Question 1

Figure: Music and Movie Downloads 4  Refer to the figure. According to this figure, which of the following statements is FALSE?

Accepted Answer

A)   The optimal consumption bundle contains 5 movie downloads and 10 music downloads.
B)   The MRS is 0.50 at the optimal consumption bundle.
C)   The price per music download is half as expensive as the price per movie download.
D)   At the optimal consumption bundle, the marginal utility of movie downloads is equal to half the marginal utility of music downloads.

Question 2

The demand curve is downward sloping because of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 3

Marginal utility is the change in utility from consuming an additional unit.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions:
Figure: Optimal Choice 
-(Figure: Optimal Choice)  Refer to the figure. Suppose the figure represents indifference curves of a consumer who purchases flip-flops and sneakers. If the dotted line represents this consumer's budget constraint, then Bundle D on the graph:

Accepted Answer

A)   results in a lower level of overall utility than Bundle E.
B)   is preferred to point E but unattainable.
C)   has a higher marginal rate of substitution than Bundle E.
D)   maximizes total utility.

Question 5

Countries in Western Europe tend to have more generous unemployment benefits for their workers than the United States. All else equal, you would expect workers in Western Europe to:

Accepted Answer

A)   work more hours on average.
B)   work fewer hours on average.
C)   have higher wages.
D)   have lower wages.

Question 6

The consumption bundle that maximizes utility for a consumer is the bundle that:

Accepted Answer

A)   equates the slope of the budget constraint with the slope of the indifference curve.
B)   maximizes marginal utility across all goods.
C)   minimizes the costs of production.
D)   maximizes the marginal rate of substitution.

Question 7

Use the following to answer questions:
Figure: Budget Constraint 4 
-(Figure: Budget Constraint 4)  Refer to the figure. This figure represents the budget constraint of a consumer who purchases flip-flops and sneakers. If the price of sneakers rises, then the budget constraint will:

Accepted Answer

A)   not change.
B)   become steeper.
C)   become flatter.
D)   shift to the left.

Question 8

Assume that the unit price of good A is $2, and the unit price of good B is $2. If an individual has income of $20, which consumption bundles of (good A, good B)  is on the edge of the budget constraint?

Accepted Answer

A)   (5,5) 
B)   (5,4) 
C)   (6,3) 
D)   (6,5)

Question 9

Preferences are characterized generally by:

Accepted Answer

A)   budget constraints.
B)   consumption bundles.
C)   indifference curves.
D)   income.

Question 10

Use the following to answer questions:
Figure: Comic Books and Coffee 2  
 
-(Figure: Comic Books and Coffee 2)  Refer to the figure. If the price of comic books in the figure is $0.50, the marginal utility per dollar for the third comic book is:

Accepted Answer

A)   $11.00.
B)   $5.50.
C)   $22.00.
D)   $11.50.

Question 11

A point above the budget constraint is sometimes affordable.

Accepted Answer

A) True 
 B)False

Question 12

If the marginal utility of apples is 4 and marginal utility of grapes is 4, the consumer is maximizing utility.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions:
Figure: Optimal Choice 
-(Figure: Optimal Choice)  Refer to the figure. If the dotted line in the figure represents this consumer's budget constraint, then the utility-maximizing bundle for this consumer is:

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   E.

Question 14

Which statement best illustrates the concept of diminishing marginal utility?

Accepted Answer

A)   Gladys is hungry and the first piece of pizza she eats tastes wonderful! The second tastes great, the third good, the fourth okay, and the fifth piece of pizza she eats makes her sick.
B)   Thomas likes tomatoes more than Janice, and thus gets more utility from tomatoes than Janice does.
C)   High Fly is a new low-cost airline. Initially it is very expensive for High Fly to offer flights to customers because of the high start-up costs, but after fixed costs are covered the additional cost of adding one more consumer falls significantly.
D)   Sarah likes hamburgers, but the price she is willing to pay for them is low as compared to another good.

Question 15

Use the following to answer questions:
Figure: Indifference Curve 
-(Figure: Indifference Curve)  Refer to the figure. This figure represents the indifference curve of a consumer who purchases flip-flops and sneakers. Which point generates the highest level of utility for the consumer?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 16

If the price of apples rises, oranges become relatively less expensive. The increase in the orange consumption resulting from this price change is an example of the income effect.

Accepted Answer

A) True 
 B)False

Question 17

Diminishing marginal utility means that marginal utility ______ as consumption ______.

Accepted Answer

A)   decreases; decreases
B)   decreases; increases
C)   increases; decreases
D)   increases; increases

Question 18

Consumption Bundle A contains 6 donuts and 2 cups of coffee, and consumption Bundle B contains 4 donuts and 1.5 cups of coffee. Bundle A and Bundle B could lie on the same indifference curve.

Accepted Answer

A) True 
 B)False

Question 19

At the consumer's optimal consumption bundle, the MRSXY is 4, and the marginal utility of good X is 8. What is the marginal utility of good Y?

Accepted Answer

A)   1/2
B)   2
C)   24
D)   16

Question 20

Use the following to answer questions:
Figure: Budget Constraint 2 
-(Figure: Budget Constraint 2)  Refer to the figure. A consumer has $45 to spend on movie and music downloads per month. What is the price per movie and music download?

Accepted Answer

A)   $15 per movie download and $0.45 per music download
B)   $3 per movie download and $1 per music download
C)   $2.50 per movie download and $1.50 per music download
D)   $10 per movie download and $0.80 per music download

Exam 25: Consumer Choice

Assume that the unit price of good A is $2, and the unit price of good B is $2. If an individual has income of $20, which consumption bundles of (good A, good B) is on the edge of the budget constraint?

