Question 1

If the price of a product increases, then

Accepted Answer

A)  the budget line rotates and the optimal quantity demanded, which corresponds to the higher price, decreases.
B)  the budget line rotates and the optimal quantity demanded, which corresponds to the higher price, increases.
C)  the budget line shifts outward and the optimal quantity demanded, which corresponds to the higher price, decreases.
D)  the budget line shifts inward and the optimal quantity demanded, which corresponds to the higher price, increases.E) A) and C)
F) None of the above

Question 2

The change in total utility derived when a customer consumes one more unit of a good or service is called

Accepted Answer

A)  total utility.
B)  marginal utility.
C)  average utility.
D)  final utility.E) B) and D)
F) A) and B)

Question 3

The fact that the price of diamonds is higher than the price of water

Accepted Answer

A)  cannot be explained by behavioral economics or consumer choice theory.
B)  is an outcome of irrational behavior in consumer choice theory.
C)  can be explained only by behavioral economics but not by consumer choice theory.
D)  can be explained as the outcome of a consumer optimum in consumer choice theory.E) A) and B)
F) None of the above

Question 4

-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 onlyE) C) and D)
F) B) and D)

Question 5

The price of a can of soft drink is $1.25 and the marginal utility of the second can consumed is 10 utils. The marginal utility of the third donut is 4 utils. You should only consume the third donut if the price of the donut is less than or equal to

Accepted Answer

A)  $0.41.
B)  $0.625.
C)  $0.25.
D)  $0.50.E) All of the above
F) A) and D)

Question 6

Regretting a last unit of consumption of cake implies that

Accepted Answer

A)  the total utility from eating cake was negative.
B)  cake is an inferior good.
C)  the marginal utility of the last unit of cake consumed was negative.
D)  the demand curve for cake is horizontal.E) A) and D)
F) None of the above

Question 7

The quantity of good M is measured along the vertical axis, and the quantity of good N is measured along the horizontal axis. If the prices of both goods M and N declines by 50% each, then the budget line

Accepted Answer

A)  shifts inward to the left by 50%.
B)  shifts outward to the right by 50%.
C)  shifts outward to the right by 100%.
D)  rotates clockwise by 180 degrees.E) A) and C)
F) All of the above

Question 8

When the price of a normal good decreases, people increase their consumption of the good. The reason is

Accepted Answer

A)  the law of diminishing marginal utility.
B)  the substitution and income effects.
C)  the substitution effect only.
D)  the income effect only.E) B) and C)
F) None of the above

Question 9

-Refer to the above table. The marginal utility of the 6th movie for Michelle is

Accepted Answer

A)  25 units of utility.
B)  30 units of utility.
C)  35 units of utility.
D)  40 units of utility.E) A) and D)
F) A) and B)

Question 10

-Refer to the above table. David's utility schedule is characterized by

Accepted Answer

A)  diminishing marginal utility.
B)  increasing marginal utility.
C)  constant marginal utility.
D)  decreasing marginal utility.E) A) and D)
F) All of the above

Question 11

-According to the above table, John's marginal utility from watching the 9th movie is

Accepted Answer

A)  405 units of utility.
B)  0 units of utility.
C)  15 units of utility.
D)  10 units of utility.E) None of the above
F) B) and D)

Question 12

Diminishing marginal utility means that as more of a good is consumed,

Accepted Answer

A)  the rate at which total utility increases starts to diminish.
B)  the rate at which total utility increases stays the same.
C)  the rate at which total utility increases starts to increase.
D)  there is no impact on the rate of change of total utility.E) A) and D)
F) All of the above

Question 13

The marginal rate of substitution is

Accepted Answer

A)  equal to unit changes in the quantities of both goods so that utility rises.
B)  the slope of the budget line at all points.
C)  the change in the quantity of one good that just offsets a unit change in another good, keeping utility constant.
D)  found by adding additional units.E) A) and B)
F) A) and C)

Question 14

If you could pay for a product according to the marginal utility that you gain from additional consumption, then as you consume more of a product the price you pay would

Accepted Answer

A)  remain the same.
B)  increase.
C)  be deferred.
D)  decline.E) B) and D)
F) A) and B)

Question 15

You consider yourself to be wise consumer. The marginal utility/price ratio of coffee is 12 utils per dollar. If the price of a donut is $0.75, you should only buy the donut if it gives you at least

Accepted Answer

A)  16 utils of satisfaction.
B)  9 utils of satisfaction.
C)  12 utils of satisfaction.
D)  The answer cannot be determined with this information.E) None of the above
F) A) and B)

Question 16

When an individual's purchasing power changes due to a change in the price of a good or service, this is referred to as

Accepted Answer

A)  marginal effect.
B)  real-income effect.
C)  substitution effect.
D)  utility effect.E) C) and D)
F) A) and B)

Question 17

Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should

Accepted Answer

A)  consume twice as much beer as wine.
B)  consume twice as much wine as beer.
C)  increase his consumption of beer relative to wine.
D)  increase his consumption of wine relative to beer.E) A) and D)
F) None of the above

Question 18

A higher price for a good implies that

Accepted Answer

A)  the marginal utility of the good has declined.
B)  the total value of the good to the consumer has increased.
C)  the sacrifice of utility of another good has increased.
D)  the marginal utility of another good has decreased.E) None of the above
F) B) and C)

Question 19

If the last $5 spent on movies added 30 utils to your total satisfaction and the last $8 spent on books add 64 utils,

Accepted Answer

A)  you can increase your satisfaction by buying more books and seeing fewer movies.
B)  your total satisfaction is 94 utils.
C)  you can increase your satisfaction by buying fewer books and seeing more movies.
D)  you can increase your satisfaction by buying only books.E) None of the above
F) C) and D)

Question 20

-Refer to the above table. The marginal utility of the 8th movie for Robert is

Accepted Answer

A)  30 units of utility.
B)  20 units of utility.
C)  420 units of utility.
D)  5 units of utility.E) B) and C)
F) A) and D)

Exam 20: Consumer Choice

You consider yourself to be wise consumer. The marginal utility/price ratio of coffee is 12 utils per dollar. If the price of a donut is $0.75, you should only buy the donut if it gives you at least

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The marginal rate of substitution is

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-Refer to the above table. David's utility schedule is characterized by

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A higher price for a good implies that

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-Refer to the above table. The marginal utility of the 6th movie for Michelle is

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When the price of a normal good decreases, people increase their consumption of the good. The reason is

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Regretting a last unit of consumption of cake implies that

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When an individual's purchasing power changes due to a change in the price of a good or service, this is referred to as

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If you could pay for a product according to the marginal utility that you gain from additional consumption, then as you consume more of a product the price you pay would

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If the last $5 spent on movies added 30 utils to your total satisfaction and the last $8 spent on books add 64 utils,

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The price of a can of soft drink is $1.25 and the marginal utility of the second can consumed is 10 utils. The marginal utility of the third donut is 4 utils. You should only consume the third donut if the price of the donut is less than or equal to

Correct AnswerverifiedShow Answer

Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should

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The quantity of good M is measured along the vertical axis, and the quantity of good N is measured along the horizontal axis. If the prices of both goods M and N declines by 50% each, then the budget line

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-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?

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The change in total utility derived when a customer consumes one more unit of a good or service is called

Correct AnswerverifiedShow Answer

-Refer to the above table. The marginal utility of the 8th movie for Robert is

Correct AnswerverifiedShow Answer

The fact that the price of diamonds is higher than the price of water

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-According to the above table, John's marginal utility from watching the 9th movie is

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If the price of a product increases, then

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Diminishing marginal utility means that as more of a good is consumed,

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