Question 1

Why does the paradox of value between diamonds and water arise?

Accepted Answer

A)  because water has a low price and a low total utility, while diamonds have a high price and a high total utility 
B)  because water has a low price and a low marginal utility, while diamonds have a high price and a high marginal utility 
C)  because necessities like water are higher priced than luxuries like diamonds 
D)  because diamonds have a higher value to people even though water is essential to life 
E)  because water has a low price and a low total utility, while diamonds have a high price but also a low total utility 
A)  because water has a low price and a low total utility, while diamonds have a high price and a high total utility 
B)  because water has a low price and a low marginal utility, while diamonds have a high price and a high marginal utility 
C)  because necessities like water are higher priced than luxuries like diamonds 
D)  because diamonds have a higher value to people even though water is essential to life 
E)  because water has a low price and a low total utility, while diamonds have a high price but also a low total utility

Question 2

The maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized is known as

Accepted Answer

A)  demand. 
B)  marginal benefit. 
C)  quantity demanded. 
D)  total utility. 
E)  marginal utility. 
A)  demand. 
B)  marginal benefit. 
C)  quantity demanded. 
D)  total utility. 
E)  marginal utility.

Question 3

A budget line shows the

Accepted Answer

A)  limits to production possibilities. 
B)  limits to production opportunities. 
C)  slope of the demand curve. 
D)  limits to consumption possibilities. 
E)  way the demand curve shifts if the consumer's budget changes. 
A)  limits to production possibilities. 
B)  limits to production opportunities. 
C)  slope of the demand curve. 
D)  limits to consumption possibilities. 
E)  way the demand curve shifts if the consumer's budget changes.

Question 4

Samantha has a budget of $40 and buys beef jerky and fried pork rinds.Her budget does not change and the price of both beef jerky and fried pork rinds increases.As a result,

Accepted Answer

A)  Samantha's consumption possibilities have decreased. 
B)  Samantha's budget line shifts inward. 
C)  Samantha can still buy the combination of beef jerky and fried pork rinds she was initially consuming because her budget did not change. 
D)  Answers A and B are correct. 
E)  Answers A and C are correct. 
A)  Samantha's consumption possibilities have decreased. 
B)  Samantha's budget line shifts inward. 
C)  Samantha can still buy the combination of beef jerky and fried pork rinds she was initially consuming because her budget did not change. 
D)  Answers A and B are correct. 
E)  Answers A and C are correct.

Question 5

If a consumer's budget increases,the budget line

Accepted Answer

A)  rotates outward and its slope changes. 
B)  rotates inward and its slope changes. 
C)  shifts outward and its slope does not change. 
D)  shifts inward and its slope does not change. 
E)  does not change. 
A)  rotates outward and its slope changes. 
B)  rotates inward and its slope changes. 
C)  shifts outward and its slope does not change. 
D)  shifts inward and its slope does not change. 
E)  does not change.

Question 6

-Susan can watch movies or attend plays.The table above gives combinations of movies and plays that are on her budget line.If the price of a movie is $10,then her budget for movies and plays is

Accepted Answer

A)  $10 per month. 
B)  $50 per month. 
C)  $60 per month. 
D)  $120 per month. 
E)  unknown from the information. 
A)  $10 per month. 
B)  $50 per month. 
C)  $60 per month. 
D)  $120 per month. 
E)  unknown from the information.

Question 7

-The figure above shows a consumer's budget line between sodas and DVD rentals.Point b represents an

Accepted Answer

A)  affordable combination of sodas and DVDs that spends the entire budget. 
B)  affordable combination of sodas and DVDs that does not spend the entire budget. 
C)  unaffordable combination of sodas and DVDs. 
D)  affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure. 
E)  None of the above answers is correct. 
A)  affordable combination of sodas and DVDs that spends the entire budget. 
B)  affordable combination of sodas and DVDs that does not spend the entire budget. 
C)  unaffordable combination of sodas and DVDs. 
D)  affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure. 
E)  None of the above answers is correct.

Question 8

The indifference curve/budget line diagram concludes that Jim is definitely in equilibrium when he is

Accepted Answer

A)  spending all his budget. 
B)  saving some of his budget. 
C)  consuming the combination of goods and services that is affordable and on the highest attainable indifference curve. 
D)  consuming a combination of goods and services that is on an indifference curve. 
E)  None of the above answers is correct. 
A)  spending all his budget. 
B)  saving some of his budget. 
C)  consuming the combination of goods and services that is affordable and on the highest attainable indifference curve. 
D)  consuming a combination of goods and services that is on an indifference curve. 
E)  None of the above answers is correct.

Question 9

Why do consumers prefer higher indifference curves?

Accepted Answer

When comparing two indifference curves,i

Question 10

If Sarah gets 40 units of utility from her first piece of toast for breakfast and a total of 70 units from two pieces of toast,then the marginal utility of the first piece is ________ units and the marginal utility of the second piece is ________ units.

