Question 1

In utility analysis, it is assumed that marginal utility diminishes as consumption of a product decreases.

Accepted Answer

A) True 
 B)False

Question 2

Because incomes are limited, purchasing one thing means not being able to purchase other things.This indicates that:

Accepted Answer

A) marginal utility diminishes. 
B) marginal utility is constant. 
C) people will allocate their income among goods so as to achieve the most satisfaction. 
D) people will allocate their income among goods so that the marginal utilities of all goods is equal. 
E) people will allocate their income among goods so that the marginal utilities of all goods is zero. 
A) marginal utility diminishes. 
B) marginal utility is constant. 
C) people will allocate their income among goods so as to achieve the most satisfaction. 
D) people will allocate their income among goods so that the marginal utilities of all goods is equal. 
E) people will allocate their income among goods so that the marginal utilities of all goods is zero.

Question 3

If cherries cost twice as much as dates, and the last cherry consumed provides twice as much utility as the last date consumed, the consumer is maximizing utility.

Accepted Answer

A) True 
 B)False

Question 4

The law of diminishing marginal utility does not hold good when the good is free or priced at zero dollars.

Accepted Answer

A) True 
 B)False

Question 5

Which one of the following is based on the idea that marginal utility of income diminishes as income increases?

Accepted Answer

A) Progressive taxation 
B) Capital controls 
C) Minimum wages 
D) Price controls 
E) Employee compensation regulations 
A) Progressive taxation 
B) Capital controls 
C) Minimum wages 
D) Price controls 
E) Employee compensation regulations

Question 6

To decide which of two goods is the better buy, a consumer should compare the products' _____.

Accepted Answer

A) marginal utilities 
B) total utilities 
C) marginal utilities per dollar 
D) total utilities per dollar 
E) disutility 
A) marginal utilities 
B) total utilities 
C) marginal utilities per dollar 
D) total utilities per dollar 
E) disutility

Question 7

Suppose that there are five bottles of lemonade, each of which gives the consumer the same level of utility.According to the law of diminishing marginal utility, how can one receive the highest utility?

Accepted Answer

A) Consume all five bottles in the next hour 
B) Consume all five bottles today 
C) Consume all five bottles in one day next week 
D) Consume two bottles today and three tomorrow 
E) Consume one bottle each day for the next five days 
A) Consume all five bottles in the next hour 
B) Consume all five bottles today 
C) Consume all five bottles in one day next week 
D) Consume two bottles today and three tomorrow 
E) Consume one bottle each day for the next five days

Question 8

The substitution effect occurs because when the price of one good increases, consumers will buy fewer substitute goods.

Accepted Answer

A) True 
 B)False

Question 9

The prices that people are willing to pay for goods and services mostly depend on:

Accepted Answer

A) the total utility derived from the goods. 
B) the marginal utility derived from the goods. 
C) the availability of the goods. 
D) the cost of producing the goods. 
E) whether the goods are legal since the laws affect the position of both supply and demand curves. 
A) the total utility derived from the goods. 
B) the marginal utility derived from the goods. 
C) the availability of the goods. 
D) the cost of producing the goods. 
E) whether the goods are legal since the laws affect the position of both supply and demand curves.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

As the price of a good increases:

Accepted Answer

A) that good will yield less satisfaction per dollar than before. 
B) consumers will have more real income to spend on other goods. 
C) the quantity demanded of that good will also increase. 
D) the utility-maximizing quantity of that good will not change. 
E) consumers will buy the good and substitute away from other goods. 
A) that good will yield less satisfaction per dollar than before. 
B) consumers will have more real income to spend on other goods. 
C) the quantity demanded of that good will also increase. 
D) the utility-maximizing quantity of that good will not change. 
E) consumers will buy the good and substitute away from other goods.

Question 12

Assume MUX = 30 utils, MUY = 15 utils, PX = $2 and PY = $0.50.This consumer:

Accepted Answer

A) should buy less of X and less of Y. 
B) is in equilibrium. 
C) should buy more of X and less of Y. 
D) should buy less of X and more of Y. 
E) should buy more of X and more of Y. 
A) should buy less of X and less of Y. 
B) is in equilibrium. 
C) should buy more of X and less of Y. 
D) should buy less of X and more of Y. 
E) should buy more of X and more of Y.

Question 13

Consumers should allocate their income so that the marginal utility associated with the:

Accepted Answer

A) first dollar spent is equal for all goods. 
B) last dollar spent is equal for all goods. 
C) last dollar spent is lower for high-priced items than for lower- priced items. 
D) first dollar spent is greater for high-priced items than for lower-priced items. 
E) first dollar spent is less for high-priced items than for lower-priced items. 
A) first dollar spent is equal for all goods. 
B) last dollar spent is equal for all goods. 
C) last dollar spent is lower for high-priced items than for lower- priced items. 
D) first dollar spent is greater for high-priced items than for lower-priced items. 
E) first dollar spent is less for high-priced items than for lower-priced items.

