Question 1

The total utility of the consumer diminishes whenever:

Accepted Answer

A) he or she buys an additional unit of a good. 
B) his or her marginal utility decreases. 
C) his or her total utility increases at a decreasing rate. 
D) the last unit consumed of a particular good is distasteful or provides dissatisfaction. 
E) other consumers are also purchasing the product. 
A) he or she buys an additional unit of a good. 
B) his or her marginal utility decreases. 
C) his or her total utility increases at a decreasing rate. 
D) the last unit consumed of a particular good is distasteful or provides dissatisfaction. 
E) other consumers are also purchasing the product.

Question 2

Suppose the prices of goods X, Y, and Z are $4, $1, and $5, respectively, and the last unit purchased of good X has a marginal utility MUx = 16 utils.At the point of equilibrium, the marginal utility of the last unit purchased of goods Y and Z will be:

Accepted Answer

A) MUy = 16 utils and MUz = 16 utils, respectively. 
B) MUy = 8 utils and MUz = 2 utils, respectively. 
C) MUy = 4 utils and MUz = 20 utils, respectively. 
D) MUy = 2 utils and MUz = 4 utils, respectively. 
E) MUy = 12 utils and MUz = 20 utils, respectively. 
A) MUy = 16 utils and MUz = 16 utils, respectively. 
B) MUy = 8 utils and MUz = 2 utils, respectively. 
C) MUy = 4 utils and MUz = 20 utils, respectively. 
D) MUy = 2 utils and MUz = 4 utils, respectively. 
E) MUy = 12 utils and MUz = 20 utils, respectively.

Question 3

Marginal utility diminishes more quickly:

Accepted Answer

A) the less durable the good is. 
B) the greater the number of consumers consuming the good. 
C) the shorter the time period between two successive consumptions. 
D) the greater the number of firms producing the good. 
E) the cheaper the good is. 
A) the less durable the good is. 
B) the greater the number of consumers consuming the good. 
C) the shorter the time period between two successive consumptions. 
D) the greater the number of firms producing the good. 
E) the cheaper the good is.

Question 4

As a consumer eats additional pieces of pizza, total utility will _____.

Accepted Answer

A) always keep increasing 
B) always keep decreasing 
C) keep increasing until dissatisfaction sets in 
D) keep decreasing until dissatisfaction sets in 
E) initially keep decreasing until it becomes zero and then increase 
A) always keep increasing 
B) always keep decreasing 
C) keep increasing until dissatisfaction sets in 
D) keep decreasing until dissatisfaction sets in 
E) initially keep decreasing until it becomes zero and then increase

Question 5

It is often observed that, over the same period of time and for the same good, marginal utility declines rapidly for some consumers and very little for others.This observation illustrates:

Accepted Answer

A) that economic theory is of little value in explaining consumer behavior. 
B) that consumers are not identical. 
C) tastes and preferences should not be included in any discussion of consumer choice. 
D) tastes and preferences among consumers are quite similar. 
E) that if consumers weren't identical, economic theory would not be able to provide insight into consumer behavior. 
A) that economic theory is of little value in explaining consumer behavior. 
B) that consumers are not identical. 
C) tastes and preferences should not be included in any discussion of consumer choice. 
D) tastes and preferences among consumers are quite similar. 
E) that if consumers weren't identical, economic theory would not be able to provide insight into consumer behavior.

Question 6

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.The consumer prefers _____ to _____.

Accepted Answer

A) A;C 
B) B;A 
C) B;D 
D) D;E 
E) I1;I2 
A) A;C 
B) B;A 
C) B;D 
D) D;E 
E) I1;I2

Question 7

In economic theory, the idea of the equimarginal principle, or consumer equilibrium, means:

