Question 1

The marginal rate of substitution measures the

Accepted Answer

A)   magnitude of the substitution effect.
B)   total utility received by a consumer when equilibrium is achieved.
C)   extra utility that a consumer derives from successive units of a product.
D)   consumer's willingness to substitute one product for another so that total utility will remain constant.E) None of the above
F) A) and B)

Question 2

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18.  What level of total utility will the utility-maximizing consumer realize?

Accepted Answer

A)   96 utils
B)   108 utils
C)   72 utils
D)   142 utilsE) A) and C)
F) None of the above

Question 3

Many people do not steal or commit fraud because to them, the resulting feelings of guilt and uneasiness make the

Accepted Answer

A)   marginal utility of the act increase.
B)   marginal utility of the act decrease.
C)   marginal cost of the act increase.
D)   marginal cost of the act decrease.E) A) and D)
F) C) and D)

Question 4

Answer the question based on the table below showing the marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $4, and the price of product Y is $2. The income of the consumer is $30.
 What would be the utility-maximizing combination of products X and Y that could be purchased with $30?

Accepted Answer

A)   3X and 3Y
B)   4X and 4Y
C)   5X and 4Y
D)   5X and 5YE) B) and C)
F) A) and D)

Question 5

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) A) and B)
F) A) and C)

Question 6

If the total utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

Accepted Answer

A)   168.
B)   27.
C)   156.
D)   972.E) A) and D)
F) A) and C)

Question 7

The diamond-water paradox arises because

Accepted Answer

A)   essential goods may be cheap, while nonessential goods may be expensive.
B)   the marginal utility of certain products increases, rather than diminishes.
C)   essential goods are always higher priced than nonessential goods.
D)   we sometimes fail to use money as a standard of value.E) C) and D)
F) B) and D)

Question 8

With diminishing marginal utility, if a consumer reduces her consumption of a good, then her marginal utility from that good would increase.

Accepted Answer

A) True 
 B)False

Question 9

With a fixed money income, an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

Accepted Answer

A)   iPads are often superior to laptop and desktop computers in their ability to create content.
B)   A scarcity of production capacity has curtailed the manufacture of laptop and desktop computers.
C)   Many consumers perceive that iPads are superior to laptops and desktop computers for the consumption of digital media.
D)   The prices of laptops and desktop computers have increased dramatically.E) None of the above
F) All of the above

Question 11

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) C) and D)
F) A) and B)

Question 12

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth

Accepted Answer

A)   is relatively unappreciative of the arts.
B)   obtains more marginal utility from the play than from the hockey game.
C)   has a higher "marginal utility-to-price ratio" for the hockey game than for the play.
D)   has recently attended several other Broadway plays.E) A) and D)
F) All of the above

Question 13

Refer to the diagram. The marginal utility of the third unit of X is

Accepted Answer

A)   5.
B)   4.
C)   2.
D)   15.E) A) and C)
F) B) and C)

Question 14

An indifference curve

Accepted Answer

A)   may be either upsloping or downsloping, depending on whether the two products are complements or substitutes.
B)   is downsloping and convex to the origin.
C)   is upsloping and has a constant slope.
D)   is downsloping and concave to the origin.E) All of the above
F) B) and D)

Question 15

A child is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from each product are as shown in the following table.  If the child buys either chocolates or hard candies one piece at a time, what will be his first two purchases?

Accepted Answer

A)   a hard candy, followed by another hard candy
B)   a hard candy, followed by a chocolate
C)   a chocolate, followed by a hard candy
D)   a chocolate, followed by another chocolateE) A) and D)
F) All of the above

Question 16

Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py = 30/2 and MUz/Pz = 45/3. To maximize utility, without spending more money, the consumer should

Accepted Answer

A)   purchase less of Y and more of Z.
B)   purchase more of Y and less of Z.
C)   purchase more of both Y and Z.
D)   make no change in the quantities of Y and Z.E) A) and B)
F) B) and C)

Question 17

Most economists contend that

Accepted Answer

A)   noncash gifts are more efficient than cash gifts.
B)   noncash gifts are less efficient than cash gifts.
C)   noncash and cash gifts are equally efficient.
D)   government can assess consumer preferences better than can consumers themselves.E) None of the above
F) B) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 30 and the marginal utility of product Beta is 40. The price of product Alpha is $5, and the price of product Beta is $10. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should

Accepted Answer

A)   increase consumption of product Beta and decrease consumption of product Alpha.
B)   increase consumption of product Beta and increase consumption of product Alpha.
C)   increase consumption of product Alpha and decrease consumption of product Beta.
D)   makeno change in the consumption of Alpha or Beta.E) A) and B)
F) None of the above

Question 20

A consumer's demand curve for a product is downsloping because

Accepted Answer

A)   total utility falls below marginal utility as more of a product is consumed.
B)   marginal utility diminishes as more of a product is consumed.
C)   time becomes less valuable as more of a product is consumed.
D)   the income and substitution effects precisely offset each other.E) C) and D)
F) A) and C)

Exam 7: Utility Maximization

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. What level of total utility will the utility-maximizing consumer realize?

Correct Answer
verified

With a fixed money income, an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Correct Answer
verified

If the total utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

Correct Answer
verified

With diminishing marginal utility, if a consumer reduces her consumption of a good, then her marginal utility from that good would increase.

Correct Answer
verified

Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

Correct Answer
verified

Many people do not steal or commit fraud because to them, the resulting feelings of guilt and uneasiness make the

Correct Answer
verified

The marginal rate of substitution measures the

Correct Answer
verified

An indifference curve

Correct Answer
verified

Refer to the diagram. The marginal utility of the third unit of X is

Correct Answer
verified

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

Correct Answer
verified

Most economists contend that

Correct Answer
verified

If total utility is increasing, then marginal utility

Correct Answer
verified

The diamond-water paradox arises because

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Total utility may be determined by

Correct Answer
verified

A consumer's demand curve for a product is downsloping because

Correct Answer
verified

Assume that a consumer purchases a combination of products Y and Z and that the MUy/P_y= 30/2 and MUz/P_z= 45/3. To maximize utility, without spending more money, the consumer should

Correct Answer
verified

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth

Correct Answer
verified

Correct Answer
verified

Exam 7: Utility Maximization

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. What level of total utility will the utility-maximizing consumer realize?

Correct AnswerverifiedShow Answer

With a fixed money income, an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Correct AnswerverifiedShow Answer

If the total utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

Correct AnswerverifiedShow Answer

With diminishing marginal utility, if a consumer reduces her consumption of a good, then her marginal utility from that good would increase.

Correct AnswerverifiedShow Answer

Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

Correct AnswerverifiedShow Answer

Many people do not steal or commit fraud because to them, the resulting feelings of guilt and uneasiness make the

Correct AnswerverifiedShow Answer

The marginal rate of substitution measures the

Correct AnswerverifiedShow Answer

An indifference curve

Correct AnswerverifiedShow Answer

Refer to the diagram. The marginal utility of the third unit of X is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Most economists contend that

Correct AnswerverifiedShow Answer

If total utility is increasing, then marginal utility

Correct AnswerverifiedShow Answer

The diamond-water paradox arises because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Total utility may be determined by

Correct AnswerverifiedShow Answer

A consumer's demand curve for a product is downsloping because

Correct AnswerverifiedShow Answer

Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py = 30/2 and MUz/Pz = 45/3. To maximize utility, without spending more money, the consumer should

Correct AnswerverifiedShow Answer

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Assume that a consumer purchases a combination of products Y and Z and that the MUy/P_y= 30/2 and MUz/P_z= 45/3. To maximize utility, without spending more money, the consumer should

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified