Question 1

Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. If the price of pizza decreases, then Tonya's consumption of pizza will

Accepted Answer

A)  decrease due to the income effect.
B)  decrease due to the substitution effect.
C)  increase due to the income effect.
D)  increase due to the law of diminishing marginal utility.E) All of the above
F) A) and D)

Question 2

A consumer is maximizing her utility with a particular money income when

Accepted Answer

A)  the total utility derived from each product consumed is the same.
B)  MU a/ Pₐ = MU b/ Pᵦ = MU c/ Pc = . . . = MU n/ Pₙ .
C)  MU a = MU b = MU c = . . . = MU n.
D)  Pₐ = Pᵦ = Pc = . . . = Pₙ .E) B) and D)
F) B) and C)

Question 3

Which of the following is correct?

Accepted Answer

A)  Budget lines are linear and upsloping; indifference curves are downsloping and concave to the origin.
B)  Budget lines are linear and downsloping; indifference curves are downsloping and concave to the origin.
C)  Budget lines are linear and downsloping; indifference curves are downsloping and convex to the origin.
D)  Budget lines are downsloping and convex to the origin; indifference curves are linear and downsloping.E) B) and C)
F) A) and C)

Question 4

Refer to data. Marginal utility becomes negative beginning with the

Accepted Answer

A)  first unit.
B)  second unit.
C)  third unit.
D)  fourth unit.E) None of the above
F) All of the above

Question 5

Recently, the price of lentils increased. As a result Lincoln residents noticed that their neighbor, Rasputin, decreased his consumption of lentils and of steak. Rasputin said his utility had declined. Many citizens made donations to the "Rasputin Relief Fund." Rasputin was given a cash grant equal to the amount he claimed to need to regain his initial utility level. Happy and thankful, Rasputin rushed off to the store to make his new purchases-consisting of more steak and slightly less lentils. Each graph above shows two indifference curves for Rasputin, I₁ and I₂, and the two budget constraints, B₁ and B₂, that he faced. Let E₁ represent Rasputin's initial equilibrium, E₂ equal his equilibrium following the increase in the price of lentils, and E₃ his equilibrium after receiving the cash from the relief fund. Which graph above is consistent with Rasputin's claims in the above story?

Accepted Answer

A)  graph A
B)  graph B
C)  graph C
D)  graph DE) C) and D)
F) A) and B)

Question 6

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Accepted Answer

A)  the consumer's purchase of good 2 decreases even though its price stays constant.
B)  the slope of the budget line decreases because the price of good 1 increased.
C)  the marginal utility of good 1 increases and the marginal utility of good 2 decreases.
D)  the consumer's total utility decreases.E) B) and C)
F) All of the above

Question 7

If two combinations of goods X and Y give a consumer equal satisfaction, then these two combinations must both be on the same

Accepted Answer

A)  budget line.
B)  indifference curve.
C)  demand curve.
D)  supply curve.E) B) and C)
F) None of the above

Question 8

The table below shows the utility schedule for a consumer of candy bars.  This consumer begins to experience diminishing marginal utility when consuming the

Accepted Answer

A)  third candy bar.
B)  fourth candy bar.
C)  sixth candy bar.
D)  seventh candy bar.E) A) and C)
F) C) and D)

Question 9

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ Pc = 100/?, the prices of products B and C in consumer equilibrium

Accepted Answer

A)  cannot be determined from the information given.
B)  are $10.5 and $15, respectively.
C)  are $12 and $20, respectively.
D)  are $15 and $10.5, respectively.E) B) and D)
F) All of the above

Question 10

According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts"

Accepted Answer

A)  are inefficient because the time spent in these activities is never worth the benefit recipients receive from doing them.
B)  are equally efficient because the recipient gets exactly what he wants.
C)  are more efficient than if givers simply gave cash gifts.
D)  increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying.E) B) and C)
F) B) and D)