Question 14

The table below shows the total utility associated with various units of goods X and Y. Table 6.5
  Refer to Table 6.5.Given that the price of good X is $2 per unit, the price of good Y is $5 per unit, and that the consumer spends a total of $14 on both goods, what is the total utility associated with the utility-maximizing combination?

Accepted Answer

A) 84 
B) 154 
C) 172 
D) Indeterminate 
E) 215 
A) 84 
B) 154 
C) 172 
D) Indeterminate 
E) 215

Question 15

According to Table 6.2, marginal utility is negative _____.

Accepted Answer

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

Question 16

The table below shows the total utility associated with various units of goods X and Y. Table 6.5
  Refer to Table 6.5.Given that the price of good X is $2 per unit, the price of good Y is $5 per unit, and that the consumer spends a total of $14 on both goods, what is the total utility associated with the utility-maximizing combination?

Accepted Answer

A) 84 
B) 154 
C) 172 
D) Indeterminate 
E) 215 
A) 84 
B) 154 
C) 172 
D) Indeterminate 
E) 215

Question 17

According to the law of diminishing utility, _____.

Accepted Answer

A) the same tax rate should be applied to every dollar 
B) the rich people should have a lower tax rate 
C) the rich people should have a higher tax rate 
D) the total burden on the society from a tax will be less if proportional taxation is used 
E) the poorer people should have a lower tax rate 
A) the same tax rate should be applied to every dollar 
B) the rich people should have a lower tax rate 
C) the rich people should have a higher tax rate 
D) the total burden on the society from a tax will be less if proportional taxation is used 
E) the poorer people should have a lower tax rate

Question 18

According to the concept of framing, when a customer calls a hotel regarding a reservation the hotel reservationists generally state room rates as the _____.

Accepted Answer

A) lowest they charge during peak demand periods 
B) average they charge during peak demand periods 
C) highest they charge during peak demand periods and then discount those rates 
D) lowest they charge during off-peak demand periods 
E) highest they charge during off-peak demand periods and then discount those rates 
A) lowest they charge during peak demand periods 
B) average they charge during peak demand periods 
C) highest they charge during peak demand periods and then discount those rates 
D) lowest they charge during off-peak demand periods 
E) highest they charge during off-peak demand periods and then discount those rates

Question 19

Which of the following will most likely happen when a person's income increases, other things equal?

Accepted Answer

A) The budget line will shift outward 
B) The budget line will become steeper 
C) The budget line will become flatter 
D) The indifference curves will shift outward 
E) The indifference curves will shift downward 
A) The budget line will shift outward 
B) The budget line will become steeper 
C) The budget line will become flatter 
D) The indifference curves will shift outward 
E) The indifference curves will shift downward

Question 20

With an increase in income, the consumer will maximize utility on a new indifference curve that represents a higher level of utility.

Accepted Answer

A) True 
 B)False

Exam 36: Consumer Choice

In utility analysis, it is assumed that marginal utility diminishes as consumption of a product decreases.

Because incomes are limited, purchasing one thing means not being able to purchase other things.This indicates that:

If cherries cost twice as much as dates, and the last cherry consumed provides twice as much utility as the last date consumed, the consumer is maximizing utility.

The law of diminishing marginal utility does not hold good when the good is free or priced at zero dollars.

Which one of the following is based on the idea that marginal utility of income diminishes as income increases?

To decide which of two goods is the better buy, a consumer should compare the products' _____.

Suppose that there are five bottles of lemonade, each of which gives the consumer the same level of utility.According to the law of diminishing marginal utility, how can one receive the highest utility?

The substitution effect occurs because when the price of one good increases, consumers will buy fewer substitute goods.

The prices that people are willing to pay for goods and services mostly depend on:

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

As the price of a good increases:

Assume MUX = 30 utils, MUY = 15 utils, PX = $2 and PY = $0.50.This consumer:

Consumers should allocate their income so that the marginal utility associated with the:

According to Table 6.2, marginal utility is negative _____.

According to the law of diminishing utility, _____.

According to the concept of framing, when a customer calls a hotel regarding a reservation the hotel reservationists generally state room rates as the _____.

Which of the following will most likely happen when a person's income increases, other things equal?

With an increase in income, the consumer will maximize utility on a new indifference curve that represents a higher level of utility.

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

Assume MU_X = 30 utils, MU_Y = 15 utils, P_X = $2 and P_Y = $0.50.This consumer: