Question 1

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 2

Following a decrease in the price of a good or service, an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.

Accepted Answer

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

Question 3

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 4

The table given below depicts the total utility derived from the consumption of a good. Table 6.1
  According to Table 6.1, the total utility from consuming all 5 units is _____.

Accepted Answer

A) 13 
B) 55 
C) 64 
D) 188 
E) 303 
A) 13 
B) 55 
C) 64 
D) 188 
E) 303

Question 5

One explanation for the status quo bias is an aversion to loss.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Total utility is maximized when _____.

Accepted Answer

A) marginal utility is maximized 
B) marginal utility is the same for all goods consumed 
C) marginal utility per dollar expenditure is maximized 
D) marginal utility per dollar expenditure is the same for all goods consumed 
E) any change in purchasing from good A to good B reduces marginal satisfaction 
A) marginal utility is maximized 
B) marginal utility is the same for all goods consumed 
C) marginal utility per dollar expenditure is maximized 
D) marginal utility per dollar expenditure is the same for all goods consumed 
E) any change in purchasing from good A to good B reduces marginal satisfaction

Question 8

Utility is easy to measure in the real world with recent advances in psychometric technology.

Accepted Answer

A) True 
 B)False

Question 9

A price change triggers the income effect but not the substitution effect.

Accepted Answer

A) True 
 B)False

Question 10

If the consumer purchases only two goods, X and Y, and if (MUx / Px)= (MUy / Py)then the consumer cannot reallocate her expenditures on X and Y to increase her utility, unless she has more money to spend.

Accepted Answer

A) True 
 B)False

Question 11

Marginal utility is negative when total utility is increasing.

Accepted Answer

A) True 
 B)False

Question 12

When marginal utility is positive and increasing, then

Accepted Answer

A) total utility must be negative. 
B) total utility must be increasing at an increasing rate. 
C) total utility must be increasing at a decreasing rate. 
D) total utility is decreasing. 
E) total utility is at its maximum point. 
A) total utility must be negative. 
B) total utility must be increasing at an increasing rate. 
C) total utility must be increasing at a decreasing rate. 
D) total utility is decreasing. 
E) total utility is at its maximum point.

Question 13

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 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

The figure given below represents two indifference curves I1 and I2 of an individual. Figure 6.2   Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?

Accepted Answer

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

Question 16

If a consumer is buying only goods A and B, then he or she will be in equilibrium only when MUa = MUb.

Accepted Answer

A) True 
 B)False

Question 17

The term _____ refers to the idea that the value people place on money depends on where that money comes from.

Accepted Answer

A) decision making 
B) psychological pricing 
C) mental accounting 
D) marketing mix 
E) anchoring 
A) decision making 
B) psychological pricing 
C) mental accounting 
D) marketing mix 
E) anchoring

Question 18

According to Table 6.2, marginal utility is positive _____.

Accepted Answer

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

Question 19

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 20

If a consumer purchases more of a product, then most likely the marginal utility of _____.

Accepted Answer

A) that product decreases 
B) that product remains the same 
C) other products decreases 
D) other products increases 
E) that product increases 
A) that product decreases 
B) that product remains the same 
C) other products decreases 
D) other products increases 
E) that product increases

Exam 8: Consumer Choice

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.

Following a decrease in the price of a good or service, an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.

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

The table given below depicts the total utility derived from the consumption of a good. Table 6.1 According to Table 6.1, the total utility from consuming all 5 units is _____.

One explanation for the status quo bias is an aversion to loss.

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

Total utility is maximized when _____.

Utility is easy to measure in the real world with recent advances in psychometric technology.

A price change triggers the income effect but not the substitution effect.

If the consumer purchases only two goods, X and Y, and if (MUx / Px)= (MUy / Py)then the consumer cannot reallocate her expenditures on X and Y to increase her utility, unless she has more money to spend.

Marginal utility is negative when total utility is increasing.

When marginal utility is positive and increasing, then

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:

When economists describe the theory of consumer choice, they

The figure given below represents two indifference curves I1 and I2 of an individual. Figure 6.2 Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?

If a consumer is buying only goods A and B, then he or she will be in equilibrium only when MUa = MUb.

The term _____ refers to the idea that the value people place on money depends on where that money comes from.

According to Table 6.2, marginal utility is positive _____.

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

If a consumer purchases more of a product, then most likely the marginal utility of _____.

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

If the consumer purchases only two goods, X and Y, and if (MU_x / P_x)= (MU_y / P_y)then the consumer cannot reallocate her expenditures on X and Y to increase her utility, unless she has more money to spend.

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 figure given below represents two indifference curves I₁ and I₂ of an individual. Figure 6.2 Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?

If a consumer is buying only goods A and B, then he or she will be in equilibrium only when MU_a = MU_b.