Question 1

If the price of videotapes decreases, then the _____.

Accepted Answer

A) marginal utility of videotapes will decrease 
B) marginal utility of videotapes will increase 
C) marginal utility per dollar of videotapes will decrease 
D) marginal utility per dollar of videotapes will increase 
E) total utility of videotapes will increase 
A) marginal utility of videotapes will decrease 
B) marginal utility of videotapes will increase 
C) marginal utility per dollar of videotapes will decrease 
D) marginal utility per dollar of videotapes will increase 
E) total utility of videotapes will increase

Question 2

The law of diminishing marginal utility states that as additional units are consumed, satisfaction per unit will decline.

Accepted Answer

A) True 
 B)False

Question 3

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

Accepted Answer

A) marginal utility 
B) total utility 
C) disutility 
D) profit 
E) the law of diminishing marginal utility 
A) marginal utility 
B) total utility 
C) disutility 
D) profit 
E) the law of diminishing marginal utility

Question 4

Derek has $1 to spend at the grocery store.An apple, an orange, and a banana cost $.50 each.If Derek's MUA/PA (ratio of marginal utility to price)of an apple is 45, MUO/PO of an orange is 38, and MUB/PB of a banana is 52, he will purchase a(n)_____ first and a(n)_____ second.

Accepted Answer

A) apple;orange 
B) orange;apple 
C) banana;orange 
D) banana;apple 
E) orange;banana 
A) apple;orange 
B) orange;apple 
C) banana;orange 
D) banana;apple 
E) orange;banana

Question 5

The theory of bounded rationality states that it is likely for consumers to have perfect information.

Accepted Answer

A) True 
 B)False

Question 6

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3   In Figure 6.3, if the price of one unit of good X and good Y is $30 and $20, respectively, the consumer's income is _____.

Accepted Answer

A) $50 
B) $150 
C) $400 
D) $600 
E) $900 
A) $50 
B) $150 
C) $400 
D) $600 
E) $900

Question 7

As you move along an indifference curve, your total utility increases or decreases depending on whether it's an upward or downward movement.

Accepted Answer

A) True 
 B)False

Question 8

If a good is free, a rational consumer will continue to consume that good, irrespective of its marginal utility.

Accepted Answer

A) True 
 B)False

Question 9

Jason is trying to decide whether to buy a bagel or a muffin for breakfast.The bagel costs $.50 and has a marginal utility of 5.The muffin costs $1 and has a marginal utility of 20.Which should he buy, and why?

Accepted Answer

A) The muffin, because it has a higher marginal utility 
B) The muffin, because it has a lower marginal utility per dollar 
C) The bagel, because it costs less 
D) The bagel, because it has a higher marginal utility per dollar 
E) The muffin, because it has a higher marginal utility per dollar 
A) The muffin, because it has a higher marginal utility 
B) The muffin, because it has a lower marginal utility per dollar 
C) The bagel, because it costs less 
D) The bagel, because it has a higher marginal utility per dollar 
E) The muffin, because it has a higher marginal utility per dollar

Question 10

Suppose the price of beef declines by $0.50 per pound at the supermarket.Consumers of beef immediately increase their purchases of beef.This illustrates:

Accepted Answer

A) the fact that beef is an inferior good. 
B) the cross-elasticity effect of a price decrease. 
C) the substitution effect of a price decrease. 
D) the fact that beef is an economic bad. 
E) the income effect of rise in price. 
A) the fact that beef is an inferior good. 
B) the cross-elasticity effect of a price decrease. 
C) the substitution effect of a price decrease. 
D) the fact that beef is an economic bad. 
E) the income effect of rise in price.

Question 11

When a good becomes more expensive, it yields less satisfaction per dollar, so consumers buy less of it and more of other goods.This is called the _____ effect.

Accepted Answer

A) substitution 
B) income 
C) replacement 
D) augmentation 
E) disbursement 
A) substitution 
B) income 
C) replacement 
D) augmentation 
E) disbursement

Question 12

A utility-maximizing consumer always purchases a good that yields the greatest average utility per dollar of expenditure.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that apples and bananas both cost the same, but the marginal utility of bananas is twice as high as that for apples.This implies the consumer should purchase more apples and fewer bananas in order to maximize utility.

Accepted Answer

A) True 
 B)False

Question 14

When economists describe the theory of consumer choice, they

Accepted Answer

A) portray people as simple and methodical with perfectly predictable patterns of behavior. 
B) assert that consumers decide which goods and services give them the greatest utility within their limited incomes. 
C) point out that consumers rarely consider utility in their purchase decisions;they look at other factors like convenience, peer behavior, and price. 
D) assert that the retail price is the only variable consumers really consider in making their purchasing decisions. 
E) admit that consumer behavior is random and there is no credible economic theory to explain the phenomenon. 
A) portray people as simple and methodical with perfectly predictable patterns of behavior. 
B) assert that consumers decide which goods and services give them the greatest utility within their limited incomes. 
C) point out that consumers rarely consider utility in their purchase decisions;they look at other factors like convenience, peer behavior, and price. 
D) assert that the retail price is the only variable consumers really consider in making their purchasing decisions. 
E) admit that consumer behavior is random and there is no credible economic theory to explain the phenomenon.