Question 11

The table shows the utility schedule for a consumer of candy bars.  Based on the data in the table, you can conclude that the

Accepted Answer

A)  marginal utility of the fourth unit is 96.
B)  total utility of 5 units is 88.
C)  total utility of 2 units is 16.
D)  marginal utility of the sixth unit is 5.E) A) and C)
F) A) and B)

Question 12

Sharon purchases two products with a given fixed budget, orange juice and soda. Her marginal utility from orange juice is 60, and her marginal utility from soda is 30. The price of a bottle of orange juice is $2.00, and the price of soda is $1.00. These data suggest that

Accepted Answer

A)  Sharon is maximizing her utility from the given fixed budget.
B)  Sharon should buy more orange juice and less soda.
C)  Sharon should buy more soda and less orange juice.
D)  Sharon should buy less orange juice and soda.E) A) and B)
F) None of the above

Question 13

Refer to the diagram. If the budget line shifts from ab to ac, the

Accepted Answer

A)  price of K has increased.
B)  consumer's money income has fallen.
C)  price of K has decreased.
D)  price of J has increased.E) B) and D)
F) C) and D)

Question 14

If the budget line shifts from BB to bb in the diagram, we can infer that the

Accepted Answer

A)  price of Y has increased and the price of X has decreased.
B)  price of Y has decreased and the price of X has increased.
C)  prices of both X and Y have increased.
D)  prices of both X and Y have decreased.E) A) and B)
F) A) and D)

Question 15

Assume that a consumer purchases a combination of product A and product B such that the MU ₐ /P ₐ = 8 and MU ᵦ /P ᵦ = 6. To maximize utility without spending more money, the consumer should

Accepted Answer

A)  purchase less of product A and more of product B.
B)  purchase more of product A and less of product B.
C)  purchase more of both product A and product B.
D)  make no change in purchases of products A and B.E) A) and B)
F) A) and C)

Question 16

The ratio of the prices of two products that a consumer could buy with a given fixed income is equivalent to the

Accepted Answer

A)  marginal rate of substitution.
B)  slope of the budget line.
C)  income elasticity of demand for the two products.
D)  price elasticity of demand for the two products.E) A) and B)
F) A) and C)

Question 17

An indifference curve shows all

Accepted Answer

A)  possible equilibrium positions on an indifference map.
B)  equilibrium combinations of two products that are obtainable with a given money income.
C)  combinations of two products yielding the same total utility to a consumer.
D)  possible combinations of two products that a consumer can purchase, given her income and the prices of the products.E) B) and C)
F) None of the above

Question 18

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8.  If the price of A decreases, while the price of B and the consumer's income stay the same, we would expect

Accepted Answer

A)  MU/P of A to increase, and the consumer will thus buy less of B.
B)  MU/P of A to increase, and the consumer will thus buy less of A.
C)  MU/P of A to decrease, and the consumer will thus buy less of B.
D)  MU/P of A to decrease, and the consumer will thus buy less of A.E) A) and B)
F) A) and C)

Question 19

What is the difference between total utility and marginal utility?

Accepted Answer

Total utility is the total amount of sat...

Question 20

The marginal rate of substitution of beef for chicken is the

Accepted Answer

A)  number of units of chicken the consumer is prepared to give up to obtain one more unit of beef.
B)  number of units of beef the consumer is prepared to give up as income falls.
C)  number of units of beef the consumer must sacrifice to obtain one more unit of chicken.
D)  rate at which units of beef may be exchanged for units of chicken in the market.E) A) and B)
F) A) and D)

Exam 7: Utility Maximization

If two combinations of goods X and Y give a consumer equal satisfaction, then these two combinations must both be on the same

Correct Answer
verified

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Correct Answer
verified

What is the difference between total utility and marginal utility?

