Question 1

The theory of bounded rationality states that it is likely for consumers to have perfect information.

Accepted Answer

A) True 
 B)False

Question 2

According to utility theory, a consumer is in equilibrium when:

Accepted Answer

A)  total income is spent.
B)  marginal utility per dollar spent for a good is maximized.
C)  total utility per unit of a good is maximized.
D)  total utility per dollar spent is equal for all goods.
E)  marginal utility per dollar spent is equal for all goods.

Question 3

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

Accepted Answer

A)  Total utility
B)  Marginal utility
C)  Disutility
D)  Diminishing marginal utility
E)  Expected utility

Question 4

The total utility of the consumer diminishes whenever:

Accepted Answer

A)  he or she buys an additional unit of a good.
B)  his or her marginal utility decreases.
C)  his or her total utility increases at a decreasing rate.
D)  the last unit consumed of a particular good is distasteful or provides dissatisfaction.
E)  other consumers are also purchasing the product.

Question 5

The equimarginal principle illustrates:

Accepted Answer

A)  that consumers are essentially robots.
B)  that people behave irrationally.
C)  that people behave in rather consistent ways in order to maximize happiness.
D)  that people behave in rather inconsistent ways.
E)  that people will spend all their incomes.

Question 6

When marginal utility is negative, total utility is _____.

Accepted Answer

A)  increasing
B)  at a minimum
C)  equal to zero
D)  decreasing
E)  at a maximum

Question 7

If MUX / PX Y / PY then this consumer:

Accepted Answer

A)  will buy less of X and more of Y.
B)  will buy more of X and more of Y.
C)  is in equilibrium.
D)  will buy more of X and less of Y.
E)  will buy less of X and less of Y.

Question 8

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

Accepted Answer

A)  the total utility you get from the two pieces of gum will be higher tomorrow.
B)  the marginal utility you get from the second piece will be higher tomorrow.
C)  the marginal utility you get from the second piece will be higher today.
D)  the marginal utility you get from the first piece will be less today.
E)  the total utility you get from the two pieces will be less tomorrow.

Question 9

In order to maximize utility, consumers _____.

Accepted Answer

A)  continue to make purchases until the marginal utility of each good is zero
B)  compare the marginal utilities of the last dollar spent on each good
C)  equate the total utilities of each good consumed
D)  continue to purchase a good until total utility is equal to zero
E)  will continue purchasing till diminishing marginal utility is not achieved

Question 10

When the budget line is just tangent to the highest achievable indifference curve, then _____.

Accepted Answer

A)  the consumer is in equilibrium
B)  the consumer should purchase more of good X
C)  the consumer should purchase more of good Y
D)  the consumer cannot afford the combination represented by the tangency point
E)  the consumer should purchase less of both goods

Question 11

An increase in income _____.

Accepted Answer

A)  makes the budget line flatter
B)  makes the budget line steeper
C)  makes the consumer worse off
D)  makes the consumer achieve a higher level of utility
E)  makes the consumer more selfish

Question 12

If a consumer is buying three goods A, B and C, then she will be in equilibrium when total utility from each good is equal.

Accepted Answer

A) True 
 B)False

Exam 8: Consumer Choice

An increase in income _____.

Correct Answer
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When marginal utility is negative, total utility is _____.

Correct Answer
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According to utility theory, a consumer is in equilibrium when:

Correct Answer
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If MU_X/ P_X < MU_Y/ P_Y then this consumer:

Correct Answer
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In order to maximize utility, consumers _____.

Correct Answer
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The theory of bounded rationality states that it is likely for consumers to have perfect information.

Correct Answer
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The total utility of the consumer diminishes whenever:

Correct Answer
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The equimarginal principle illustrates:

Correct Answer
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If a consumer is buying three goods A, B and C, then she will be in equilibrium when total utility from each good is equal.

Correct Answer
verified

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

Correct Answer
verified

When the budget line is just tangent to the highest achievable indifference curve, then _____.

Correct Answer
verified

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

Correct Answer
verified

Exam 8: Consumer Choice

An increase in income _____.

Correct AnswerverifiedShow Answer

When marginal utility is negative, total utility is _____.

Correct AnswerverifiedShow Answer

According to utility theory, a consumer is in equilibrium when:

Correct AnswerverifiedShow Answer

If MUX / PX < MUY / PY then this consumer:

Correct AnswerverifiedShow Answer

In order to maximize utility, consumers _____.

Correct AnswerverifiedShow Answer

The theory of bounded rationality states that it is likely for consumers to have perfect information.

Correct AnswerverifiedShow Answer

The total utility of the consumer diminishes whenever:

Correct AnswerverifiedShow Answer

The equimarginal principle illustrates:

Correct AnswerverifiedShow Answer

If a consumer is buying three goods A, B and C, then she will be in equilibrium when total utility from each good is equal.

Correct AnswerverifiedShow Answer

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

Correct AnswerverifiedShow Answer

When the budget line is just tangent to the highest achievable indifference curve, then _____.

Correct AnswerverifiedShow Answer

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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If MU_X/ P_X < MU_Y/ P_Y then this consumer:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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