Accepted Answer

A)  40; 70 
B)  40; 110 
C)  40; 30 
D)  40; 35 
E)  70; 40 
A)  40; 70 
B)  40; 110 
C)  40; 30 
D)  40; 35 
E)  70; 40

Question 11

Marginal utility is the

Accepted Answer

A)  change in total utility that results from a one-unit increase in the quantity of a good consumed. 
B)  total benefit from the consumption of a good or service. 
C)  quantity of a good a consumer prefers. 
D)  average utility per unit consumed. 
E)  change in total utility that results from a one dollar increase in the price of a good consumed. 
A)  change in total utility that results from a one-unit increase in the quantity of a good consumed. 
B)  total benefit from the consumption of a good or service. 
C)  quantity of a good a consumer prefers. 
D)  average utility per unit consumed. 
E)  change in total utility that results from a one dollar increase in the price of a good consumed.

Question 12

-Sam's total utility for bananas is in the table above.Sam's marginal utility from the fourth banana is

Accepted Answer

A)  100 
B)  25 
C)  20 
D)  15 
E)  It cannot be determined from the given information. 
A)  100 
B)  25 
C)  20 
D)  15 
E)  It cannot be determined from the given information.

Question 13

Moving along an indifference curve the

Accepted Answer

A)  marginal rate of substitution is constant. 
B)  consumer does not prefer one consumption point to another. 
C)  marginal rate of substitution is equal to 0. 
D)  consumer prefers some of the consumption points to others. 
E)  marginal rate of substitution for a good increases as more of the good is consumed. 
A)  marginal rate of substitution is constant. 
B)  consumer does not prefer one consumption point to another. 
C)  marginal rate of substitution is equal to 0. 
D)  consumer prefers some of the consumption points to others. 
E)  marginal rate of substitution for a good increases as more of the good is consumed.

Question 14

A budget line

Accepted Answer

A)  shows the limits to what can be consumed. 
B)  has a slope equal to a relative price. 
C)  rotates or shifts only when the consumer's budget changes. 
D)  Answers B and C are both correct. 
E)  Answers A and B are both correct. 
A)  shows the limits to what can be consumed. 
B)  has a slope equal to a relative price. 
C)  rotates or shifts only when the consumer's budget changes. 
D)  Answers B and C are both correct. 
E)  Answers A and B are both correct.

Question 15

If the total utility of 2 bags of chips is 25,the total utility of 3 bags is 33,and the total utility of 4 bags is 40 units,then the marginal utility of the 3rd and 4th bags are

Accepted Answer

A)  8 and 7, respectively. 
B)  12.5 and 11, respectively. 
C)  11 and 10, respectively. 
D)  58 and 73, respectively. 
E)  33 and 40, respectively. 
A)  8 and 7, respectively. 
B)  12.5 and 11, respectively. 
C)  11 and 10, respectively. 
D)  58 and 73, respectively. 
E)  33 and 40, respectively.

Question 16

In a month,Samantha consumes the quantity of lobster dinners so that her marginal utility from a lobster dinner is 500 units.The price of a lobster dinner is $25.She also is consuming the quantity of spaghetti dinners so that its marginal utility is 300 units,while its price is $15.Samantha is allocating her entire budget.What should she do to maximize her total utility?

Accepted Answer

A)  consume more lobster dinners and fewer spaghetti dinners 
B)  consume more spaghetti dinners and fewer lobster dinners 
C)  consume the current combination of lobster and spaghetti dinners 
D)  consume fewer lobster dinners and fewer spaghetti dinners 
E)  Not enough information is given to answer the question. 
A)  consume more lobster dinners and fewer spaghetti dinners 
B)  consume more spaghetti dinners and fewer lobster dinners 
C)  consume the current combination of lobster and spaghetti dinners 
D)  consume fewer lobster dinners and fewer spaghetti dinners 
E)  Not enough information is given to answer the question.

Question 17

Timmy makes $100 per week as a taxidermist.He spends all this income to buy pizza and hair gel.The price of a pizza is $10 and the price of a bottle of hair gel is $4.If Timmy buys 5 bottles of hair gel,then he buys ________ pizzas.

Accepted Answer

A)  10 
B)  4 
C)  8 
D)  20 
E)  None of the above answers is correct. 
A)  10 
B)  4 
C)  8 
D)  20 
E)  None of the above answers is correct.

Question 18

-Tris is shopping for pants and belts.He has a budget of $100.The price of a pair of pants is $20 and the price of a belt is $5.His marginal utility schedules are above.What combination of pants and belts does Tris buy? Explain your answer.

Accepted Answer

Tris buys 4 pairs of pants and 4 belts b

Question 19

-The table above shows Buffy's utility from wooden stakes and cloves of garlic.If Buffy increases her consumption of wooden stakes from 4 to 5 stakes,her marginal utility from the 5th stake is

Accepted Answer

A)  65. 
B)  7. 
C)  58. 
D)  7 ÷ 5 = 1.29. 
E)  None of the above answers is correct. 
A)  65. 
B)  7. 
C)  58. 
D)  7 ÷ 5 = 1.29. 
E)  None of the above answers is correct.

