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When successive units of a typical good are consumed, the marginal utility gained:


A) tends to decrease.
B) tends to increase.
C) may increase or decrease depending on the cost of the good.
D) tends to stay the same.

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

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If the graph shown represents Stella's budget constraint, and she has an income of $60 to spend on these two items, Stella could choose which consumption bundle? A) Six salads and eight burritos B) Four salads and four burritos C) Two salads and six burritos D) Three salads and four burritos If the graph shown represents Stella's budget constraint, and she has an income of $60 to spend on these two items, Stella could choose which consumption bundle?


A) Six salads and eight burritos
B) Four salads and four burritos
C) Two salads and six burritos
D) Three salads and four burritos

E) C) and D)
F) None of the above

Correct Answer

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After watching a movie, Alan chooses to go for a walk rather than watch a second movie. Economists would explain his choice using the concept of:


A) budget constraints.
B) diminishing marginal utility.
C) income effect.
D) substitution effect.

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

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Dave and Diya play two games of tennis before deciding to stop for lunch. Using the concept of utility to explain their choices, we can conclude that:


A) the marginal utility of the second game must have been zero.
B) the marginal utility they would receive from playing a third game must be negative.
C) the marginal utility they would receive from playing a third game must be less than the marginal utility they would receive from eating lunch.
D) All of these are correct.

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

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Kaito has an hour to spend reading at the library. Spending that hour reading a graphic novel would give him a utility of 5, reading a biography would give him a utility of 4, and reading his economics textbook would give him a utility of 9. An economist would predict that Kaito will spend his hour reading:


A) a graphic novel.
B) a biography.
C) his economics textbook.
D) It is impossible to predict how Kaito will spend his time.

E) C) and D)
F) None of the above

Correct Answer

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In general, a change in the price of a good:


A) causes a substitution effect only.
B) causes an income effect only.
C) causes both an income and substitution effect.
D) has no effect on the budget constraint.

E) C) and D)
F) None of the above

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The table shown describes the different combinations of goods that Brianna can consume, given that she has $80 to spend on these two items. The table shown describes the different combinations of goods that Brianna can consume, given that she has $80 to spend on these two items. Brianna's utility-maximizing bundle of goods is _____ concert tickets and _____ movie tickets. A) 3; 2 B) 2; 4 C) 1; 6 D) 0; 8 Brianna's utility-maximizing bundle of goods is _____ concert tickets and _____ movie tickets.


A) 3; 2
B) 2; 4
C) 1; 6
D) 0; 8

E) C) and D)
F) A) and D)

Correct Answer

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If Bert's budget constraint is represented in the graph shown, his opportunity cost of three bags of chips is: A) twelve pints of ice cream. B) eight pints of ice cream. C) four pints of ice cream. D) Cannot answer without knowing Bert's income. If Bert's budget constraint is represented in the graph shown, his opportunity cost of three bags of chips is:


A) twelve pints of ice cream.
B) eight pints of ice cream.
C) four pints of ice cream.
D) Cannot answer without knowing Bert's income.

E) A) and B)
F) A) and D)

Correct Answer

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What is the relative price of three gallons of milk for the budget constraint represented in the graph shown? A) 2 cases of soda B) 4 cases of soda C) $12 D) $9 What is the relative price of three gallons of milk for the budget constraint represented in the graph shown?


A) 2 cases of soda
B) 4 cases of soda
C) $12
D) $9

E) A) and D)
F) A) and B)

Correct Answer

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Assume Josiah's budget constraint is represented in the graph shown. If Josiah's income is $36, what are the prices of these two goods? A) Soda costs $3 per case and milk costs $4 a gallon. B) Soda costs $4 per case and milk costs $3 a gallon. C) Soda costs $12 per case and milk costs $9 a gallon. D) Soda costs $6 per case and milk costs $3 a gallon. Assume Josiah's budget constraint is represented in the graph shown. If Josiah's income is $36, what are the prices of these two goods?


