Question 1

An indifference curve

Accepted Answer

A)  must be convex to the origin.
B)  must be concave to the origin.
C)  may be convex or concave to the origin.
D)  depends on the prices of the products and the consumer's income.

Question 2

The law of diminishing marginal utility implies that the marginal utility for a particular product

Accepted Answer

A)  remains constant, regardless of how much of the product is consumed.
B)  remains constant as long as the product is still considered useful.
C)  decreases as more of the product is consumed.
D)  increases as more of the product is consumed.

Question 3

The price of hamburgers is $2 and the price of movies is $4. The consumer has $16 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

Accepted Answer

A)  is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.
B)  is an optimum since the entire income is spent and total utility is maximized.
C)  is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.
D)  is not an optimum because the consumer has not spent all of his money.

Question 4

A consumer's optimum is found when

Accepted Answer

A)  the marginal utility of the last dollar spent equals zero for each good.
B)  the marginal utility of each good is increasing and the total income is spent.
C)  the total utility of each good is the same and the total income is spent.
D)  the marginal utility of the last dollar spent on each good is the same and all income is spent.

Question 5

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 6

To calculate marginal utility, divide the change in total utility by

Accepted Answer

A)  the number of units consumed.
B)  the price of the product.
C)  the change in the number of units consumed.
D)  the consumer's subjective level of preference.

Question 7

An indifference curve cannot be positively sloped because

Accepted Answer

A)  the law of diminishing marginal utility would be violated.
B)  the substitution effect would be violated.
C)  a point to the right of another point will represent a lower quantity of both goods and a reduction in utility.
D)  a point to the right of another point will represent a higher quantity of both goods and an increase in utility.

Question 8

Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing

Accepted Answer

A)  irrational behavior.
B)  the law of diminishing marginal utility.
C)  the income effect.
D)  the substitution effect.

Question 9

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

Accepted Answer

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

Question 10

Utility analysis is the analysis of

Accepted Answer

A)  the formation of tastes and preferences.
B)  the differences of tastes and preferences across individuals.
C)  the consumption decisions of people based on utility maximization.
D)  how consumers determine the utility they receive from consumption.

Question 11

-Refer to the above table. Which of the four people have utility schedules characterized by the law of diminishing marginal utility?

Accepted Answer

A)  Amy, Robert, and David only
B)  Michelle only
C)  Michelle and David only
D)  Amy and Robert only

Question 12

Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good x, a normal good?

Accepted Answer

A)  An increase in the marginal utility of x
B)  A decrease in the total utility of y
C)  An increase in the marginal utility of good y
D)  A decrease in income

Question 13

-In the above table, what is the marginal utility of the sixth slice of pizza consumed?

Accepted Answer

A)  7
B)  137
C)  120
D)  -17

Question 14

When the price of DVDs falls relative to movie and restaurant prices, and consumers buy more of the DVDs, economists call this

Accepted Answer

A)  indifference.
B)  satisfaction.
C)  marginalization.
D)  substitution.

Question 15

When you purchase the lower-priced store brand bread instead of the more expensive name brand, you are experiencing

Accepted Answer

A)  the substitution effect.
B)  the income effect.
C)  a fall in total utility.
D)  diminishing marginal product.

Question 16

-Refer to the above table. The table gives the various combinations of Good A and Good B along Jane's indifference curve. The marginal rate of substitution when Jane goes from combination B to combination C is

Accepted Answer

A)  4:1.
B)  3:1.
C)  2:1.
D)  0.

Question 17

Karen has decided that she would enjoy eating another cookie. Which of the following statements is consistent with Karen's decision?

Accepted Answer

A)  Karen's marginal utility has decreased with a corresponding decrease in total utility.
B)  Karen's marginal and total utility remain unchanged.
C)  Karen's marginal utility has decreased but it is unclear what has happened to total utility.
D)  Karen's total utility has increased but it is unclear what has happened to her marginal utility.

Question 18

-Refer to the above table. If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $19, the rational consumer will purchase

Accepted Answer

A)  2 magazines and 2 books.
B)  2 magazines and 3 books.
C)  5 magazines and 6 books.
D)  6 magazines and 6 books.

Question 19

The reason that diamonds cost more than water is

Accepted Answer

A)  the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase.
B)  most consumers consume little water.
C)  diamonds are more beautiful than water.
D)  water is a necessity.

Question 20

-Refer to the above table. The marginal utility of the 5th movie for Robert is

Accepted Answer

A)  400 units of utility.
B)  50 units of utility.
C)  60 units of utility.
D)  70 units of utility.

Exam 20: Consumer Choice

-Refer to the above table. If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $19, the rational consumer will purchase

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An indifference curve cannot be positively sloped because

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-Refer to the above table. The table gives the various combinations of Good A and Good B along Jane's indifference curve. The marginal rate of substitution when Jane goes from combination B to combination C is

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When you purchase the lower-priced store brand bread instead of the more expensive name brand, you are experiencing

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

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

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-Refer to the above table. The marginal utility of the 5th movie for Robert is

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When the price of DVDs falls relative to movie and restaurant prices, and consumers buy more of the DVDs, economists call this

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The law of diminishing marginal utility implies that the marginal utility for a particular product

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Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good x, a normal good?

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A consumer's optimum is found when

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Utility analysis is the analysis of

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An indifference curve

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Karen has decided that she would enjoy eating another cookie. Which of the following statements is consistent with Karen's decision?

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The reason that diamonds cost more than water is

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The price of hamburgers is $2 and the price of movies is $4. The consumer has $16 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

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-Refer to the above table. Which of the four people have utility schedules characterized by the law of diminishing marginal utility?

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To calculate marginal utility, divide the change in total utility by

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-In the above table, what is the marginal utility of the sixth slice of pizza consumed?

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Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing

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