Question 1

Indifference curves are convex to the origin if

Accepted Answer

A)   a person's marginal rate of substitution declines as he or she consumes more of a good.
B)   a person's marginal rate of substitution increases as he or she consumes more of a good.
C)   the law of diminishing marginal utility holds.
D)   a and c
E)   none of the aboveF) A) and B)
G) A) and C)

Question 2

A person is said to be in consumer equilibrium if she

Accepted Answer

A)   equates marginal utilities per dollar spent.
B)   has diminishing marginal utility of money.
C)   purchases only normal goods.
D)   has an incentive to redirect her purchases.E) A) and B)
F) All of the above

Question 3

An indifference curve shows all the combinations of bundles of two goods a person can purchase given a fixed amount of income.

Accepted Answer

A) True 
 B)False

Question 4

No matter what the price of a given item of food,a person will eat the same amount of that food.This is __________ with the idea of __________.

Accepted Answer

A)   consistent; consumer equilibrium
B)   not consistent; consumer equilibrium
C)   consistent; maximizing total utility
D)   consistent; consumers' surplus
E)   none of the aboveF) C) and D)
G) A) and D)

Question 5

If a person is receiving greater marginal utility per dollar from consuming one good than another,it follows that he or she is

Accepted Answer

A)   maximizing disutility.
B)   not maximizing utility.
C)   maximizing utility.
D)   There is not enough information to answer the question.E) C) and D)
F) All of the above

Question 6

The theory of consumer choice assumes that consumers attempt to maximize

Accepted Answer

A)   the difference between total utility and marginal utility.
B)   average utility.
C)   total utility.
D)   marginal utility.E) B) and D)
F) A) and B)

Question 7

Exhibit 21-6
 1,I2 and I3 are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should A)  strive for point N by obtaining a larger money income. B)  purchase more of X and less of Y. C)  remain at that point in order to maximize utility. D)  purchase more of Y and less of X. E)  none of the above" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 21-6.I1,I2 and I3 are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should

Accepted Answer

A)   strive for point N by obtaining a larger money income.
B)   purchase more of X and less of Y.
C)   remain at that point in order to maximize utility.
D)   purchase more of Y and less of X.
E)   none of the aboveF) All of the above
G) B) and E)

Question 8

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer) equilibrium will buy more of good __________ until the marginal utility of good __________ falls to __________ utils.

Accepted Answer

A)   Y; Y; 12
B)   X; X; 24
C)   Y; X; 12
D)   Y; Y; there is not enough information to answer this part of the question.
E)   X; X; there is not enough information to answer this part of the question.F) C) and D)
G) D) and E)

Question 9

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.

Accepted Answer

A)   lower than; marginal utility
B)   greater than; average utility
C)   the same as; marginal utility
D)   greater than; marginal utility
E)   none of the aboveF) A) and B)
G) B) and C)

Question 10

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else.MUL = 24 and MUE = 40.The price of eye shadow is $5,and the price of lipstick is $4.What should Valerie do?

Accepted Answer

A)   Consume more eye shadow and less lipstick.
B)   Consume more lipstick and less eye shadow.
C)   Consume less of both.
D)   Consume more of both.
E)   Not change her consumption of either good.F) D) and E)
G) A) and D)

Question 11

Suppose Will receives 150 utils from consuming one banana and 250 utils from consuming two bananas.What is the marginal utility of the second banana?

Accepted Answer

A)   50 utils
B)   125 utils
C)   100 utils
D)   58 utils
E)   none of the aboveF) A) and E)
G) B) and E)

Question 12

Smith says she gets 5 utils from consuming the fifth unit of a good whereas Jones says he gets 10 utils from consuming the fifth unit of a good.It follows that

Accepted Answer

A)   the fifth unit of the good means more to Jones than Smith.
B)   the fifth unit of the good means more to Smith than Jones.
C)   the fifth unit of the good means twice as much to Jones as it means to Smith.
D)   if the law of diminishing marginal utility holds, both Smith and Jones will get less utility from the sixth unit of the good than the fifth.
E)   a and dF) A) and B)
G) C) and D)

Question 13

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful.Is this necessarily good?