Correct Answer
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Use the following to answer questions: Figure: Budget Constraint 2 -(Figure: Budget Constraint 2) Refer to the figure. A consumer has $45 to spend on movie and music downloads per month. What is the price per movie and music download?

Correct Answer
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If the marginal utility of apples is 4 and marginal utility of grapes is 4, the consumer is maximizing utility.

Correct Answer
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A point above the budget constraint is sometimes affordable.

Correct Answer
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At the consumer's optimal consumption bundle, the MRS_XY is 4, and the marginal utility of good X is 8. What is the marginal utility of good Y?

Correct Answer
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Use the following to answer questions: Figure: Indifference Curve -(Figure: Indifference Curve) Refer to the figure. This figure represents the indifference curve of a consumer who purchases flip-flops and sneakers. Which point generates the highest level of utility for the consumer?

Correct Answer
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Use the following to answer questions: Figure: Comic Books and Coffee 2 -(Figure: Comic Books and Coffee 2) Refer to the figure. If the price of comic books in the figure is $0.50, the marginal utility per dollar for the third comic book is:

Correct Answer
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Correct Answer
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The demand curve is downward sloping because of diminishing marginal utility.

Correct Answer
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Diminishing marginal utility means that marginal utility as consumption .

Correct Answer
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Countries in Western Europe tend to have more generous unemployment benefits for their workers than the United States. All else equal, you would expect workers in Western Europe to:

Correct Answer
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The consumption bundle that maximizes utility for a consumer is the bundle that:

Correct Answer
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Use the following to answer questions: Figure: Budget Constraint 4 -(Figure: Budget Constraint 4) Refer to the figure. This figure represents the budget constraint of a consumer who purchases flip-flops and sneakers. If the price of sneakers rises, then the budget constraint will:

Correct Answer
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Consumption Bundle A contains 6 donuts and 2 cups of coffee, and consumption Bundle B contains 4 donuts and 1.5 cups of coffee. Bundle A and Bundle B could lie on the same indifference curve.

Correct Answer
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Use the following to answer questions: Figure: Optimal Choice -(Figure: Optimal Choice) Refer to the figure. If the dotted line in the figure represents this consumer's budget constraint, then the utility-maximizing bundle for this consumer is:

Correct Answer
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If the price of apples rises, oranges become relatively less expensive. The increase in the orange consumption resulting from this price change is an example of the income effect.

Correct Answer
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Preferences are characterized generally by:

Correct Answer
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Figure: Music and Movie Downloads 4 Refer to the figure. According to this figure, which of the following statements is FALSE?

Correct Answer
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Marginal utility is the change in utility from consuming an additional unit.

Correct Answer
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Which statement best illustrates the concept of diminishing marginal utility?

Correct Answer
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Exam 25: Consumer Choice

Assume that the unit price of good A is $2, and the unit price of good B is $2. If an individual has income of $20, which consumption bundles of (good A, good B) is on the edge of the budget constraint?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Budget Constraint 2 -(Figure: Budget Constraint 2) Refer to the figure. A consumer has $45 to spend on movie and music downloads per month. What is the price per movie and music download?

Correct AnswerverifiedShow Answer

If the marginal utility of apples is 4 and marginal utility of grapes is 4, the consumer is maximizing utility.

Correct AnswerverifiedShow Answer

A point above the budget constraint is sometimes affordable.

Correct AnswerverifiedShow Answer

At the consumer's optimal consumption bundle, the MRSXY is 4, and the marginal utility of good X is 8. What is the marginal utility of good Y?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Indifference Curve -(Figure: Indifference Curve) Refer to the figure. This figure represents the indifference curve of a consumer who purchases flip-flops and sneakers. Which point generates the highest level of utility for the consumer?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Comic Books and Coffee 2 -(Figure: Comic Books and Coffee 2) Refer to the figure. If the price of comic books in the figure is $0.50, the marginal utility per dollar for the third comic book is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The demand curve is downward sloping because of diminishing marginal utility.

Correct AnswerverifiedShow Answer

Diminishing marginal utility means that marginal utility ______ as consumption ______.

Correct AnswerverifiedShow Answer

Countries in Western Europe tend to have more generous unemployment benefits for their workers than the United States. All else equal, you would expect workers in Western Europe to:

Correct AnswerverifiedShow Answer

The consumption bundle that maximizes utility for a consumer is the bundle that:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Budget Constraint 4 -(Figure: Budget Constraint 4) Refer to the figure. This figure represents the budget constraint of a consumer who purchases flip-flops and sneakers. If the price of sneakers rises, then the budget constraint will:

Correct AnswerverifiedShow Answer

Consumption Bundle A contains 6 donuts and 2 cups of coffee, and consumption Bundle B contains 4 donuts and 1.5 cups of coffee. Bundle A and Bundle B could lie on the same indifference curve.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Optimal Choice -(Figure: Optimal Choice) Refer to the figure. If the dotted line in the figure represents this consumer's budget constraint, then the utility-maximizing bundle for this consumer is:

Correct AnswerverifiedShow Answer

If the price of apples rises, oranges become relatively less expensive. The increase in the orange consumption resulting from this price change is an example of the income effect.

Correct AnswerverifiedShow Answer

Preferences are characterized generally by:

Correct AnswerverifiedShow Answer

Figure: Music and Movie Downloads 4 Refer to the figure. According to this figure, which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Marginal utility is the change in utility from consuming an additional unit.

Correct AnswerverifiedShow Answer

Which statement best illustrates the concept of diminishing marginal utility?

Correct AnswerverifiedShow Answer

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At the consumer's optimal consumption bundle, the MRS_XY is 4, and the marginal utility of good X is 8. What is the marginal utility of good Y?

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Diminishing marginal utility means that marginal utility as consumption .

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