Question 1

What is utility analysis? What is the goal of this analysis?

Accepted Answer

The answer of What is utility analysis? What is the...

Question 2

To remain in consumer optimum

Accepted Answer

A)  a price increase requires an increase in consumption. 
B)  a price decrease requires an increase in consumption. 
C)  a price decrease requires a decrease in consumption. 
D)  prices must remain static.

Question 3

-Use the above figure. When the budget line rotates from "b" to "c"

Accepted Answer

A)  the price of product J increases. 
B)  the price of product J decreases. 
C)  the price of product K increases. 
D)  the price of product K decreases.

Question 4

-Using the above figure, we can conclude that

Accepted Answer

A)  the consumer will purchase goods at combination M. 
B)  the consumer is indifferent between J and M. 
C)  K is the optimal combination of goods. 
D)  L is preferred to K.

Question 5

Which of the following best describes the consumer optimum?

Accepted Answer

A)  MUa/Pa = TUb/Pb 
B)  MUa/TUa = Pa 
C)  MUa/Pa = MUb/Pb = . . . = MUz/Pz. 
D)  change in TU/change in P = MU

Question 6

The consumer optimum is the set of goods and services, subject to the limited income of the consumer, that

Accepted Answer

A)  the consumer can afford to buy. 
B)  is characterized by zero marginal utility on each good and service. 
C)  maximizes the level of satisfaction for each consumer. 
D)  is characterized by increasing marginal utility.

Question 7

When you tell your mother, "I'll never be tired of your cooking," you are saying the

Accepted Answer

A)  total utility of her cooking to you is constant. 
B)  total utility of her cooking to you is equal to 1. 
C)  marginal utility of her cooking to you is 0. 
D)  marginal utility of her cooking to you will never be 0.

Question 8

In order for a consumer to choose between two different goods, he has to take into consideration the

Accepted Answer

A)  marginal utility of production. 
B)  marginal utility divided by the price. 
C)  marginal utility plus the price. 
D)  total utility divided by price.

Question 9

If the commercial is TRUE that every additional bite of food tastes as good as the first, the marginal utility from consuming more of the advertised product must be

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero.

Question 10

-Refer to the above figure. Given the indifference map and budget constraint represented above, what are all possible points at which that the individual can consume?

Accepted Answer

A)  points A and C only 
B)  point B only 
C)  point D only 
D)  points A, B and C only

Question 11

The utility that people experience from the consumption of a good depends on

Accepted Answer

A)  their income level. 
B)  their tastes and preferences. 
C)  total sales of the good. 
D)  how much shopping time they spent obtaining the good.

Question 12

-In the above table, Carl experiences diminishing marginal utility after consuming how many beers?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Question 13

Economists infer that a consumer receives more utility from one good than another by

Accepted Answer

A)  giving consumers surveys about the utility they receive from the goods. 
B)  observing the consumer's behavior. 
C)  the logic of the models used. 
D)  means of introspection and speculation.

Question 14

-Refer to the above figure. Which point represents the highest level of utility?

Accepted Answer

A)  Point A 
B)  Point B 
C)  Point C 
D)  Point D

Question 15

Suppose a consumer is at an optimum, consuming 6 hamburgers a week at a price of $1.50 each and 10 donuts a week at 50 cents a donut. If the price of a hamburger increases to $2.00, what will the consumer do to arrive at a new equilibrium? Why?

Accepted Answer

The answer of Suppose a consumer is at an optimum,...

Question 16

If the price of a good is zero, a rational consumer will

Accepted Answer

A)  buy all of the units available. 
B)  not consume the good at all since it must not be valuable if it has a zero price. 
C)  stop consuming the good when marginal utility is zero. 
D)  consume the good up to the point where total utility is just below zero.

Question 17

Using indifference curve analysis, an optimum is characterized by

Accepted Answer

A)  the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. 
B)  the marginal rate of substitution being equal to one. 
C)  the marginal rate of substitution being equal to zero. 
D)  the marginal rate of substitution being equal to the ratio of the prices of the two goods.

Question 18

The average demand curve slopes downward due to all of the following EXCEPT

Accepted Answer

A)  the law of increasing relative costs. 
B)  the laws of diminishing marginal utility. 
C)  the real-income effect. 
D)  the principle of substitution.

Question 19

The information on a demand curve is also on a(n)

Accepted Answer

A)  indifference curve. 
B)  budget constraint. 
C)  income-consumption curve. 
D)  price-consumption curve.

Question 20

When you buy something, you do so because of the satisfaction you expect to receive from having and using that good. Another term that can be used for satisfaction is

Accepted Answer

A)  need. 
B)  purchasing power. 
C)  utility. 
D)  price elasticity.

Exam 20: Consumer Choice