Question 1

Water is plentiful in most of the world, so its price and total utility are low.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a consumer is spending his or her entire budget. In order to obtain the most satisfaction from his or her purchases, all goods should:

Accepted Answer

A)   provide the same marginal utility per dollar.
B)   be consumed in equal quantities.
C)   have identical marginal utilities.
D)   give the consumer matching amounts of total utility.

Question 3

The ratio of the price of good X on the horizontal axis to the price of good Y on the vertical axis is the ____ of the budget line.

Accepted Answer

A)   marginal rate
B)   slope
C)   marginal utility
D)   equalization rate

Question 4

Exhibit 6A-6 Consumer equilibrium
​ 
-As shown in Exhibit 6A-6, the marginal rate of substitution (MRS)  at point X is ____ the marginal rate of substitution at point Y.

Accepted Answer

A)   less than
B)   greater than
C)   equal to
D)   twice

Question 5

If water is essential for life, while diamonds are not, then why is water cheaper than diamonds?

Accepted Answer

A)   Because most people would rather die with a big diamond ring than live without one.
B)   Because the total utility generated by diamonds is larger than the total utility generated by water.
C)   Because most people do not understand their total need for water.
D)   Because water is abundant, the marginal utility of water is low, and price reflects marginal utility, not total utility.

Question 6

Exhibit 6-3 Marginal utility data for goods X and Y   Units of good X  Marginal utility of  good X  Units of good Y  Marginal utility of good Y⁡12011421621231231048485456\begin{array} { | c | c | c | c | } \hline 	ext { Units of good X } & \begin{array} { c } 	ext { Marginal utility of } \	ext { good X }\end{array} & 	ext { Units of good Y } & \begin{array} { c } 	ext { Marginal utility of } \\operatorname { good~Y }\end{array} \\hline 1 & 20 & 1 & 14 \2 & 16 & 2 & 12 \3 & 12 & 3 & 10 \4 & 8 & 4 & 8 \5 & 4 & 5 & 6 \\hline\end{array} Units of good X 12345​ Marginal utility of  good X ​20161284​ Units of good Y 12345​ Marginal utility of good Y​14121086​​ 
-As shown in Exhibit 6-3, assume that the price of good X is $2 per unit and the price of good Y is $1 per unit and your budget is $11. If you consume 3 units of good X and 4 units of good Y and maximize utility, you should consume:

Accepted Answer

A)   neither X nor Y.
B)   more of X.
C)   more of Y.
D)   more of both X and Y.
E)   less of both X and Y.

Question 7

A consumer buys only food and clothing. If the quantity of food bought increases while that of clothing remains the same, the marginal utility of food will:

Accepted Answer

A)   fall, but not as fast as the marginal utility of clothing falls.
B)   rise, but not as fast as the marginal utility of clothing rises.
C)   rise relative to the marginal utility of clothing.
D)   fall relative to the marginal utility of clothing.

Question 8

The slope of an indifference curve is equal to the ratio of the ____ of the good on the horizontal axis to the ____ of the good on the vertical axis.

Accepted Answer

A)   marginal product (MP) ; total value (TV) 
B)   marginal utility (MU) ; marginal utility (MU) 
C)   price (P) ; price (P) 
D)   total utility (TU) ; price (P)

Question 9

Marginal utility will generally decrease when:

Accepted Answer

A)   more of a particular good is consumed.
B)   less of a particular good is consumed.
C)   average utility is the least.
D)   per capita utility is the least.
E)   the TU curve's slope is positive rather than negative.

Question 10

If Jane's marginal benefit as a consumer in the jeans market is larger than the price of a pair of jeans:

Accepted Answer

A)   Jane will not purchase any more jeans.
B)   Jane can benefit by purchasing more jeans.
C)   the opportunity cost of a pair of jeans is lower than the price.
D)   Jane will decrease her total utility by purchasing more jeans.

Question 11

According to the law of diminishing marginal utility, the marginal utility curve is ____.

Accepted Answer

A)   vertical
B)   flat.
C)   upward sloping.
D)   downward sloping.

Question 12

Suppose that for Merv the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10. For his snack, Merv should buy:

Accepted Answer

A)   the caviar if he has the $50; otherwise, the popcorn.
B)   the caviar if he has the $50; otherwise, nothing.
C)   the popcorn, whether he has the $50 or not.
D)   one serving each of the caviar and popcorn, if he has $51.
E)   five servings of popcorn for each serving of caviar.

Question 13

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because:

Accepted Answer

A)   they substitute other forms of transportation for driving.
B)   the nominal amount of their paychecks is smaller.
C)   the purchasing power of their income is reduced.
D)   their demand for automobiles is very elastic.

Question 14

Only at the point of consumer equilibrium does the marginal rate of substitution (MRS)  equal the:

Accepted Answer

A)   slope of the budget line.
B)   slope of the indifference curve.
C)   price ratio.
D)   all of these.

Question 15

Consumers always prefer indifference curves that are ____ the origin.

Accepted Answer

A)   closer to
B)   tangent to
C)   farther from
D)   concave relative to

Question 16

The marginal rate of substitution measures the slope of the:

Accepted Answer

A)   total utility curve.
B)   demand curve.
C)   budget line.
D)   indifference curve.

Question 17

A budget line represents all the combinations of two good a consumer can buy with a given amount of money and fixed prices for the goods.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would cause a consumer to purchase less of a good when the price of the good rises?