Correct Answer
verified
Total utility is the total amount of sat...
View Answer

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8. If the price of A decreases, while the price of B and the consumer's income stay the same, we would expect

Correct Answer
verified

Refer to data. Marginal utility becomes negative beginning with the

Correct Answer
verified

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ P_c = 100/?, the prices of products B and C in consumer equilibrium

Correct Answer
verified

The marginal rate of substitution of beef for chicken is the

Correct Answer
verified

The ratio of the prices of two products that a consumer could buy with a given fixed income is equivalent to the

Correct Answer
verified

Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. If the price of pizza decreases, then Tonya's consumption of pizza will

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

The table below shows the utility schedule for a consumer of candy bars. This consumer begins to experience diminishing marginal utility when consuming the

Correct Answer
verified

Correct Answer
verified

A consumer is maximizing her utility with a particular money income when

Correct Answer
verified

Sharon purchases two products with a given fixed budget, orange juice and soda. Her marginal utility from orange juice is 60, and her marginal utility from soda is 30. The price of a bottle of orange juice is $2.00, and the price of soda is $1.00. These data suggest that

Correct Answer
verified

An indifference curve shows all

Correct Answer
verified

Refer to the diagram. If the budget line shifts from ab to ac, the

Correct Answer
verified

The table shows the utility schedule for a consumer of candy bars. Based on the data in the table, you can conclude that the

Correct Answer
verified

According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts"

Correct Answer
verified

If the budget line shifts from BB to bb in the diagram, we can infer that the

Correct Answer
verified

Assume that a consumer purchases a combination of product A and product B such that the MU ₐ /P ₐ = 8 and MU ᵦ /P ᵦ = 6. To maximize utility without spending more money, the consumer should

Correct Answer
verified

Exam 7: Utility Maximization

If two combinations of goods X and Y give a consumer equal satisfaction, then these two combinations must both be on the same

Correct AnswerverifiedShow Answer

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Correct AnswerverifiedShow Answer

What is the difference between total utility and marginal utility?

Correct AnswerverifiedTotal utility is the total amount of sat...View AnswerShow Answer

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8. If the price of A decreases, while the price of B and the consumer's income stay the same, we would expect

Correct AnswerverifiedShow Answer

Refer to data. Marginal utility becomes negative beginning with the

Correct AnswerverifiedShow Answer

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ Pc = 100/?, the prices of products B and C in consumer equilibrium

Correct AnswerverifiedShow Answer

The marginal rate of substitution of beef for chicken is the

Correct AnswerverifiedShow Answer

The ratio of the prices of two products that a consumer could buy with a given fixed income is equivalent to the

Correct AnswerverifiedShow Answer

Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. If the price of pizza decreases, then Tonya's consumption of pizza will

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The table below shows the utility schedule for a consumer of candy bars. This consumer begins to experience diminishing marginal utility when consuming the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A consumer is maximizing her utility with a particular money income when

Correct AnswerverifiedShow Answer

Sharon purchases two products with a given fixed budget, orange juice and soda. Her marginal utility from orange juice is 60, and her marginal utility from soda is 30. The price of a bottle of orange juice is $2.00, and the price of soda is $1.00. These data suggest that

Correct AnswerverifiedShow Answer

An indifference curve shows all

Correct AnswerverifiedShow Answer

Refer to the diagram. If the budget line shifts from ab to ac, the

Correct AnswerverifiedShow Answer

The table shows the utility schedule for a consumer of candy bars. Based on the data in the table, you can conclude that the

Correct AnswerverifiedShow Answer

According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts"

Correct AnswerverifiedShow Answer

If the budget line shifts from BB to bb in the diagram, we can infer that the

Correct AnswerverifiedShow Answer

Assume that a consumer purchases a combination of product A and product B such that the MU ₐ /P ₐ = 8 and MU ᵦ /P ᵦ = 6. To maximize utility without spending more money, the consumer should

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Total utility is the total amount of sat...
View Answer

Correct Answer
verified

Correct Answer
verified

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ P_c = 100/?, the prices of products B and C in consumer equilibrium

Correct Answer
verified

Correct Answer
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