Question 1

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 2

An indifference curve shows _____.

Accepted Answer

A) the relationship between total and marginal utility 
B) the relationship between the quantity of a good and the maximum attainable satisfaction 
C) the various combinations of two goods that give the consumer the same amount of satisfaction 
D) the relationship between the price and quantity of a good that a consumer is able to purchase 
E) that the quantities of a good that give the consumer maximum satisfaction are directly related to price 
A) the relationship between total and marginal utility 
B) the relationship between the quantity of a good and the maximum attainable satisfaction 
C) the various combinations of two goods that give the consumer the same amount of satisfaction 
D) the relationship between the price and quantity of a good that a consumer is able to purchase 
E) that the quantities of a good that give the consumer maximum satisfaction are directly related to price

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

An indifference map shows _____.

Accepted Answer

A) all combinations of two goods that a consumer can afford to purchase 
B) all combinations of two goods that provide the same level of utility 
C) a set of indifference curves for a representative consumer 
D) all combinations of price and quantity that provide the same level of utility 
E) the combination of goods that a consumer can afford to buy 
A) all combinations of two goods that a consumer can afford to purchase 
B) all combinations of two goods that provide the same level of utility 
C) a set of indifference curves for a representative consumer 
D) all combinations of price and quantity that provide the same level of utility 
E) the combination of goods that a consumer can afford to buy

Question 5

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 6

Buyers who are persuaded to take a product home to try it out, _____.

Accepted Answer

A) are likely to return the product later 
B) are lucky the seller is not concerned about the buyers' credit ratings 
C) like to try the product out 
D) have no money to pay at the time 
E) will be reluctant to return the product when payment is due 
A) are likely to return the product later 
B) are lucky the seller is not concerned about the buyers' credit ratings 
C) like to try the product out 
D) have no money to pay at the time 
E) will be reluctant to return the product when payment is due

Question 7

In labor markets, a change in the wage rate has both an income and a substitution effect.An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker.If the increase in the wage rate causes an individual to work less:

Accepted Answer

A) the income effect will dominate the substitution effect. 
B) the substitution effect will dominate the income effect. 
C) the substitution and the income effects will cancel each other out. 
D) then leisure will be referred to as an inferior good. 
E) the increase in wage rates will cause an increase in the supply of labor. 
A) the income effect will dominate the substitution effect. 
B) the substitution effect will dominate the income effect. 
C) the substitution and the income effects will cancel each other out. 
D) then leisure will be referred to as an inferior good. 
E) the increase in wage rates will cause an increase in the supply of labor.

Question 8

To economists, feelings such as peace, serenity, religious devotion, and self-esteem are captured in the concept known as _____.

Accepted Answer

A) rational self-interest 
B) utility 
C) profit 
D) total revenue 
E) surplus 
A) rational self-interest 
B) utility 
C) profit 
D) total revenue 
E) surplus

Question 9

In effect, people feel that driving is safer than flying and also prefer to do so because of _____.

Accepted Answer

A) anchoring 
B) overconfidence 
C) status quo 
D) loss aversion 
E) familiarity 
A) anchoring 
B) overconfidence 
C) status quo 
D) loss aversion 
E) familiarity

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.This implies the consumer should purchase more apples and fewer bananas in order to maximize utility.

Accepted Answer

A) True 
 B)False

Question 11

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

Accepted Answer

A) marginal utility 
B) total utility 
C) disutility 
D) profit 
E) the law of diminishing marginal utility 
A) marginal utility 
B) total utility 
C) disutility 
D) profit 
E) the law of diminishing marginal utility

Question 12

The law of diminishing marginal utility states that:

Accepted Answer

A) the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed. 
B) as more of a good or service is consumed, ceteris paribus, its marginal utility relative to the marginal utility of other products increases. 
C) as more of a good or service is consumed, its marginal utility decreases. 
D) as more of a good or service is consumed, its marginal utility relative to other products remains the same. 
E) the marginal utility of all products consumed must be equal. 
A) the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed. 
B) as more of a good or service is consumed, ceteris paribus, its marginal utility relative to the marginal utility of other products increases. 
C) as more of a good or service is consumed, its marginal utility decreases. 
D) as more of a good or service is consumed, its marginal utility relative to other products remains the same. 
E) the marginal utility of all products consumed must be equal.

