Question 1

Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $18  How many units of the two products will the rational consumer purchase?

Accepted Answer

A)  3 of L and none of M
B)  4 of L and 2 of M
C)  3 of L and 5 of M
D)  2 of L and 3 of M

Question 2

To maximize utility, a consumer should allocate money income so that the

Accepted Answer

A)  elasticity of demand on all products purchased is the same.
B)  marginal utility obtained from the last dollar spent on each product is the same.
C)  total utility derived from each product consumed is the same.
D)  marginal utility of the last unit of each product consumed is the same.

Question 3

Children who dislike brussels sprouts exemplify the notion that the marginal utility of brussels sprouts is

Accepted Answer

A)  zero.
B)  negative.
C)  positive, but decreasing.
D)  less than the total utility.

Question 4

Discuss the basic determinants for an individual's demand for a specific good or service.

Accepted Answer

The basic determinants of an i...

Question 5

The theory of consumer behavior assumes that consumers attempt to maximize

Accepted Answer

A)  the difference between total and marginal utility.
B)  total utility.
C)  average utility.
D)  marginal utility.

Question 6

The data illustrate the

Accepted Answer

A)  law of comparative advantage.
B)  utility-maximizing rule.
C)  law of diminishing marginal utility.
D)  law of increasing opportunity costs.

Question 7

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

Accepted Answer

A)  All are required to explain the utility-maximizing position of a consumer.
B)  They are all empirically measurable.
C)  They all help explain the upsloping supply curve.
D)  They all help explain the downsloping demand curve.

Question 8

Theft and burglary

Accepted Answer

A)  can be viewed as attempts to maximize utility, given certain marginal costs and marginal benefits.
B)  are examples of irrational behavior.
C)  are applications of the law of increasing opportunity cost.
D)  are less economically rational than crimes of passion and violence.

Question 9

Why would an ounce of gold be priced higher than an ounce of coffee beans, even though coffee is generally considered more essential than gold?

Accepted Answer

Coffee beans are in great supply relativ...

Question 10

Which of the graphs shows an increase in the price of X and a decrease in the price of Y?

Accepted Answer

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

Question 11

List two important characteristics of indifference curves for two goods.

Accepted Answer

The two important characterist...

Question 12

The law of diminishing marginal utility explains why

Accepted Answer

A)  supply curves slope upward.
B)  demand curves slope downward.
C)  addicts can never get enough.
D)  people will only consume their favorite goods and not try new things.

Question 13

Refer to the data. The value for Y is

Accepted Answer

A)  25.
B)  30.
C)  40.
D)  45.

Question 14

When the price of a product falls, the income effect induces the consumer to purchase more of it, while the substitution effect prompts her to buy less.

Accepted Answer

A) True 
 B)False

Question 15

The fact that most medical care purchases are financed through insurance

Accepted Answer

A)  has no effect on health care consumption because aggregate costs are the same regardless of payment method.
B)  reduces the amount of health care consumed by raising the price of additional units of care.
C)  has decreased health care costs and therefore reduced aggregate health care expenditures.
D)  increases the amount of health care consumed by reducing the price of additional units of care.

Question 16

Assume MU c and MU d represent the marginal utility that a consumer gets from products C and D, the respective prices of which are Pc and Pd. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially

Accepted Answer

A) MU dMU dP d. D) MU d>MU c.

Question 17

If a consumer has an income of $100, the price of X is $2, and the price of Y is $4, what is the maximum quantity of Y the consumer is able to purchase?

Accepted Answer

A)  400
B)  100
C)  50
D)  25

Question 18

The table shows an indifference schedule for several combinations of X and Y.  Approximately how much of Y is the consumer willing to give up to obtain the twentieth unit of X?

Accepted Answer

A)  4
B)  1/4
C)  2
D)  1/2

Question 19

The fact that an ounce of gold is priced higher than an ounce of chocolate suggests that

Accepted Answer

A)  the marginal utility of the last unit of gold consumed or purchased is greater than the marginal utility of the last unit of chocolate consumed.
B)  the total utility of gold purchased is greater than the total utility of chocolate consumed.
C)  gold is a normal good, while chocolate is an inferior good.
D)  there are many substitutes for chocolate but few for gold.

Question 20

When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.

Accepted Answer

A) True 
 B)False

Exam 7: Utility Maximization

The fact that an ounce of gold is priced higher than an ounce of chocolate suggests that

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If a consumer has an income of $100, the price of X is $2, and the price of Y is $4, what is the maximum quantity of Y the consumer is able to purchase?

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When the price of a product falls, the income effect induces the consumer to purchase more of it, while the substitution effect prompts her to buy less.

Correct AnswerverifiedShow Answer

Why would an ounce of gold be priced higher than an ounce of coffee beans, even though coffee is generally considered more essential than gold?

Correct AnswerverifiedCoffee beans are in great supply relativ...View AnswerShow Answer

To maximize utility, a consumer should allocate money income so that the

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The law of diminishing marginal utility explains why

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The data illustrate the

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List two important characteristics of indifference curves for two goods.

Correct AnswerverifiedThe two important characterist...View AnswerShow Answer

The theory of consumer behavior assumes that consumers attempt to maximize

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Assume MU c and MU d represent the marginal utility that a consumer gets from products C and D, the respective prices of which are Pc and Pd. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially

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Refer to the data. The value for Y is

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Discuss the basic determinants for an individual's demand for a specific good or service.

Correct AnswerverifiedThe basic determinants of an i...View AnswerShow Answer

Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $18 How many units of the two products will the rational consumer purchase?

Correct AnswerverifiedShow Answer

The fact that most medical care purchases are financed through insurance

Correct AnswerverifiedShow Answer

When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.

Correct AnswerverifiedShow Answer

Children who dislike brussels sprouts exemplify the notion that the marginal utility of brussels sprouts is

Correct AnswerverifiedShow Answer

Theft and burglary

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Which of the graphs shows an increase in the price of X and a decrease in the price of Y?

Correct AnswerverifiedShow Answer

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

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The table shows an indifference schedule for several combinations of X and Y. Approximately how much of Y is the consumer willing to give up to obtain the twentieth unit of X?

Correct AnswerverifiedShow Answer

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Coffee beans are in great supply relativ...
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The two important characterist...
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Assume MU c and MU d represent the marginal utility that a consumer gets from products C and D, the respective prices of which are P_c and P_d. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially

Correct Answer
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Correct Answer
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The basic determinants of an i...
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