Accepted Answer

A) consumers appear to be similar in their buying habits, which explains why prices are almost always in equilibrium. 
B) to maximize utility, consumers allocate all of their incomes among goods so as to equate the total utility of all units of goods purchased. 
C) to maximize utility, consumers must allocate their scarce incomes among only the cheapest products available. 
D) to maximize utility, consumers must allocate their scarce incomes among goods so as to equate the marginal utilities per dollar of expenditure on the last unit of each good purchased. 
E) the marginal utilities among luxury goods are always equal among certain high income earners. 
A) consumers appear to be similar in their buying habits, which explains why prices are almost always in equilibrium. 
B) to maximize utility, consumers allocate all of their incomes among goods so as to equate the total utility of all units of goods purchased. 
C) to maximize utility, consumers must allocate their scarce incomes among only the cheapest products available. 
D) to maximize utility, consumers must allocate their scarce incomes among goods so as to equate the marginal utilities per dollar of expenditure on the last unit of each good purchased. 
E) the marginal utilities among luxury goods are always equal among certain high income earners.

Question 8

According to neuroeconomists, the limbic portion of the brain called the amygdala is more primitive and deals with emotion.

Accepted Answer

A) True 
 B)False

Question 9

An "all you can eat" restaurant illustrates the economic principle:

Accepted Answer

A) of consumers' inability to maximize their total utility. 
B) that economic theory clearly breaks down under certain circumstances. 
C) that marginal utility is always positive. 
D) that consumers will stop eating when marginal utility is zero. 
E) that consumers will stop eating when total utility is zero. 
A) of consumers' inability to maximize their total utility. 
B) that economic theory clearly breaks down under certain circumstances. 
C) that marginal utility is always positive. 
D) that consumers will stop eating when marginal utility is zero. 
E) that consumers will stop eating when total utility is zero.

Question 10

Total utility is determined by:

Accepted Answer

A) multiplying the quantity purchased by the price of the good. 
B) finding the additional utility gained from consuming one more unit of product. 
C) summing the marginal utilities for each successive unit of product consumed. 
D) summing the number of units of a good consumed. 
E) dividing the marginal utility derived from consuming a good by its price. 
A) multiplying the quantity purchased by the price of the good. 
B) finding the additional utility gained from consuming one more unit of product. 
C) summing the marginal utilities for each successive unit of product consumed. 
D) summing the number of units of a good consumed. 
E) dividing the marginal utility derived from consuming a good by its price.

Question 11

Due to the law of diminishing marginal utility, _____.

Accepted Answer

A) the first unit of a product offers more satisfaction than the last unit of the same product 
B) the marginal utility curve is upward sloping 
C) when marginal utility becomes negative, total utility increases 
D) there is more satisfaction with each unit of good consumed 
E) when marginal utility becomes positive, total utility declines 
A) the first unit of a product offers more satisfaction than the last unit of the same product 
B) the marginal utility curve is upward sloping 
C) when marginal utility becomes negative, total utility increases 
D) there is more satisfaction with each unit of good consumed 
E) when marginal utility becomes positive, total utility declines

Question 12

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 indifference curve I1 in Figure 6.1, for each extra apple the consumer eats, he or she must simultaneously sacrifice ____ of listening to music to keep total utility constant.

Accepted Answer

A) 1 hour 
B) 2 hours 
C) 3 hours 
D) 4 hours 
E) 5 hours 
A) 1 hour 
B) 2 hours 
C) 3 hours 
D) 4 hours 
E) 5 hours

Question 13

Which of the following statements about marginal utility is correct?

Accepted Answer

A) When marginal utility is negative, an increase in the quantity will increase total utility. 
B) When marginal utility is decreasing, an increase in quantity will decrease total utility. 
C) When marginal utility is positive, an increase in quantity will decrease total utility. 
D) When marginal utility is zero, an increase in quantity will leave total utility unchanged. 
E) When total utility is increasing, marginal utility will be negative. 
A) When marginal utility is negative, an increase in the quantity will increase total utility. 
B) When marginal utility is decreasing, an increase in quantity will decrease total utility. 
C) When marginal utility is positive, an increase in quantity will decrease total utility. 
D) When marginal utility is zero, an increase in quantity will leave total utility unchanged. 
E) When total utility is increasing, marginal utility will be negative.

Question 14

The principle that people would rather leave things as they are is called _____.

