Question 1

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 2

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 3

If all consumers had identical preferences, then their marginal utility schedules would be the same.

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

Suppose a budget line is drawn with X on the horizontal axis and Y on the vertical axis.A decrease in the price of X will cause:

Accepted Answer

A) an increase in the vertical intercept and no change in the horizontal intercept. 
B) a decrease in the vertical intercept and no change in the horizontal intercept. 
C) an increase in the horizontal intercept and no change in the vertical intercept. 
D) a decrease in the horizontal intercept and no change in the vertical intercept. 
E) a parallel, rightward shift of the budget line. 
A) an increase in the vertical intercept and no change in the horizontal intercept. 
B) a decrease in the vertical intercept and no change in the horizontal intercept. 
C) an increase in the horizontal intercept and no change in the vertical intercept. 
D) a decrease in the horizontal intercept and no change in the vertical intercept. 
E) a parallel, rightward shift of the budget line.

Question 6

Other things equal, if there is a price increase of a good measured on the vertical axis, the budget constraint will shift outward.

Accepted Answer

A) True 
 B)False

Question 7

_____ is the lack of satisfaction yielded after consuming too much of the same product.

Accepted Answer

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

Question 8

According to Table 6.1, marginal utility _____.

Accepted Answer

A) increases from the first unit to the third unit and then declines 
B) decreases from the third unit to the fifth unit only 
C) increases from the first unit to the third unit and decreases from the third unit to the fifth unit 
D) decreases from the first unit to the fifth unit 
E) increases from the fourth unit 
A) increases from the first unit to the third unit and then declines 
B) decreases from the third unit to the fifth unit only 
C) increases from the first unit to the third unit and decreases from the third unit to the fifth unit 
D) decreases from the first unit to the fifth unit 
E) increases from the fourth unit

Question 9

The study of decision making that assumes people are rational in a broad sense, even if they do not have complete and perfect information is called _____.

Accepted Answer

A) rational economics 
B) reasonable economics 
C) understandable economics 
D) behavioral economics 
E) optimal economics 
A) rational economics 
B) reasonable economics 
C) understandable economics 
D) behavioral economics 
E) optimal economics

Question 10

The law of diminishing marginal utility states that as additional units are consumed, satisfaction per unit will decline.

Accepted Answer

A) True 
 B)False

Question 11

When total utility is at a maximum, marginal 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.

Question 12

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 13

Neuroeconomics suggests that the frontal lobe carries out most decision making and strategic thinking takes place in the prefrontal cortex.

Accepted Answer

A) True 
 B)False

Question 14

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 15

If total utility increases by smaller and smaller amounts as more units of a product are consumed, then marginal utility is:

Accepted Answer

A) decreasing and is a negative amount. 
B) decreasing and is a positive amount. 
C) zero. 
D) increasing and is a negative amount. 
E) increasing and is a positive amount. 
A) decreasing and is a negative amount. 
B) decreasing and is a positive amount. 
C) zero. 
D) increasing and is a negative amount. 
E) increasing and is a positive amount.

Question 16

The shorter the period of time being considered, the less rapidly will diminishing marginal utility set in.

Accepted Answer

A) True 
 B)False

Question 17

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 Figure 6.1, which of the following is incorrect?

Accepted Answer

A) The consumer prefers B to A 
B) The consumer is not indifferent between A and B 
C) The consumer is indifferent between D and E 
D) Indifference curve I2 should cross indifference curve I1 as shown 
E) The consumer is indifferent between B and C 
A) The consumer prefers B to A 
B) The consumer is not indifferent between A and B 
C) The consumer is indifferent between D and E 
D) Indifference curve I2 should cross indifference curve I1 as shown 
E) The consumer is indifferent between B and C

Question 18

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 19

According to Table 6.1, which of the following units of the good yields disutility?

Accepted Answer

A) Units 1 and 4 
B) Units 2 and 3 
C) Unit 3 
D) Units 3, 4, and 5 
E) Units 4 and 5 
A) Units 1 and 4 
B) Units 2 and 3 
C) Unit 3 
D) Units 3, 4, and 5 
E) Units 4 and 5

Question 20

Jason is trying to decide whether to buy a bagel or a muffin for breakfast.The bagel costs $.50 and has a marginal utility of 5.The muffin costs $1 and has a marginal utility of 20.Which should he buy, and why?

Accepted Answer

A) The muffin, because it has a higher marginal utility 
B) The muffin, because it has a lower marginal utility per dollar 
C) The bagel, because it costs less 
D) The bagel, because it has a higher marginal utility per dollar 
E) The muffin, because it has a higher marginal utility per dollar 
A) The muffin, because it has a higher marginal utility 
B) The muffin, because it has a lower marginal utility per dollar 
C) The bagel, because it costs less 
D) The bagel, because it has a higher marginal utility per dollar 
E) The muffin, because it has a higher marginal utility per dollar

Exam 8: Consumer Choice

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

According to Table 6.2, marginal utility is negative _____.

If all consumers had identical preferences, then their marginal utility schedules would be the same.

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

Suppose a budget line is drawn with X on the horizontal axis and Y on the vertical axis.A decrease in the price of X will cause:

Other things equal, if there is a price increase of a good measured on the vertical axis, the budget constraint will shift outward.

_____ is the lack of satisfaction yielded after consuming too much of the same product.

According to Table 6.1, marginal utility _____.

The study of decision making that assumes people are rational in a broad sense, even if they do not have complete and perfect information is called _____.

The law of diminishing marginal utility states that as additional units are consumed, satisfaction per unit will decline.

When total utility is at a maximum, marginal utility is:

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:

Neuroeconomics suggests that the frontal lobe carries out most decision making and strategic thinking takes place in the prefrontal cortex.

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?

If total utility increases by smaller and smaller amounts as more units of a product are consumed, then marginal utility is:

The shorter the period of time being considered, the less rapidly will diminishing marginal utility set in.

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 Figure 6.1, which of the following is incorrect?

Marginal utility diminishes more quickly:

According to Table 6.1, which of the following units of the good yields disutility?

Jason is trying to decide whether to buy a bagel or a muffin for breakfast.The bagel costs $.50 and has a marginal utility of 5.The muffin costs $1 and has a marginal utility of 20.Which should he buy, and why?

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

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