A) Soda costs $3 per case and milk costs $4 a gallon.
B) Soda costs $4 per case and milk costs $3 a gallon.
C) Soda costs $12 per case and milk costs $9 a gallon.
D) Soda costs $6 per case and milk costs $3 a gallon.

E) B) and C)
F) All of the above

Correct Answer

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Assume the graph shown represents Ayesha's budget constraint. If she has $48 to spend on these two items, what must a movie theater ticket cost? A) $8 B) $6 C) $4 D) $12 Assume the graph shown represents Ayesha's budget constraint. If she has $48 to spend on these two items, what must a movie theater ticket cost?


A) $8
B) $6
C) $4
D) $12

E) None of the above
F) B) and C)

Correct Answer

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Utility is:


A) maximized by rational individuals.
B) revealed by observing choices an individual makes.
C) the satisfaction individuals get from different bundles of goods.
D) All of these are correct.

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

Correct Answer

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Utility is:


A) a quantitative measure of consumers' preferences.
B) an objective measure of a person's happiness.
C) as difficult to measure as an individual's income level.
D) a meaningful number measuring a consumer's precise level of satisfaction.

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

Correct Answer

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If the graph shown represents Stella's budget constraint, and salads cost $8, how much does Stella have to spend on these two items? A) $40 B) $64 C) $48 D) This question cannot be answered without more information. If the graph shown represents Stella's budget constraint, and salads cost $8, how much does Stella have to spend on these two items?


A) $40
B) $64
C) $48
D) This question cannot be answered without more information.

E) A) and D)
F) All of the above

Correct Answer

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Madison has set aside $24 for her snack budget this month. Her favorite snacks are ice cream and chips. The price of a pint of ice cream is $4 and the price of a bag of chips is $3. She currently consumes three pints of ice cream and four bags of chips each month. If the price of a pint of ice cream drops to $3, the income effect predicts that Madison will consume:


A) more ice cream and more chips.
B) equal amounts of ice cream and chips.
C) more ice cream and fewer chips.
D) less ice cream and more chips.

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

Correct Answer

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Assume Willow's weekly income is $56 and she wants to spend it on either salads or burritos. If her budget constraint is pictured in the graph shown, which of the following must be true? A) Willow will buy more burritos than salads because they are less expensive. B) Willow will buy more salads than burritos because they are less expensive. C) Salads must cost $14, and burritos must cost $7. D) Salads must cost $8, and burritos must cost $4. Assume Willow's weekly income is $56 and she wants to spend it on either salads or burritos. If her budget constraint is pictured in the graph shown, which of the following must be true?


A) Willow will buy more burritos than salads because they are less expensive.
B) Willow will buy more salads than burritos because they are less expensive.
C) Salads must cost $14, and burritos must cost $7.
D) Salads must cost $8, and burritos must cost $4.

E) C) and D)
F) A) and D)

Correct Answer

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What is a bundle in terms of utility?


A) A specific combination of goods and services an individual could consume.
B) The number of people that choose a particular combination of goods.
C) A curve describing different combinations of goods and services an individual could choose to consume.
D) The sale of goods or services at a discounted price.

E) A) and B)
F) None of the above

Correct Answer

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When an individual's income decreases, the slope of the budget constraint stays the same because:


A) everything is relatively more expensive now.
B) everything is relatively less expensive now.
C) the relative prices of the goods haven't changed.
D) the prices of the goods change in the same proportion.

E) None of the above
F) All of the above

Correct Answer

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Sadie has just eaten a donut that gave her a utility of 6. If she chooses to eat another donut, we can assume that:


A) she will receive an increase in utility of more than 6 from the additional donut.
B) she will receive a decrease in utility from the additional donut.
C) she will receive an increase in utility of less than 6 from the additional donut.
D) her total utility will fall because of diminishing marginal utility.

E) B) and C)
F) B) and D)

Correct Answer

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"Do unto others as you would have done unto you" is an example of the economic concept of:


A) marginal utility.
B) altruism.
C) reciprocity.
D) selfishness.

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

Correct Answer

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