relatively more of the product 
D) the price of this product must have increased 
E) the price of the product must have decreased 
A) the consumer is in equilibrium 
B) the consumer has been purchasing relatively less of the product 
C) the consumer has been purchasing relatively more of the product 
D) the price of this product must have increased 
E) the price of the product must have decreased

Question 16

A consumer is in equilibrium when:

Accepted Answer

A) his or her marginal utility derived from each good is maximized. 
B) each dollar spent on each item provides more and more satisfaction. 
C) each dollar spent on each item provides less and less satisfaction. 
D) the last dollar spent on each item provides the same additional satisfaction as that dollar would if spent on any other item. 
E) his or her average utility for each item is the same. 
A) his or her marginal utility derived from each good is maximized. 
B) each dollar spent on each item provides more and more satisfaction. 
C) each dollar spent on each item provides less and less satisfaction. 
D) the last dollar spent on each item provides the same additional satisfaction as that dollar would if spent on any other item. 
E) his or her average utility for each item is the same.

Question 17

Suppose a budget line is drawn with X on the horizontal axis and Y on the vertical axis.A decrease in the price of X will cause:

Accepted Answer

A) an increase in the vertical intercept and no change in the horizontal intercept. 
B) a decrease in the vertical intercept and no change in the horizontal intercept. 
C) an increase in the horizontal intercept and no change in the vertical intercept. 
D) a decrease in the horizontal intercept and no change in the vertical intercept. 
E) a parallel, rightward shift of the budget line. 
A) an increase in the vertical intercept and no change in the horizontal intercept. 
B) a decrease in the vertical intercept and no change in the horizontal intercept. 
C) an increase in the horizontal intercept and no change in the vertical intercept. 
D) a decrease in the horizontal intercept and no change in the vertical intercept. 
E) a parallel, rightward shift of the budget line.

Question 18

The figure given below represents two indifference curves I1 and I2 of an individual. Figure 6.2   Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

Question 19

The equimarginal principle illustrates:

Accepted Answer

A) that consumers are essentially robots. 
B) that people behave irrationally. 
C) that people behave in rather consistent ways in order to maximize happiness. 
D) that people behave in rather inconsistent ways. 
E) that people will spend all their incomes. 
A) that consumers are essentially robots. 
B) that people behave irrationally. 
C) that people behave in rather consistent ways in order to maximize happiness. 
D) that people behave in rather inconsistent ways. 
E) that people will spend all their incomes.

Question 20

When total utility is at a maximum, marginal utility is:

Accepted Answer

A) increasing. 
B) at a minimum. 
C) equal to zero. 
D) decreasing. 
E) at a maximum. 
A) increasing. 
B) at a minimum. 
C) equal to zero. 
D) decreasing. 
E) at a maximum.

Exam 36: Consumer Choice

According to utility theory, a consumer is in equilibrium when:

The table given below depicts the total utility derived from the consumption of a good. Table 6.1 According to Table 6.1, the total utility from consuming all 5 units is _____.

The law of diminishing marginal utility states that:

_____ is the lack of satisfaction yielded after consuming too much of the same product.

If total utility increases by smaller and smaller amounts as more units of a product are consumed, then marginal utility is:

Jen spent her weekly allowance of $110 on clothes and cosmetics.Assume that she had allocated $100 to shoes and $10 to lipsticks and is in equilibrium.What can you conclude from her purchase decisions?

_____ is the understanding that perfect information is not likely to be available, and that as a result people make decisions that in hindsight look irrational, but in reality are the rational results of a brain that is economizing.

According to Table 6.2, marginal utility is positive _____.

If the consumer purchases only two goods, X and Y, and if (MUx / Px)= (MUy / Py)then the consumer cannot reallocate her expenditures on X and Y to increase her utility, unless she has more money to spend.

When the budget line is just tangent to the highest achievable indifference curve, then _____.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3 Refer to Figure 6.3.What combinations of X and Y are attainable by the consumer?

One explanation for the status quo bias is an aversion to loss.

The below indifference map shows the various combinations of hours of music and apples that yield different levels of utility. Figure 6.1 According to Figure 6.1, which of the following is incorrect?

In effect, people feel that driving is safer than flying and also prefer to do so because of _____.

If the marginal utility of a product is diminishing relative to the marginal utility of other products, then _____.

A consumer is in equilibrium when:

Suppose a budget line is drawn with X on the horizontal axis and Y on the vertical axis.A decrease in the price of X will cause:

The figure given below represents two indifference curves I1 and I2 of an individual. Figure 6.2 Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?

The equimarginal principle illustrates:

When total utility is at a maximum, marginal utility is:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

If the consumer purchases only two goods, X and Y, and if (MU_x / P_x)= (MU_y / P_y)then the consumer cannot reallocate her expenditures on X and Y to increase her utility, unless she has more money to spend.

The figure given below represents two indifference curves I₁ and I₂ of an individual. Figure 6.2 Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?