Accepted Answer

A)   Yes, because everyone is satisfied.
B)   No, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products.
C)   Yes, because the law of diminishing marginal utility indicates that in order to get the greatest amount of satisfaction from the use of resources, people should consume as much of every good as they can.
D)   none of the aboveE) None of the above
F) B) and C)

Question 14

The law of diminishing marginal utility can be stated as follows:

Accepted Answer

A)   As the amount of a good consumed increases, the sum of satisfaction received tends to decrease.
B)   As the amount of a good consumed increases, the additional satisfaction gained from consuming additional units tends to decrease.
C)   As the amount of a good consumed decreases, the additional satisfaction gained from consuming additional units tends to increase.
D)   As the amount of a good consumed increases, the sum of satisfaction received tends to increase but at a diminishing rate.
E)   b and dF) A) and D)
G) B) and E)

Question 15

If the MU/P ratio for two goods is the same,then

Accepted Answer

A)   the slope of the budget constraint between the two goods is equal to the marginal rate of substitution (MRS)  between the two goods.
B)   the indifference curve between the two goods is concave to the origin.
C)   the prices of the two goods are the same.
D)   it follows that consumers prefer fewer goods to more goods.
E)   a and cF) All of the above
G) B) and C)

Question 16

When people treat some dollars differently than others,they are said to be compartmentalizing.

Accepted Answer

A) True 
 B)False

Question 17

According to the traditional theory of marginal utility as presented in the textbook,as more units of a good are acquired,the consumer's marginal utility

Accepted Answer

A)   always continues to rise.
B)   diminishes.
C)   remains constant.
D)   may diminish at first, but it must eventually rise.
E)   may rise at first, but it must eventually become constant.F) A) and E)
G) C) and D)

Question 18

Exhibit 21-4
 
-Refer to Exhibit 21-4. What value goes in blank (B) ?

Accepted Answer

A)   115
B)   150
C)   45
D)   100
E)   There is not enough information to answer this question.F) A) and B)
G) A) and C)

Question 19

Exhibit 21-2
 
-Refer to Exhibit 21-2.Total utility for the first three oranges is

Accepted Answer

A)   12 utils.
B)   62 utils.
C)   49 utils.
D)   15 utils.
E)   42 utils.F) B) and C)
G) A) and D)

Question 20

Exhibit 21-5
 
-Refer to Exhibit 21-5. What value goes in blank (A) ?

Accepted Answer

A)   12.0
B)   13.5
C)   10.0
D)   14.0
E)   There is not enough information to answer this question.F) A) and C)
G) D) and E)

Exam 21: Consumer Choice: Maximizing Utility and Behavioral Economics

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.

Correct AnswerverifiedShow Answer

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (A) ?

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Smith says she gets 5 utils from consuming the fifth unit of a good whereas Jones says he gets 10 utils from consuming the fifth unit of a good.It follows that

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If the MU/P ratio for two goods is the same,then

Correct AnswerverifiedShow Answer

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer) equilibrium will buy more of good __________ until the marginal utility of good __________ falls to __________ utils.

Correct AnswerverifiedShow Answer

The law of diminishing marginal utility can be stated as follows:

Correct AnswerverifiedShow Answer

Indifference curves are convex to the origin if

Correct AnswerverifiedShow Answer

The theory of consumer choice assumes that consumers attempt to maximize

Correct AnswerverifiedShow Answer

If a person is receiving greater marginal utility per dollar from consuming one good than another,it follows that he or she is

Correct AnswerverifiedShow Answer

No matter what the price of a given item of food,a person will eat the same amount of that food.This is __________ with the idea of __________.

Correct AnswerverifiedShow Answer

When people treat some dollars differently than others,they are said to be compartmentalizing.

Correct AnswerverifiedShow Answer

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else.MUL = 24 and MUE = 40.The price of eye shadow is $5,and the price of lipstick is $4.What should Valerie do?

Correct AnswerverifiedShow Answer

A person is said to be in consumer equilibrium if she

Correct AnswerverifiedShow Answer

Exhibit 21-2 -Refer to Exhibit 21-2.Total utility for the first three oranges is

Correct AnswerverifiedShow Answer

According to the traditional theory of marginal utility as presented in the textbook,as more units of a good are acquired,the consumer's marginal utility

Correct AnswerverifiedShow Answer

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (B) ?

Correct AnswerverifiedShow Answer

Exhibit 21-6 -Refer to Exhibit 21-6.I1,I2 and I3 are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should

Correct AnswerverifiedShow Answer

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful.Is this necessarily good?

Correct AnswerverifiedShow Answer

Suppose Will receives 150 utils from consuming one banana and 250 utils from consuming two bananas.What is the marginal utility of the second banana?

Correct AnswerverifiedShow Answer

An indifference curve shows all the combinations of bundles of two goods a person can purchase given a fixed amount of income.

Correct AnswerverifiedShow Answer

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be the of the 10,000th unit.

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The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer) equilibrium will buy more of good until the marginal utility of good falls to __ utils.

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No matter what the price of a given item of food,a person will eat the same amount of that food.This is with the idea of .

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Exhibit 21-6 -Refer to Exhibit 21-6.I₁,I₂ and I₃ are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should

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