Question 20

-The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah is NOT able to purchase the combination of

Accepted Answer

A)  50 roses bushes and 0 pieces of sushi. 
B)  20 rose bushes and 200 pieces of sushi. 
C)  0 roses bushes and 300 pieces of sushi. 
D)  30 roses bushes and 300 pieces of sushi. 
E)  None of the above answers is correct because Sarah is able to purchase all the listed combinations of roses and sushi. 
A)  50 roses bushes and 0 pieces of sushi. 
B)  20 rose bushes and 200 pieces of sushi. 
C)  0 roses bushes and 300 pieces of sushi. 
D)  30 roses bushes and 300 pieces of sushi. 
E)  None of the above answers is correct because Sarah is able to purchase all the listed combinations of roses and sushi.

Why does the paradox of value between diamonds and water arise?

The maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized is known as

A budget line shows the

Samantha has a budget of $40 and buys beef jerky and fried pork rinds.Her budget does not change and the price of both beef jerky and fried pork rinds increases.As a result,

If a consumer's budget increases,the budget line

-Susan can watch movies or attend plays.The table above gives combinations of movies and plays that are on her budget line.If the price of a movie is $10,then her budget for movies and plays is

-The figure above shows a consumer's budget line between sodas and DVD rentals.Point b represents an

The indifference curve/budget line diagram concludes that Jim is definitely in equilibrium when he is

Why do consumers prefer higher indifference curves?

If Sarah gets 40 units of utility from her first piece of toast for breakfast and a total of 70 units from two pieces of toast,then the marginal utility of the first piece is units and the marginal utility of the second piece is units.

Marginal utility is the

-Sam's total utility for bananas is in the table above.Sam's marginal utility from the fourth banana is

Moving along an indifference curve the

A budget line

If the total utility of 2 bags of chips is 25,the total utility of 3 bags is 33,and the total utility of 4 bags is 40 units,then the marginal utility of the 3rd and 4th bags are

Timmy makes $100 per week as a taxidermist.He spends all this income to buy pizza and hair gel.The price of a pizza is $10 and the price of a bottle of hair gel is $4.If Timmy buys 5 bottles of hair gel,then he buys ________ pizzas.

-Tris is shopping for pants and belts.He has a budget of $100.The price of a pair of pants is $20 and the price of a belt is $5.His marginal utility schedules are above.What combination of pants and belts does Tris buy? Explain your answer.

-The table above shows Buffy's utility from wooden stakes and cloves of garlic.If Buffy increases her consumption of wooden stakes from 4 to 5 stakes,her marginal utility from the 5th stake is

-The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah is NOT able to purchase the combination of

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 13: Consumer Choice and Demand

Why does the paradox of value between diamonds and water arise?

The maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized is known as

A budget line shows the

Samantha has a budget of $40 and buys beef jerky and fried pork rinds.Her budget does not change and the price of both beef jerky and fried pork rinds increases.As a result,

If a consumer's budget increases,the budget line

-Susan can watch movies or attend plays.The table above gives combinations of movies and plays that are on her budget line.If the price of a movie is $10,then her budget for movies and plays is

-The figure above shows a consumer's budget line between sodas and DVD rentals.Point b represents an

The indifference curve/budget line diagram concludes that Jim is definitely in equilibrium when he is

Why do consumers prefer higher indifference curves?

If Sarah gets 40 units of utility from her first piece of toast for breakfast and a total of 70 units from two pieces of toast,then the marginal utility of the first piece is ________ units and the marginal utility of the second piece is ________ units.

Marginal utility is the

-Sam's total utility for bananas is in the table above.Sam's marginal utility from the fourth banana is

Moving along an indifference curve the

A budget line

If the total utility of 2 bags of chips is 25,the total utility of 3 bags is 33,and the total utility of 4 bags is 40 units,then the marginal utility of the 3rd and 4th bags are

Timmy makes $100 per week as a taxidermist.He spends all this income to buy pizza and hair gel.The price of a pizza is $10 and the price of a bottle of hair gel is $4.If Timmy buys 5 bottles of hair gel,then he buys ________ pizzas.

-Tris is shopping for pants and belts.He has a budget of $100.The price of a pair of pants is $20 and the price of a belt is $5.His marginal utility schedules are above.What combination of pants and belts does Tris buy? Explain your answer.

-The table above shows Buffy's utility from wooden stakes and cloves of garlic.If Buffy increases her consumption of wooden stakes from 4 to 5 stakes,her marginal utility from the 5th stake is

-The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah is NOT able to purchase the combination of

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

If Sarah gets 40 units of utility from her first piece of toast for breakfast and a total of 70 units from two pieces of toast,then the marginal utility of the first piece is units and the marginal utility of the second piece is units.