Question 1

-Given the above figure, when Joey eats a third piece of pizza his marginal utility is ________ and his total utility is ________.

Accepted Answer

A)  falling; falling
B)  falling; rising
C)  rising; falling
D)  rising; risingE) B) and C)
F) A) and B)

Question 2

Which of the following is FALSE?

Accepted Answer

A)  A consumer is maximizing total utility when he or she gets the same amount of marginal utility from the last dollar spent on each good purchased.
B)  As additional units of a good or service are consumed, marginal utility diminishes.
C)  Utility is want-satisfying power.
D)  Assuming that the law of diminishing marginal utility holds, the demand curve must be upward sloping.E) A) and B)
F) A) and C)

Question 3

-Refer to the above table. If the price of Good X is $1, the price of Good Y is $2, and the consumer has $13, the rational consumer will purchase

Accepted Answer

A)  3 units of Good X and 4 units of Good Y.
B)  1 units of Good X and 1 units of Good Y.
C)  6 units of Good X and 0 units of Good Y.
D)  5 units of Good X and 4 units of Good Y.E) B) and C)
F) A) and C)

Question 4

John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $4. The price of Good B is $2. If John wants to maximize his utility he should

Accepted Answer

A)  continue to purchase the same amount of Good A and Good B.
B)  increase the consumption of Good A and decrease the consumption of Good B.
C)  decrease the consumption of Good A and increase the consumption of Good B.
D)  decrease the consumption of Good A and decrease the consumption of Good BE) B) and D)
F) A) and C)

Question 5

Let the quantity of hamburgers be measured along the vertical axis and the quantity of movies be measured along the horizontal axis. If the price of a hamburger is $1.50 and the price of a movie is $6, then the slope of the budget line is

Accepted Answer

A)  -6.
B)  -4.
C)  -3.
D)  -0.25.E) A) and D)
F) A) and C)

Question 6

-Refer to the above table. If the consumer's equilibrium consists of 4 magazines and 4 books, then we know that

Accepted Answer

A)  the price of a magazine is 5 times more than the price of a book.
B)  the price of a magazine is 6 times more than the price of a book.
C)  the price of a book is 5 times more than the price of a magazine.
D)  the price of a book is 3 times more than the price of a magazine.E) C) and D)
F) B) and D)

Question 7

In economics, utility is defined as

Accepted Answer

A)  the want-satisfying power of a good or service.
B)  the usefulness of a good or service.
C)  the utilitarian value of a good or service.
D)  the objective measure of the desirability of a good or service.E) C) and D)
F) A) and D)

Question 8

If marginal utility is positive but diminishing, then

Accepted Answer

A)  average utility must be negative.
B)  marginal utility must be above-average utility.
C)  total utility must be positive.
D)  marginal utility must be more than total utility.E) C) and D)
F) A) and B)

Question 9

If a consumer is at an optimum, consuming X and Y, and the price of X decreases, then to get to a new equilibrium the consumer must

Accepted Answer

A)  purchase less X.
B)  purchase less of both X and Y.
C)  purchase more X.
D)  purchase more of both X and Y.E) A) and B)
F) A) and C)

Question 10

To derive the law of demand, we assume that

Accepted Answer

A)  prices are constant.
B)  real prices are constant.
C)  marginal utility is constant.
D)  tastes are constant.E) None of the above
F) All of the above

Question 11

The budget line

Accepted Answer

A)  shifts to the left as income increases.
B)  has a positive slope.
C)  is a vertical line.
D)  shows the combination of goods that can be purchased at fixed prices and with a given income.E) A) and C)
F) B) and D)

Question 12

A decrease in the price of a good causes

Accepted Answer

A)  the utility of the good to decrease.
B)  the marginal utility of the good to decrease.
C)  purchasing power of a person's income to increase.
D)  the nominal wealth of a person to increase.E) A) and D)
F) A) and B)

Question 13

Suppose a consumer is at an optimum. What happens when the price of one good she has been consuming increases?

Accepted Answer

A)  The value of the marginal utility of the last unit consumed decreases.
B)  The value of the marginal utility of the last unit consumed increases.
C)  The marginal utility per dollar spent on the last unit consumed of that good increases by the same proportion as the price increases.
D)  The marginal utility per dollar spent on the last unit consumed of that good is now smaller than the marginal utility per dollar spent on other goods the person consumes.E) A) and B)
F) B) and C)

Question 14

The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 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.E) A) and B)
F) A) and D)

Question 15

-Refer to the above table. What is the marginal utility for the 10th unit for Mary and for John?

Accepted Answer

A)  Mary: -10; John: 10
B)  Mary: 10; John 10
C)  Mary: 220; John 450
D)  Mary: 0; John: 0E) All of the above
F) A) and D)

Question 16

A consumer has been buying 5 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will

Accepted Answer

A)  buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books.
B)  buy more books because they are now relatively more valuable than they were before.
C)  buy the same number of books and magazines as before because they provide different types of utility.
D)  buy fewer books than before because they are relatively more expensive than they were before.E) B) and C)
F) None of the above

Question 17

-According to the above table, Mary's marginal utility from watching the 6th movie is

Accepted Answer

A)  190 units of utility.
B)  40 units of utility.
C)  10 units of utility.
D)  20 units of utility.E) B) and D)
F) All of the above

Question 18

-Given the above figure, marginal utility becomes negative when Joey consumes the ________ piece of pizza.

Accepted Answer

A)  1st
B)  3rd
C)  4th
D)  5thE) None of the above
F) A) and B)

Question 19

The consumer optimum (for two goods, a and b) is reached when

Accepted Answer

A)  TUa = TUb.
B)  MUa = MUb.
C)  TUa/Pa = TUb/Pb.
D)  MUa/Pa = MUb/Pb.E) None of the above
F) B) and C)

Question 20

The inverse relationship between quantity demanded and price of a good or service can be explained, in part, by

Accepted Answer

A)  a shift in the demand curve.
B)  diminishing marginal utility only.
C)  diminishing marginal utility and the rule of equal marginal utilities per dollar.
D)  the real income effect.E) All of the above
F) C) and D)

Exam 20: Consumer Choice

Let the quantity of hamburgers be measured along the vertical axis and the quantity of movies be measured along the horizontal axis. If the price of a hamburger is $1.50 and the price of a movie is $6, then the slope of the budget line is

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A decrease in the price of a good causes

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If marginal utility is positive but diminishing, then

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-Given the above figure, marginal utility becomes negative when Joey consumes the ________ piece of pizza.

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In economics, utility is defined as

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-Refer to the above table. If the price of Good X is $1, the price of Good Y is $2, and the consumer has $13, the rational consumer will purchase

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The inverse relationship between quantity demanded and price of a good or service can be explained, in part, by

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The consumer optimum (for two goods, a and b) is reached when

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To derive the law of demand, we assume that

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-According to the above table, Mary's marginal utility from watching the 6th movie is

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-Refer to the above table. If the consumer's equilibrium consists of 4 magazines and 4 books, then we know that

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Which of the following is FALSE?

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A consumer has been buying 5 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will

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-Given the above figure, when Joey eats a third piece of pizza his marginal utility is ________ and his total utility is ________.

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John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $4. The price of Good B is $2. If John wants to maximize his utility he should

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Suppose a consumer is at an optimum. What happens when the price of one good she has been consuming increases?

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The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 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. What is the marginal utility for the 10th unit for Mary and for John?

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If a consumer is at an optimum, consuming X and Y, and the price of X decreases, then to get to a new equilibrium the consumer must

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The budget line

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-Given the above figure, when Joey eats a third piece of pizza his marginal utility is and his total utility is .

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