Question 1

The substitution effect of a price decrease for a good causes an increase in the consumption of the good, regardless of whether the good is normal or inferior.

Accepted Answer

A) True 
 B)False

Question 2

The table shows a consumer's utility schedule.  Marginal utility begins to diminish with the consumption of the

Accepted Answer

A)  fifth unit.
B)  fourth unit.
C)  third unit.
D)  second unit.E) A) and D)
F) A) and C)

Question 3

Given the indifference curve and budget line above, this individual

Accepted Answer

A)  prefers B to A, but B costs more.
B)  prefers B to A, and they cost the same.
C)  is indifferent between A and B, but A costs less.
D)  is indifferent between A and B, and they cost the sameE) A) and B)
F) None of the above

Question 4

"Consumer equilibrium" refers to the situation when the consumer is getting

Accepted Answer

A)  the highest total utility out of spending a given budget on various goods.
B)  the highest marginal utility out of spending a given budget on various goods.
C)  equal marginal utility values from each product consumed.
D)  equal total utility values from each product consumed.E) A) and B)
F) B) and C)

Question 5

Indifference curves are convex to the origin due to diminishing marginal rates of substitution.

Accepted Answer

A) True 
 B)False

Question 6

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8.  If the price of B falls to $1, while the price of A and the consumer's income stay the same, what would be the utility-maximizing combination of goods A and B?

Accepted Answer

A)  5 A and 3 B
B)  4 A and 4 B
C)  3 A and 5 B
D)  2 A and 6 BE) A) and B)
F) All of the above C

Question 7

In drawing a particular budget line, money income and the prices of the two products are fixed.

Accepted Answer

A) True 
 B)False

Question 8

The table below shows the utility schedule for a consumer of candy bars.  Marginal utility becomes negative with the consumption of the

Accepted Answer

A)  Negative marginal utility is not shown in the table; marginal utility remains positive throughout.
B)  fifth candy bar.
C)  sixth candy bar.
D)  seventh candy bar.E) B) and C)
F) All of the above

Question 9

If a rational consumer is in equilibrium, which of the following conditions will hold true?

Accepted Answer

A)  MU a = MU b = MU c = . . . = MU n.
B)  The marginal utility of each good purchased will be zero.
C)  The marginal utility of the last dollar spent on each good purchased will be the same.
D)  The total utility obtained from each good purchased will be the same.E) B) and C)
F) A) and C) C

Question 10

Total utility may be determined by

Accepted Answer

A)  multiplying the marginal utility of the last unit consumed by the number of units consumed.
B)  summing the marginal utilities of each unit consumed.
C)  multiplying the marginal utility of the last unit consumed by product price.
D)  multiplying the marginal utility of the first unit consumed by the number of units consumed.E) B) and C)
F) None of the above

Question 11

If total utility is increasing, then marginal utility

Accepted Answer

A)  must be declining.
B)  must be increasing.
C)  must be increasing at an increasing rate.
D)  may either be increasing or decreasing, but it must be greater than zero.E) All of the above
F) A) and B)

Question 12

When a consumer shifts purchases from product X to product Y, the marginal utility of

Accepted Answer

A)  X falls and the marginal utility of Y rises.
B)  X rises and the marginal utility of Y falls.
C)  both X and Y rises.
D)  both X and Y falls.E) B) and C)
F) All of the above

Question 13

All of the following would reduce property crime by increasing its "price," except

Accepted Answer

A)  imposing greater penalties for those who are caught and convicted.
B)  using more sophisticated security systems.
C)  enhancing the legitimate earnings of potential criminals.
D)  cutting out the middlemen ("fences") by selling stolen goods via Internet auction sites.E) None of the above
F) A) and D)

Question 14

An indifference map implies that

Accepted Answer

A)  money income is constant, but the prices of the two products vary directly with the quantities purchased.
B)  the two products under consideration are perfectly substitutable for one another.
C)  a consumer is better off to be at some point high on a given curve as opposed to a point low on the same curve.
D)  curves farther from the origin yield higher levels of total utility.E) All of the above
F) None of the above

Question 15

Which of the following statements about utility is true?

Accepted Answer

A)  It is the same as usefulness.
B)  Total utility diminishes as soon as additional units of a good are consumed.
C)  Utility is objectively determined, meaning a good should provide the same satisfaction to whomever consumes it.
D)  Utility is difficult to measure quantitatively.E) A) and D)
F) A) and C)

Question 16

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from threecans of Pepsi is 38 units of utility. The marginal utility of the third Pepsi is

Accepted Answer

A)  26 units of utility.
B)  6 units of utility.
C)  8 units of utility.
D)  38 units of utility.E) All of the above
F) A) and D) C

Question 17

The substitution effect

Accepted Answer

A)  is generally so weak that its effect cannot be predicted.
B)  for an increase in the relative price of a good is sometimes positive but sometimes negative.
C)  refers to the change in the quantity demanded of a good due to a change in its relative price.
D)  measures the change in the quantity of a good demanded brought about by a change in real income associated with a change in the price of the good.E) None of the above
F) All of the above

Question 18

How can the utility-maximizing rule be used to explain the substitution and income effect?