Question 15

In labor markets, a change in the wage rate has both an income and a substitution effect.An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker.If the increase in the wage rate causes an individual to work less:

Accepted Answer

A) the income effect will dominate the substitution effect. 
B) the substitution effect will dominate the income effect. 
C) the substitution and the income effects will cancel each other out. 
D) then leisure will be referred to as an inferior good. 
E) the increase in wage rates will cause an increase in the supply of labor. 
A) the income effect will dominate the substitution effect. 
B) the substitution effect will dominate the income effect. 
C) the substitution and the income effects will cancel each other out. 
D) then leisure will be referred to as an inferior good. 
E) the increase in wage rates will cause an increase in the supply of labor.

Question 16

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3   In Figure 6.3, the consumer is in equilibrium at point:

Accepted Answer

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

Question 17

An indifference curve shows _____.

Accepted Answer

A) the relationship between total and marginal utility 
B) the relationship between the quantity of a good and the maximum attainable satisfaction 
C) the various combinations of two goods that give the consumer the same amount of satisfaction 
D) the relationship between the price and quantity of a good that a consumer is able to purchase 
E) that the quantities of a good that give the consumer maximum satisfaction are directly related to price 
A) the relationship between total and marginal utility 
B) the relationship between the quantity of a good and the maximum attainable satisfaction 
C) the various combinations of two goods that give the consumer the same amount of satisfaction 
D) the relationship between the price and quantity of a good that a consumer is able to purchase 
E) that the quantities of a good that give the consumer maximum satisfaction are directly related to price

Question 18

Neuroeconomics suggests that the frontal lobe carries out most decision making and strategic thinking takes place in the prefrontal cortex.

Accepted Answer

A) True 
 B)False

Question 19

If all consumers had identical preferences, then their marginal utility schedules would be the same.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements concerning income and substitution effects is nottrue?

Accepted Answer

A) Income and substitution effects cause the demand curve to slope downward. 
B) When the price of a good falls, real purchasing power increases and consumers can purchase more of all goods. 
C) The substitution effect describes the situation where more of a good whose price has fallen is purchased and less of all other goods is purchased. 
D) A price decrease of one good cannot cause the income effect. 
E) Income and substitution effects are related to diminishing marginal utility and consumer equilibrium. 
A) Income and substitution effects cause the demand curve to slope downward. 
B) When the price of a good falls, real purchasing power increases and consumers can purchase more of all goods. 
C) The substitution effect describes the situation where more of a good whose price has fallen is purchased and less of all other goods is purchased. 
D) A price decrease of one good cannot cause the income effect. 
E) Income and substitution effects are related to diminishing marginal utility and consumer equilibrium.

Exam 36: Consumer Choice

If the price of videotapes decreases, then the _____.

The law of diminishing marginal utility states that as additional units are consumed, satisfaction per unit will decline.

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

Derek has $1 to spend at the grocery store.An apple, an orange, and a banana cost $.50 each.If Derek's MUA/PA (ratio of marginal utility to price)of an apple is 45, MUO/PO of an orange is 38, and MUB/PB of a banana is 52, he will purchase a(n)_____ first and a(n)_____ second.

The theory of bounded rationality states that it is likely for consumers to have perfect information.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3 In Figure 6.3, if the price of one unit of good X and good Y is $30 and $20, respectively, the consumer's income is _____.

As you move along an indifference curve, your total utility increases or decreases depending on whether it's an upward or downward movement.

If a good is free, a rational consumer will continue to consume that good, irrespective of its marginal utility.

Jason is trying to decide whether to buy a bagel or a muffin for breakfast.The bagel costs $.50 and has a marginal utility of 5.The muffin costs $1 and has a marginal utility of 20.Which should he buy, and why?

Suppose the price of beef declines by $0.50 per pound at the supermarket.Consumers of beef immediately increase their purchases of beef.This illustrates:

When a good becomes more expensive, it yields less satisfaction per dollar, so consumers buy less of it and more of other goods.This is called the _____ effect.

A utility-maximizing consumer always purchases a good that yields the greatest average utility per dollar of expenditure.

Suppose that apples and bananas both cost the same, but the marginal utility of bananas is twice as high as that for apples.This implies the consumer should purchase more apples and fewer bananas in order to maximize utility.

When economists describe the theory of consumer choice, they

In labor markets, a change in the wage rate has both an income and a substitution effect.An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker.If the increase in the wage rate causes an individual to work less:

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3 In Figure 6.3, the consumer is in equilibrium at point:

An indifference curve shows _____.

Neuroeconomics suggests that the frontal lobe carries out most decision making and strategic thinking takes place in the prefrontal cortex.

If all consumers had identical preferences, then their marginal utility schedules would be the same.

Which of the following statements concerning income and substitution effects is nottrue?

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

Derek has $1 to spend at the grocery store.An apple, an orange, and a banana cost $.50 each.If Derek's MU_A/P_A (ratio of marginal utility to price)of an apple is 45, MU_O/P_O of an orange is 38, and MU_B/P_B of a banana is 52, he will purchase a(n)_ first and a(n)_ second.