Accepted Answer

A) status quo 
B) stand still 
C) stagnation 
D) pause 
E) quo warranto 
A) status quo 
B) stand still 
C) stagnation 
D) pause 
E) quo warranto

Question 15

Consumer equilibrium exists when the marginal utility per dollar of expenditure is the same for all goods and services.

Accepted Answer

A) True 
 B)False

Question 16

Marginal utility is negative when total utility is increasing.

Accepted Answer

A) True 
 B)False

Question 17

In the theory of utility, it is assumed that marginal utility:

Accepted Answer

A) increases as consumption of a product increases. 
B) is always zero irrespective of any increase or decrease in consumption. 
C) remains constant when consumption of a product increases. 
D) diminishes as consumption of a product increases. 
E) remains constant when consumption of a product decreases. 
A) increases as consumption of a product increases. 
B) is always zero irrespective of any increase or decrease in consumption. 
C) remains constant when consumption of a product increases. 
D) diminishes as consumption of a product increases. 
E) remains constant when consumption of a product decreases.

Question 18

The _____ effect indicates that an individual's income can buy more of all goods when the price of one good declines, everything else held constant.

Accepted Answer

A) scale 
B) endowment 
C) substitution 
D) price 
E) income 
A) scale 
B) endowment 
C) substitution 
D) price 
E) income

Question 19

When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile or a Compaq computer instead of an IBM computer, an economist would assert:

Accepted Answer

A) that the consumer is making a decision based on what gives him maximum utility. 
B) that everyone knows Hondas are superior to Fords;the consumer cannot possibly be maximizing his utility. 
C) that everyone knows IBM computers are superior to Compaq computers;the consumer may be maximizing his utility at the margin, but is not maximizing total utility. 
D) that there is no standard explanation for consumer choices because consumers have varied tastes and preferences. 
E) that since rationality is bounded by lack of information, a consumer purchases goods based on convenience than on utility maximization. 
A) that the consumer is making a decision based on what gives him maximum utility. 
B) that everyone knows Hondas are superior to Fords;the consumer cannot possibly be maximizing his utility. 
C) that everyone knows IBM computers are superior to Compaq computers;the consumer may be maximizing his utility at the margin, but is not maximizing total utility. 
D) that there is no standard explanation for consumer choices because consumers have varied tastes and preferences. 
E) that since rationality is bounded by lack of information, a consumer purchases goods based on convenience than on utility maximization.

Question 20

When marginal utility is negative, total 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

The total utility of the consumer diminishes whenever:

Suppose the prices of goods X, Y, and Z are $4, $1, and $5, respectively, and the last unit purchased of good X has a marginal utility MUx = 16 utils.At the point of equilibrium, the marginal utility of the last unit purchased of goods Y and Z will be:

Marginal utility diminishes more quickly:

As a consumer eats additional pieces of pizza, total utility will _____.

It is often observed that, over the same period of time and for the same good, marginal utility declines rapidly for some consumers and very little for others.This observation illustrates:

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.The consumer prefers _____ to _____.

In economic theory, the idea of the equimarginal principle, or consumer equilibrium, means:

According to neuroeconomists, the limbic portion of the brain called the amygdala is more primitive and deals with emotion.

An "all you can eat" restaurant illustrates the economic principle:

Total utility is determined by:

Due to the law of diminishing marginal utility, _____.

Which of the following statements about marginal utility is correct?

The principle that people would rather leave things as they are is called _____.

Consumer equilibrium exists when the marginal utility per dollar of expenditure is the same for all goods and services.

Marginal utility is negative when total utility is increasing.

In the theory of utility, it is assumed that marginal utility:

The _____ effect indicates that an individual's income can buy more of all goods when the price of one good declines, everything else held constant.

When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile or a Compaq computer instead of an IBM computer, an economist would assert:

When marginal utility is negative, total 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

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Suppose the prices of goods X, Y, and Z are $4, $1, and $5, respectively, and the last unit purchased of good X has a marginal utility MU_x = 16 utils.At the point of equilibrium, the marginal utility of the last unit purchased of goods Y and Z will be:

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.The consumer prefers _ to _.