Question 1

If a dinner guest was serious when she said that she could never get enough of your cooking, you would conclude that the marginal utility of your cooking for her was _____.

Accepted Answer

A)  negative
B)  decreasing
C)  increasing at an increasing rate
D)  positive
E)  less than total utilityF) A) and D)
G) C) and D)

Question 2

When the price of a good changes, the substitution effect occurs because:

Accepted Answer

A)  the consumers' real income measured in terms of that good changes.
B)  the relative price of that good changes compared to other goods in the consumption bundle.
C)  the total utility of that good changes.
D)  the marginal utility of that good changes.
E)  consumers have an incentive to substitute irrational behavior for rational behavior.F) A) and C)
G) C) and D)

Question 3

Utility is easy to measure in the real world with recent advances in psychometric technology.

Accepted Answer

A) True 
 B)False

Question 4

A ten-year-old boy spent his allowance on a soccer ball and a baseball glove.He said he could not be happier buying anything else.The price of the ball was $5, while the price of the glove was $10.If the marginal utility he received from the ball was 15 utils, then:

Accepted Answer

A)  the marginal utility he received from expenditure on the glove was 3 utils.
B)  the marginal utility he received from expenditure on the glove was 30 utils.
C)  the total utility per dollar he received from expenditure on the glove was 3 utils.
D)  the total utility per dollar he received from expenditure on the glove was 10 utils.
E)  the marginal utility he received from the expenditure of the glove was 10 utilsF) B) and E)
G) A) and B)

Question 5

Which of the following sentences based on the findings of neuroeconomics is true?

Accepted Answer

A)  Logical decision-making takes place in the limbic system.
B)  Emotional decision-making takes place in the pre-frontal cortex.
C)  The pre-frontal cortex confuses the logical side of the brain by bringing in emotions, and in some cases it takes over and demands immediate gratification.
D)  Adults have greater activity in their frontal lobes and lower activity in their amygdala than do teenagers.
E)  The amygdala takes a long-term perspective on the decision-making, looking at logical cost-benefit comparisons.F) A) and E)
G) None of the above

Question 6

If MUx / Px = MUY / PY then _____.

Accepted Answer

A)  the consumer should purchase same quantity of X and Y.
B)  the consumer should purchase less X
C)  the consumer is maximizing utility
D)  the consumer should purchase more Y
E)  the consumer is minimizing utilityF) B) and D)
G) B) and E)

Question 7

Marginal utility is _____.

Accepted Answer

A)  always greater than total utility
B)  utility that is not as good as normal utility
C)  the extra utility derived from consuming one additional unit of a good or service
D)  always positive
E)  not related to total utilityF) A) and B)
G) A) and C)

Question 8

A price change triggers the income effect but not the substitution effect.

Accepted Answer

A) True 
 B)False

Question 9

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

Accepted Answer

A)  the total utility you get from the two pieces of gum will be higher tomorrow.
B)  the marginal utility you get from the second piece will be higher tomorrow.
C)  the marginal utility you get from the second piece will be higher today.
D)  the marginal utility you get from the first piece will be less today.
E)  the total utility you get from the two pieces will be less tomorrow.F) C) and D)
G) None of the above

Question 10

The income and substitution effects of a price change occur because:

Accepted Answer

A)  consumer incomes are not constant.
B)  consumer substitution rates are not constant.
C)  income and substitution effects never occur simultaneously.
D)  of diminishing marginal utility and the equimarginal principle.
E)  of increasing marginal utility and the equimarginal principle.F) B) and D)
G) None of the above

Question 11

Marginal utility is total utility divided by the number of units consumed.

Accepted Answer

A) True 
 B)False

Question 12

Total utility is maximized when _____.

Accepted Answer

A)  marginal utility is maximized
B)  marginal utility is the same for all goods consumed
C)  marginal utility per dollar expenditure is maximized
D)  marginal utility per dollar expenditure is the same for all goods consumed
E)  any change in purchasing from good A to good B reduces marginal satisfactionF) B) and D)
G) A) and E)

Question 13

In an indifference map, one would most likely see indifference curves that:

Accepted Answer

A)  are positively sloped.
B)  intersect at the origin.
C)  cross at the equilibrium point.
D)  are bowed inward toward the origin.
E)  represent greater utility as they approach the origin.F) A) and E)
G) All of the above

Question 14

In order to maximize utility, consumers _____.