Accepted Answer

A)   The income effect
B)   The substitution effect
C)   Both a and b
D)   Neither a nor b

Question 19

The income effect refers to a change in:

Accepted Answer

A)   income because of changes in the CPI.
B)   the quantity demanded of a good because of a change in the buyer's real income.
C)   the quantity demanded of a good because of a change in the buyer's money income.
D)   none of these.

Question 20

The principle of diminishing marginal utility says that:

Accepted Answer

A)   as more of a good or service is consumed, demand decreases.
B)   as more of a good or service is consumed, the price will rise.
C)   the marginal utility of additional units consumed increases.
D)   an increase in income causes demand to increase.
E)   the marginal utility of additional units consumed decreases.

Exam 6: Consumer Choice Theory

If Jane's marginal benefit as a consumer in the jeans market is larger than the price of a pair of jeans:

Correct Answer
verified

Water is plentiful in most of the world, so its price and total utility are low.

Correct Answer
verified

Which of the following would cause a consumer to purchase less of a good when the price of the good rises?

Correct Answer
verified

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because:

Correct Answer
verified

Marginal utility will generally decrease when:

Correct Answer
verified

The income effect refers to a change in:

Correct Answer
verified

Suppose that for Merv the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10. For his snack, Merv should buy:

Correct Answer
verified

Consumers always prefer indifference curves that are ____ the origin.

Correct Answer
verified

The ratio of the price of good X on the horizontal axis to the price of good Y on the vertical axis is the ____ of the budget line.

Correct Answer
verified

The principle of diminishing marginal utility says that:

Correct Answer
verified

Exhibit 6A-6 Consumer equilibrium -As shown in Exhibit 6A-6, the marginal rate of substitution (MRS) at point X is ____ the marginal rate of substitution at point Y.

Correct Answer
verified

According to the law of diminishing marginal utility, the marginal utility curve is ____.

Correct Answer
verified

The marginal rate of substitution measures the slope of the:

Correct Answer
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A consumer buys only food and clothing. If the quantity of food bought increases while that of clothing remains the same, the marginal utility of food will:

Correct Answer
verified

If water is essential for life, while diamonds are not, then why is water cheaper than diamonds?

Correct Answer
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Correct Answer
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Only at the point of consumer equilibrium does the marginal rate of substitution (MRS) equal the:

Correct Answer
verified

A budget line represents all the combinations of two good a consumer can buy with a given amount of money and fixed prices for the goods.

Correct Answer
verified

Suppose a consumer is spending his or her entire budget. In order to obtain the most satisfaction from his or her purchases, all goods should:

Correct Answer
verified

The slope of an indifference curve is equal to the ratio of the of the good on the horizontal axis to the of the good on the vertical axis.

Correct Answer
verified

Exam 6: Consumer Choice Theory

If Jane's marginal benefit as a consumer in the jeans market is larger than the price of a pair of jeans:

Correct AnswerverifiedShow Answer

Water is plentiful in most of the world, so its price and total utility are low.

Correct AnswerverifiedShow Answer

Which of the following would cause a consumer to purchase less of a good when the price of the good rises?

Correct AnswerverifiedShow Answer

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because:

Correct AnswerverifiedShow Answer

Marginal utility will generally decrease when:

Correct AnswerverifiedShow Answer

The income effect refers to a change in:

Correct AnswerverifiedShow Answer

Suppose that for Merv the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10. For his snack, Merv should buy:

Correct AnswerverifiedShow Answer

Consumers always prefer indifference curves that are ____ the origin.

Correct AnswerverifiedShow Answer

The ratio of the price of good X on the horizontal axis to the price of good Y on the vertical axis is the ____ of the budget line.

Correct AnswerverifiedShow Answer

The principle of diminishing marginal utility says that:

Correct AnswerverifiedShow Answer

Exhibit 6A-6 Consumer equilibrium ​ -As shown in Exhibit 6A-6, the marginal rate of substitution (MRS) at point X is ____ the marginal rate of substitution at point Y.

Correct AnswerverifiedShow Answer

According to the law of diminishing marginal utility, the marginal utility curve is ____.

Correct AnswerverifiedShow Answer

The marginal rate of substitution measures the slope of the:

Correct AnswerverifiedShow Answer

A consumer buys only food and clothing. If the quantity of food bought increases while that of clothing remains the same, the marginal utility of food will:

Correct AnswerverifiedShow Answer

If water is essential for life, while diamonds are not, then why is water cheaper than diamonds?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Only at the point of consumer equilibrium does the marginal rate of substitution (MRS) equal the:

Correct AnswerverifiedShow Answer

A budget line represents all the combinations of two good a consumer can buy with a given amount of money and fixed prices for the goods.

Correct AnswerverifiedShow Answer

Suppose a consumer is spending his or her entire budget. In order to obtain the most satisfaction from his or her purchases, all goods should:

Correct AnswerverifiedShow Answer

The slope of an indifference curve is equal to the ratio of the ____ of the good on the horizontal axis to the ____ of the good on the vertical axis.

Correct AnswerverifiedShow Answer

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Exhibit 6A-6 Consumer equilibrium -As shown in Exhibit 6A-6, the marginal rate of substitution (MRS) at point X is ____ the marginal rate of substitution at point Y.

Correct Answer
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The slope of an indifference curve is equal to the ratio of the of the good on the horizontal axis to the of the good on the vertical axis.

Correct Answer
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