Accepted Answer

According to the utility-maximizing rule...

Question 19

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson

Accepted Answer

A)  has preferences that are at odds with the principle of diminishing marginal utility.
B)  considers A and B to be complementary goods.
C)  should buy less A and more B.
D)  should buy less B and more A.E) A) and B)
F) B) and D)

Question 20

Indifference curves and budget lines can be used to derive an individual's demand curve for a product.

Accepted Answer

A) True 
 B)False

Exam 7: Utility Maximization

The substitution effect of a price decrease for a good causes an increase in the consumption of the good, regardless of whether the good is normal or inferior.

Correct Answer
verified

The table shows a consumer's utility schedule. Marginal utility begins to diminish with the consumption of the

Correct Answer
verified

Given the indifference curve and budget line above, this individual

Correct Answer
verified

"Consumer equilibrium" refers to the situation when the consumer is getting

Correct Answer
verified

Indifference curves are convex to the origin due to diminishing marginal rates of substitution.

Correct Answer
verified

Correct Answer
verified
C

In drawing a particular budget line, money income and the prices of the two products are fixed.

Correct Answer
verified

The table below shows the utility schedule for a consumer of candy bars. Marginal utility becomes negative with the consumption of the

Correct Answer
verified

If a rational consumer is in equilibrium, which of the following conditions will hold true?

Correct Answer
verified
C

Total utility may be determined by

Correct Answer
verified

If total utility is increasing, then marginal utility

Correct Answer
verified

When a consumer shifts purchases from product X to product Y, the marginal utility of

Correct Answer
verified

All of the following would reduce property crime by increasing its "price," except

Correct Answer
verified

An indifference map implies that

Correct Answer
verified

Which of the following statements about utility is true?

Correct Answer
verified

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from threecans of Pepsi is 38 units of utility. The marginal utility of the third Pepsi is

Correct Answer
verified
C

The substitution effect

Correct Answer
verified

How can the utility-maximizing rule be used to explain the substitution and income effect?

Correct Answer
verified
According to the utility-maximizing rule...
View Answer

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson

Correct Answer
verified

Indifference curves and budget lines can be used to derive an individual's demand curve for a product.

Correct Answer
verified

Exam 7: Utility Maximization

The substitution effect of a price decrease for a good causes an increase in the consumption of the good, regardless of whether the good is normal or inferior.

Correct AnswerverifiedShow Answer

The table shows a consumer's utility schedule. Marginal utility begins to diminish with the consumption of the

Correct AnswerverifiedShow Answer

Given the indifference curve and budget line above, this individual

Correct AnswerverifiedShow Answer

"Consumer equilibrium" refers to the situation when the consumer is getting

Correct AnswerverifiedShow Answer

Indifference curves are convex to the origin due to diminishing marginal rates of substitution.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

In drawing a particular budget line, money income and the prices of the two products are fixed.

Correct AnswerverifiedShow Answer

The table below shows the utility schedule for a consumer of candy bars. Marginal utility becomes negative with the consumption of the

Correct AnswerverifiedShow Answer

If a rational consumer is in equilibrium, which of the following conditions will hold true?

Correct AnswerverifiedC

Total utility may be determined by

Correct AnswerverifiedShow Answer

If total utility is increasing, then marginal utility

Correct AnswerverifiedShow Answer

When a consumer shifts purchases from product X to product Y, the marginal utility of

Correct AnswerverifiedShow Answer

All of the following would reduce property crime by increasing its "price," except

Correct AnswerverifiedShow Answer

An indifference map implies that

Correct AnswerverifiedShow Answer

Which of the following statements about utility is true?

Correct AnswerverifiedShow Answer

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from threecans of Pepsi is 38 units of utility. The marginal utility of the third Pepsi is

Correct AnswerverifiedC

The substitution effect

Correct AnswerverifiedShow Answer

How can the utility-maximizing rule be used to explain the substitution and income effect?

Correct AnswerverifiedAccording to the utility-maximizing rule...View AnswerShow Answer

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson

Correct AnswerverifiedShow Answer

Indifference curves and budget lines can be used to derive an individual's demand curve for a product.

Correct AnswerverifiedShow Answer

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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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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C

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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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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According to the utility-maximizing rule...
View Answer

Correct Answer
verified

Correct Answer
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