Question 1

The marginal utility from the first burrito Bobby consumes is larger than the marginal utility from the first taco Bobby consumes. As a result

Accepted Answer

A)  tacos are an inferior good for Bobby. 
B)  Bobby will never consume tacos. 
C)  Bobby will consume a taco only if the price of a taco is less than the price of a burrito. 
D)  burritos and tacos are substitute goods for Bobby.

Question 2

Pizza Pepsi 
-The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. A slice of pizza costs $4 and a can of Pepsi $2. Suppose Priscilla has $12 to spend. If the price of pizza decreases, Priscilla's preferences (her marginal utility schedule) for pizza

Accepted Answer

A)  will increase. 
B)  will decrease. 
C)  will not change. 
D)  may increase or decrease depending on what happens to the price of Pepsi.

Question 3

The cost of basics like milk, bread, potatoes and bananas has jumped in the past year, forcing families to nix luxuries, steer away from organic goods and buy more house brands. "I think it's affecting everybody," said Elize Joseph 48, a nursing attendant. "To spend $40 on groceries is nothing. It doesn't go a long way." When food prices increase, what will happen to Elize's total utility?

Accepted Answer

A)  It increases. 
B)  It stays the same. 
C)  It decreases. 
D)  It cannot be determined without knowing her total income.

Question 4

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy buys

Accepted Answer

A)  more cookies. 
B)  fewer cookies. 
C)  more hot chocolate. 
D)  an equal amount of cookies and hot chocolate.

Question 5

Which of the following statements is TRUE?

Accepted Answer

A)  Marginal utility theory predicts that an increase in a consumer's income increases consumption of all goods. 
B)  It is possible to derive the law of demand-that a higher price decreases the quantity demanded-using marginal utility theory. 
C)  Marginal utility theory makes no prediction about a consumer's responses to hikes in the prices of the goods and services he or she consumes. 
D)  Marginal utility theory predicts that all goods are normal goods and that all goods are substitutes for each other.

Question 6

If Pete enjoys his first pancake of the morning much more than his fifth pancake of the morning, he is exhibiting

Accepted Answer

A)  utility maximizing behavior. 
B)  diminishing marginal utility. 
C)  irrational behavior. 
D)  diminishing total utility.

Question 7

-The table above gives Jane's total utility from magazines and CDs. What is the marginal utility of the sixth CD?

Accepted Answer

A)  150 units 
B)  100 units 
C)  50 units 
D)  5 units

Question 8

The table above gives Jane's total utility from magazines and CDs. The price of a magazine is $4 and the price of a CD is $10. Which of the following CORRECTLY illustrates the principle of diminishing marginal utility? The fact that

Accepted Answer

A)  the sixth magazine has less marginal utility than the sixth CD. 
B)  Jane's marginal utility per dollar from the second magazine is the same as her marginal utility per dollar from the third CD. 
C)  the marginal utility per dollar from the sixth magazine is less than the total utility from six magazines. 
D)  the marginal utility of the third CD is less than the marginal utility of second CD.

Question 9

-The table above gives Jane's total utility from magazines and CDs. The price of a magazine is $4 and the price of a CD is $10 and Jane's budget is $88. What is Jane's marginal utility per dollar spent on magazines at her consumer equilibrium?

Accepted Answer

A)  36 units 
B)  15 units 
C)  9 units 
D)  5 units

Question 10

Tommy buys only soda and pizza and is buying the amounts that maximize his utility. The marginal utility from a soda is 5 and the price of a soda is $1. The marginal utility from a slice of pizza is 10. The price of a slice of pizza must be

Accepted Answer

A)  $10. 
B)  $2. 
C)  $1. 
D)  some amount that cannot be calculated without more information.

Question 11

The paradox of value can be resolved by distinguishing between

Accepted Answer

A)  quantity demanded and quantity supplied. 
B)  supply and quantity supplied. 
C)  normative and positive statements. 
D)  total utility and marginal utility.

Question 12

Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple

Accepted Answer

A)  equals his marginal utility from his 14th loaf of bread. 
B)  is twice his marginal utility from his 14th loaf of bread. 
C)  is half his marginal utility from his 14th loaf of bread. 
D)  is such that his total utility from apples equals his total utility from bread.

Question 13

Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys ________.

Accepted Answer

A)  the combination that gives him equal total utility from pies and soda 
B)  2 pies and 2 cans of soda 
C)  only sodas because they are less expensive 
D)  the combination that gives him the same marginal utility per dollar spent on pies as on soda

Question 14

As consumption increases, total utility increases

Accepted Answer

A)  at an increasing rate. 
B)  at a decreasing rate. 
C)  at a constant rate. 
D)  and marginal utility increases.

Question 15

Keesha consumes only milkshakes and burgers. Once at her consumer equilibrium, what would happen if she changed her consumption by purchasing one more milkshake and one fewer burger?

Accepted Answer

A)  The marginal utility of a burger would decrease. 
B)  The marginal utility of a milkshake would increase. 
C)  The total utility from the consumption of both goods would decrease. 
D)  all of the above

Question 16

The predictions of marginal utility theory

Accepted Answer

A)  contradict the idea that the demand curve slopes downward. 
B)  support the idea that the demand curve slopes downward. 
C)  support the idea that the supply curve slopes upward. 
D)  contradict the idea that the supply curve slopes upward.

Question 17

Marginal utility theory predicts that a rise in the price of a banana results in

Accepted Answer

A)  the demand curve for bananas shifting rightward. 
B)  the demand curve for bananas shifting leftward. 
C)  a movement upward along the demand curve for bananas. 
D)  a movement downward along the demand curve for bananas.

Question 18

-The above table gives the total utility that Homer obtains from consuming various quantities of chocolate chip cookies. The marginal utility from the third pound of cookies is

Accepted Answer

A)  3. 
B)  4. 
C)  9. 
D)  12.

Question 19

Joe consumes pizza and movies. He is currently spending his entire income and his marginal utility of pizza is 15 and his marginal utility of movies is 10. If the price of a pizza is $10 and the price of a movie is $5, then to maximize his utility Joe should

Accepted Answer

A)  increase consumption of pizza and decrease consumption of movies. 
B)  increase consumption of movies and decrease consumption of pizza. 
C)  not change his current bundle of movies and pizza. 
D)  increase consumption of both goods.

Question 20

Pizza Pepsi 
-The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. A slice of pizza costs $4 and a can of Pepsi $2. Suppose Priscilla has $12 to spend. Which of the following leads Priscilla to switch her choices of pizza and Pepsi?

Accepted Answer

A)  an increase in the price of pizza to $6 per slice 
B)  a decrease in the price of Pepsi to $1 per can 
C)  an increase in Priscilla's income 
D)  All of the above will cause Priscilla to change her choices.

Exam 8: Utility and Demand