Accepted Answer

A)  continue to make purchases until the marginal utility of each good is zero
B)  compare the marginal utilities of the last dollar spent on each good
C)  equate the total utilities of each good consumed
D)  continue to purchase a good until total utility is equal to zero
E)  will continue purchasing till diminishing marginal utility is not achievedF) C) and D)
G) A) and B)

Question 15

Refer to Table 6.2.The law of diminishing marginal utility holds _____.

Accepted Answer

A)  for any number of avocados
B)  up to five avocados
C)  only for one or two avocados
D)  only after five avocados are consumed
E)  for the first three avocadosF) All of the above
G) A) and B)

Question 16

Following a decrease in the price of a good or service, an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.

Accepted Answer

A)  income
B)  endowment
C)  substitution
D)  price
E)  scaleF) A) and B)
G) C) and D)

Question 17

When marginal utility is positive and increasing, then

Accepted Answer

A)  total utility must be negative.
B)  total utility must be increasing at an increasing rate.
C)  total utility must be increasing at a decreasing rate.
D)  total utility is decreasing.
E)  total utility is at its maximum point.F) A) and E)
G) C) and E)

Question 18

Assume that a consumer purchases a combination of products X and Y and the MUx / Px = 75 utils per dollar and MUy / Py = 50 utils per dollar.To maximize utility without spending more dollars, the consumer should buy:

Accepted Answer

A)  more of both X and Y.
B)  less of Y only if the price of Y increases.
C)  more of Y and less of X.
D)  more of X and less of Y.
E)  less of both X and Y.F) B) and C)
G) C) and E)

Question 19

The demand curve for a product slopes downward and to the right because:

Accepted Answer

A)  total utility decreases as more of the product is consumed.
B)  total utility derived from both, the product and its substitutes is the same.
C)  marginal utility of the product diminishes as more of the product is consumed.
D)  there are no substitutes for the product.
E)  when the price falls, the income effect causes consumers to buy less of the product.F) A) and E)
G) C) and E)

Question 20

If MUX / PX Y / PY then this consumer:

Accepted Answer

A)  will buy less of X and more of Y.
B)  will buy more of X and more of Y.
C)  is in equilibrium.
D)  will buy more of X and less of Y.
E)  will buy less of X and less of Y.F) A) and D)
G) All of the above

Exam 36: Consumer Choice

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

Correct AnswerverifiedShow Answer

If a dinner guest was serious when she said that she could never get enough of your cooking, you would conclude that the marginal utility of your cooking for her was _____.

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If MUx / Px = MUY / PY then _____.

Correct AnswerverifiedShow Answer

Total utility is maximized when _____.

Correct AnswerverifiedShow Answer

The demand curve for a product slopes downward and to the right because:

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When marginal utility is positive and increasing, then

Correct AnswerverifiedShow Answer

A price change triggers the income effect but not the substitution effect.

Correct AnswerverifiedShow Answer

Utility is easy to measure in the real world with recent advances in psychometric technology.

Correct AnswerverifiedShow Answer

Marginal utility is _____.

Correct AnswerverifiedShow Answer

When the price of a good changes, the substitution effect occurs because:

Correct AnswerverifiedShow Answer

A ten-year-old boy spent his allowance on a soccer ball and a baseball glove.He said he could not be happier buying anything else.The price of the ball was $5, while the price of the glove was $10.If the marginal utility he received from the ball was 15 utils, then:

Correct AnswerverifiedShow Answer

Refer to Table 6.2.The law of diminishing marginal utility holds _____.

Correct AnswerverifiedShow Answer

In an indifference map, one would most likely see indifference curves that:

Correct AnswerverifiedShow Answer

If MUX / PX < MUY / PY then this consumer:

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The income and substitution effects of a price change occur because:

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Marginal utility is total utility divided by the number of units consumed.

Correct AnswerverifiedShow Answer

Following a decrease in the price of a good or service, an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.

Correct AnswerverifiedShow Answer

Assume that a consumer purchases a combination of products X and Y and the MUx / Px = 75 utils per dollar and MUy / Py = 50 utils per dollar.To maximize utility without spending more dollars, the consumer should buy:

Correct AnswerverifiedShow Answer

In order to maximize utility, consumers _____.

Correct AnswerverifiedShow Answer

Which of the following sentences based on the findings of neuroeconomics is true?

Correct AnswerverifiedShow Answer

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If MU_x/ P_x = MU_Y/ P_Y then _____.

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If MU_X/ P_X < MU_Y/ P_Y then this consumer:

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Assume that a consumer purchases a combination of products X and Y and the MU_x / P_x = 75 utils per dollar and MU_y / P_y = 50 utils per dollar.To maximize utility without spending more dollars, the consumer should buy:

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