Question 1

Which of the following sentences based on the findings of neuroeconomics is true?

Accepted Answer

A) Logical decision-making takes place in the limbic system. 
B) Emotional decision-making takes place in the pre-frontal cortex. 
C) The pre-frontal cortex confuses the logical side of the brain by bringing in emotions, and in some cases it takes over and demands immediate gratification. 
D) Adults have greater activity in their frontal lobes and lower activity in their amygdala than do teenagers. 
E) The amygdala takes a long-term perspective on the decision-making, looking at logical cost-benefit comparisons. 
A) Logical decision-making takes place in the limbic system. 
B) Emotional decision-making takes place in the pre-frontal cortex. 
C) The pre-frontal cortex confuses the logical side of the brain by bringing in emotions, and in some cases it takes over and demands immediate gratification. 
D) Adults have greater activity in their frontal lobes and lower activity in their amygdala than do teenagers. 
E) The amygdala takes a long-term perspective on the decision-making, looking at logical cost-benefit comparisons.

Question 2

A ten-year-old boy spent his allowance on a soccer ball and a baseball glove.He said he could not be happier buying anything else.The price of the ball was $5, while the price of the glove was $10.If the marginal utility he received from the ball was 15 utils, then:

Accepted Answer

A) the marginal utility he received from expenditure on the glove was 3 utils. 
B) the marginal utility he received from expenditure on the glove was 30 utils. 
C) the total utility per dollar he received from expenditure on the glove was 3 utils. 
D) the total utility per dollar he received from expenditure on the glove was 10 utils. 
E) the marginal utility he received from the expenditure of the glove was 10 utils 
A) the marginal utility he received from expenditure on the glove was 3 utils. 
B) the marginal utility he received from expenditure on the glove was 30 utils. 
C) the total utility per dollar he received from expenditure on the glove was 3 utils. 
D) the total utility per dollar he received from expenditure on the glove was 10 utils. 
E) the marginal utility he received from the expenditure of the glove was 10 utils

Question 3

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 4

_____ is a measure of the total satisfaction derived from consuming a quantity of some good or service.

Accepted Answer

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

Question 5

A consumer is in equilibrium when the slope of his or her indifference curve is equal to his or her budget constraint.

Accepted Answer

A) True 
 B)False

Question 6

The income and substitution effects of a price change occur because:

Accepted Answer

A) consumer incomes are not constant. 
B) consumer substitution rates are not constant. 
C) income and substitution effects never occur simultaneously. 
D) of diminishing marginal utility and the equimarginal principle. 
E) of increasing marginal utility and the equimarginal principle. 
A) consumer incomes are not constant. 
B) consumer substitution rates are not constant. 
C) income and substitution effects never occur simultaneously. 
D) of diminishing marginal utility and the equimarginal principle. 
E) of increasing marginal utility and the equimarginal principle.

Question 7

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 8

According to neuroeconomists, our logical brain knows we should spend as much as possible when we have money.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

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.

Question 12

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 13

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 14

When the price of a good changes, the substitution effect occurs because:

Accepted Answer

A) the consumers' real income measured in terms of that good changes. 
B) the relative price of that good changes compared to other goods in the consumption bundle. 
C) the total utility of that good changes. 
D) the marginal utility of that good changes. 
E) consumers have an incentive to substitute irrational behavior for rational behavior. 
A) the consumers' real income measured in terms of that good changes. 
B) the relative price of that good changes compared to other goods in the consumption bundle. 
C) the total utility of that good changes. 
D) the marginal utility of that good changes. 
E) consumers have an incentive to substitute irrational behavior for rational behavior.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Suppose two out for coffee and donuts at the local donut store.The first donut you eat tastes incredibly good.The second one also tastes pretty good.The third donut seems just okay.With the fourth donut you are turning somewhat green.The fifth donut makes you sick.Your friend, an economist, describes your experience as the principle of:

Accepted Answer

A) utility maximization. 
B) irrationality in consumer behavior. 
C) instant gratification. 
D) differing tastes and preferences. 
E) diminishing marginal utility. 
A) utility maximization. 
B) irrationality in consumer behavior. 
C) instant gratification. 
D) differing tastes and preferences. 
E) diminishing marginal utility.

Question 17

As the price of a good increases, the marginal utility per dollar spent on that good will also increase.

Accepted Answer

A) True 
 B)False

Question 18

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 19

The demand curve for a product slopes downward and to the right because:

Accepted Answer

A) total utility decreases as more of the product is consumed. 
B) total utility derived from both, the product and its substitutes is the same. 
C) marginal utility of the product diminishes as more of the product is consumed. 
D) there are no substitutes for the product. 
E) when the price falls, the income effect causes consumers to buy less of the product. 
A) total utility decreases as more of the product is consumed. 
B) total utility derived from both, the product and its substitutes is the same. 
C) marginal utility of the product diminishes as more of the product is consumed. 
D) there are no substitutes for the product. 
E) when the price falls, the income effect causes consumers to buy less of the product.

Question 20

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

Exam 8: Consumer Choice

Which of the following sentences based on the findings of neuroeconomics is true?

A ten-year-old boy spent his allowance on a soccer ball and a baseball glove.He said he could not be happier buying anything else.The price of the ball was $5, while the price of the glove was $10.If the marginal utility he received from the ball was 15 utils, then:

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

_____ is a measure of the total satisfaction derived from consuming a quantity of some good or service.

A consumer is in equilibrium when the slope of his or her indifference curve is equal to his or her budget constraint.

The income and substitution effects of a price change occur because:

According to neuroeconomists, our logical brain knows we should spend as much as possible when we have money.

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?

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

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

When the price of a good changes, the substitution effect occurs because:

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

As the price of a good increases, the marginal utility per dollar spent on that good will also increase.

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

The demand curve for a product slopes downward and to the right because:

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.

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

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