Question 1

The table given below records the total utility derived from the consumption of avocados. Table 6.2
  According to Table 6.2, the marginal utility of the third avocado is _____.

Accepted Answer

A) 12 
B) 8 
C) 48 
D) 18 
E) 4 
A) 12 
B) 8 
C) 48 
D) 18 
E) 4 A

Question 2

Marginal utility is total utility divided by the number of units consumed.

Accepted Answer

A) True 
 B)False  False

Question 3

The different combinations of any two goods that an individual can afford to purchase, given his income and prices, is shown by:

Accepted Answer

A) an indifference curve. 
B) an indifference map. 
C) a budget line. 
D) a demand curve. 
E) a supply curve. 
A) an indifference curve. 
B) an indifference map. 
C) a budget line. 
D) a demand curve. 
E) a supply curve. C

Question 4

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 5

Marginal utility is _____.

Accepted Answer

A) always greater than total utility 
B) utility that is not as good as normal utility 
C) the extra utility derived from consuming one additional unit of a good or service 
D) always positive 
E) not related to total utility 
A) always greater than total utility 
B) utility that is not as good as normal utility 
C) the extra utility derived from consuming one additional unit of a good or service 
D) always positive 
E) not related to total utility

Question 6

As long as the marginal utilities per dollar obtained from the last unit of all products consumed are the same, _____.

Accepted Answer

A) the consumer is in equilibrium and will not reallocate income 
B) the consumer is not in equilibrium and will reallocate income 
C) the consumer is most likely operating a budget deficit 
D) the consumer is not maximizing utility 
E) the government will recognize this as an intolerable disequilibrium and will most likely intervene by imposing a tax and reallocate the consumer's income 
A) the consumer is in equilibrium and will not reallocate income 
B) the consumer is not in equilibrium and will reallocate income 
C) the consumer is most likely operating a budget deficit 
D) the consumer is not maximizing utility 
E) the government will recognize this as an intolerable disequilibrium and will most likely intervene by imposing a tax and reallocate the consumer's income

Question 7

In an indifference map, one would most likely see indifference curves that:

Accepted Answer

A) are positively sloped. 
B) intersect at the origin. 
C) cross at the equilibrium point. 
D) are bowed inward toward the origin. 
E) represent greater utility as they approach the origin. 
A) are positively sloped. 
B) intersect at the origin. 
C) cross at the equilibrium point. 
D) are bowed inward toward the origin. 
E) represent greater utility as they approach the origin.

Question 8

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

Question 9

The demand curve for a product can be derived from consumer equilibrium by:

Accepted Answer

A) altering the prices of all other products. 
B) altering consumer incomes. 
C) shifting consumer preferences. 
D) altering the price of the good itself. 
E) knowing the demand curves for all other products. 
A) altering the prices of all other products. 
B) altering consumer incomes. 
C) shifting consumer preferences. 
D) altering the price of the good itself. 
E) knowing the demand curves for all other products.

Question 10

The demand curve slopes downward because of:

Accepted Answer

A) diminishing marginal utility and consumer equilibrium. 
B) the fact that consumers cannot decide how much they want to pay for goods and services. 
C) the fact that suppliers cannot decide how much to charge for the goods and services they supply. 
D) the fact that consumer tastes and preferences change rapidly. 
E) the fact that consumers are fickle, which makes pricing a good or service very difficult. 
A) diminishing marginal utility and consumer equilibrium. 
B) the fact that consumers cannot decide how much they want to pay for goods and services. 
C) the fact that suppliers cannot decide how much to charge for the goods and services they supply. 
D) the fact that consumer tastes and preferences change rapidly. 
E) the fact that consumers are fickle, which makes pricing a good or service very difficult.

Question 11

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 12

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 13

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 14

As one moves downward on an indifference curve, the:

Accepted Answer

A) total utility from the consumption of a good decreases. 
B) total utility from the consumption of a good increases. 
C) the total satisfaction from consumption remains the same. 
D) the marginal utility from the consumption a good increases. 
E) the total satisfaction from consumption decreases. 
A) total utility from the consumption of a good decreases. 
B) total utility from the consumption of a good increases. 
C) the total satisfaction from consumption remains the same. 
D) the marginal utility from the consumption a good increases. 
E) the total satisfaction from consumption decreases.

Question 15

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 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

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 18

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 19

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 20

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

Exam 8: Consumer Choice

The table given below records the total utility derived from the consumption of avocados. Table 6.2 According to Table 6.2, the marginal utility of the third avocado is _____.

Marginal utility is total utility divided by the number of units consumed.

The different combinations of any two goods that an individual can afford to purchase, given his income and prices, is shown by:

Which of the following statements about marginal utility is correct?

Marginal utility is _____.

As long as the marginal utilities per dollar obtained from the last unit of all products consumed are the same, _____.

In an indifference map, one would most likely see indifference curves that:

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

The demand curve for a product can be derived from consumer equilibrium by:

The demand curve slopes downward because of:

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

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 _____.

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

As one moves downward on an indifference curve, the:

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

A consumer is in equilibrium when:

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

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

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:

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

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

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

Consumer Choice

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