Question 13

As you move along an indifference curve, your total utility increases or decreases depending on whether it's an upward or downward movement.

Accepted Answer

A) True 
 B)False

Question 14

As the price of a good declines, a utility-maximizing consumer will respond by purchasing more of that good.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

If a dinner guest was serious when she said that she could never get enough of your cooking, you would conclude that the marginal utility of your cooking for her was _____.

Accepted Answer

A) negative 
B) decreasing 
C) increasing at an increasing rate 
D) positive 
E) less than total utility 
A) negative 
B) decreasing 
C) increasing at an increasing rate 
D) positive 
E) less than total utility

Question 18

Derek has $1 to spend at the grocery store.An apple, an orange, and a banana cost $.50 each.If Derek's MUA/PA (ratio of marginal utility to price)of an apple is 45, MUO/PO of an orange is 38, and MUB/PB of a banana is 52, he will purchase a(n)_____ first and a(n)_____ second.

Accepted Answer

A) apple;orange 
B) orange;apple 
C) banana;orange 
D) banana;apple 
E) orange;banana 
A) apple;orange 
B) orange;apple 
C) banana;orange 
D) banana;apple 
E) orange;banana

Question 19

Refer to Table 6.2.The law of diminishing marginal utility holds _____.

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) for the first three avocados 
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) for the first three avocados

Question 20

If one were to plot the data from Table 6.1 (with utility on the vertical axis and quantity of the good on the horizontal axis):

Accepted Answer

A) the total utility curve would begin to decline after the second unit of the good. 
B) the marginal utility curve would begin to decline after the third unit of the good. 
C) the marginal utility curve would intersect the horizontal axis at the third unit of the good. 
D) the marginal utility curve would intersect the horizontal axis at the second unit of the good. 
E) the total utility curve would rise from the first unit to the fifth unit. 
A) the total utility curve would begin to decline after the second unit of the good. 
B) the marginal utility curve would begin to decline after the third unit of the good. 
C) the marginal utility curve would intersect the horizontal axis at the third unit of the good. 
D) the marginal utility curve would intersect the horizontal axis at the second unit of the good. 
E) the total utility curve would rise from the first unit to the fifth unit.

Exam 8: Consumer Choice

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

An indifference curve shows _____.

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.

An indifference map shows _____.

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

Buyers who are persuaded to take a product home to try it out, _____.

In labor markets, a change in the wage rate has both an income and a substitution effect.An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker.If the increase in the wage rate causes an individual to work less:

To economists, feelings such as peace, serenity, religious devotion, and self-esteem are captured in the concept known as _____.

In effect, people feel that driving is safer than flying and also prefer to do so because of _____.

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

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

The law of diminishing marginal utility states that:

As you move along an indifference curve, your total utility increases or decreases depending on whether it's an upward or downward movement.

As the price of a good declines, a utility-maximizing consumer will respond by purchasing more of that good.

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

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

If a dinner guest was serious when she said that she could never get enough of your cooking, you would conclude that the marginal utility of your cooking for her was _____.

Derek has $1 to spend at the grocery store.An apple, an orange, and a banana cost $.50 each.If Derek's MUA/PA (ratio of marginal utility to price)of an apple is 45, MUO/PO of an orange is 38, and MUB/PB of a banana is 52, he will purchase a(n)_____ first and a(n)_____ second.

Refer to Table 6.2.The law of diminishing marginal utility holds _____.

If one were to plot the data from Table 6.1 (with utility on the vertical axis and quantity of the good on the horizontal axis):

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

Derek has $1 to spend at the grocery store.An apple, an orange, and a banana cost $.50 each.If Derek's MU_A/P_A (ratio of marginal utility to price)of an apple is 45, MU_O/P_O of an orange is 38, and MU_B/P_B of a banana is 52, he will purchase a(n)_ first and a(n)_ second.