Question 1

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Accepted Answer

A) True 
 B)False  False

Question 2

A child is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from each product are as shown in the following table.  Based on taste and preference alone, which good does the child prefer?

Accepted Answer

A)   chocolates
B)   hard candies
C)   The child equally likes chocolates and hard candies.
D)   One cannot tell from the given data.E) None of the above
F) A) and B)

Question 3

When the price of a product rises for an inferior good, the

Accepted Answer

A)   income and substitution effects will encourage consumers to purchase more of the product.
B)   income and substitution effects will encourage consumers to purchase less of the product.
C)   substitution effect will encourage consumers to purchase less of the product, but the income effect will encourage them to purchase more.
D)   substitution effect will encourage consumers to purchase more of the product, but the income effect will encourage them to purchase less.E) All of the above
F) A) and D)

Question 4

In moving northeasterly from the origin, we encounter indifference curves that reflect higher and higher levels of total utility.

Accepted Answer

A) True 
 B)False

Question 5

In the diagram,

Accepted Answer

A)   the consumer is indifferent between points A and B, but neither point maximizes his utility.
B)   the consumer is indifferent between points A and B, and either point will maximize his utility.
C)   any combination of X and Y entailing more of Y and less of X than shown at B would be preferred.
D)   any combination of X and Y entailing more of X and less of Y than shown at A would be preferred.E) B) and C)
F) A) and D)

Question 6

The law of diminishing marginal utility suggests that the total utility that a consumer derives from a product will increase slower and slower as more of the product is consumed.

Accepted Answer

A) True 
 B)False  True

Question 7

The budget line shows

Accepted Answer

A)   the amount of product A that a consumer is willing to give up to obtain one more unit of product B.
B)   all possible combinations of two goods that can be purchased, given money income and the prices of the goods.
C)   all equilibrium points on an indifference map.
D)   all possible combinations of two goods that yield the same level of utility to the consumer.E) B) and D)
F) A) and C)

Question 8

As a consumer moves down a given indifference curve, his or her total utility will diminish.

Accepted Answer

A) True 
 B)False

Question 9

AA is Al's indifference curve, and BB is Betty's. Al and Betty have the same budget line, LL. This information implies that

Accepted Answer

A)   Al's demand for X is greater than Betty's.
B)   Al's demand for Y is greater than Betty's.
C)   Al and Betty have the same demand for both products.
D)   Al will buy some of X, but Betty will not.E) None of the above
F) B) and C)

Question 10

(Consider This)  When the federal government started requiring restaurants to print calorie counts next to menu items,

Accepted Answer

A)   restaurants changed their prices, systematically lowering prices for healthier items and raising prices for high-calorie entrees.
B)   there was no meaningful change in consumption behavior, indicating that marginal utility is driven solely by tastes for the food items and not by health information.
C)   consumption of higher calorie items decreased, suggesting consumers' marginal utility for these items dropped.
D)   consumption of higher-calorie items increased, contrary to the law's objective.E) A) and B)
F) All of the above

Question 11

At each point on an indifference curve,

Accepted Answer

A)   money income is the same.
B)   the prices of the two products are the same.
C)   total utility is the same.
D)   marginal utility is the same.E) None of the above
F) All of the above

Question 12

The increase in demand for iPad tablet computers can be explained by

Accepted Answer

A)   an increase in the technology used to produce iPads, making the supply of iPads increase.
B)   an increase in the price of laptop computers, making their MU/P decrease.
C)   the enhanced versatility and storage capacity of iPads, making their MU/P increase.
D)   an increase in the income of buyers, making the demand for iPads increase.E) B) and C)
F) A) and B)

Question 13

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)   MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.
C)   MUa = MUb = MUc = . . . = MUn.
D)   Pa = Pb = Pc = . . . = Pn.E) A) and B)
F) A) and C)

Question 14

Which of the following is an assumption of the theory of consumer behavior described in this chapter?

Accepted Answer

A)   The consumer's income increases as prices of goods increase
B)   Each good that a consumer consumes has a price
C)   The consumer oftentimes is not sure about her preferences
D)   Marginal utility increases as more units of a good is consumedE) B) and C)
F) All of the above

Question 15

If money income increases and the prices of products A and B both increase, then the budget line

Accepted Answer

A)   must shift to the right.
B)   must shift to the left.
C)   may shift either to the right or the left, or not at all.
D)   will no longer be tangent to an indifference curve.E) B) and C)
F) A) and D)

Question 16

The movement of the budget line from BB to bb in the figure suggests that income has

Accepted Answer

A)   increased and the price of X has decreased.
B)   fallen and the price of Y has increased.
C)   fallen and the price of Y has decreased.
D)   decreased, but there have been no price changes.E) B) and C)
F) A) and B)

Question 17

An increase in the price of product X causes a decrease in the quantity demanded for product X. One basic explanation for this is

Accepted Answer

A)   the law of increasing opportunity cost.
B)   the price-elasticity effect.
C)   the law of supply.
D)   the law of diminishing marginal utility.E) A) and B)
F) A) and C) D

Question 18

To derive the demand curve of a product in indifference curve analysis, the

Accepted Answer

A)   budget line is assumed to stay in a fixed position.
B)   money income of the consumer is assumed to be variable.
C)   prices of both products are assumed to be variable.
D)   tastes and preferences of the consumer are assumed to be fixed.E) A) and B)
F) All of the above

Question 19

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

Accepted Answer

A)   6
B)   2
C)   2.5
D)   4E) A) and D)
F) A) and C)

Question 20

A change in the slope of a budget line is solely the result of a change in

Accepted Answer

A)   consumer preferences.
B)   the price of one good relative to the other.
C)   money income.
D)   the slope of the indifference curve that is tangent to the budget line.E) None of the above
F) A) and D)

Exam 7: Utility Maximization

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Correct AnswerverifiedFalse

A child is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from each product are as shown in the following table. Based on taste and preference alone, which good does the child prefer?

Correct AnswerverifiedShow Answer

When the price of a product rises for an inferior good, the

Correct AnswerverifiedShow Answer

In moving northeasterly from the origin, we encounter indifference curves that reflect higher and higher levels of total utility.

Correct AnswerverifiedShow Answer

In the diagram,

Correct AnswerverifiedShow Answer

The law of diminishing marginal utility suggests that the total utility that a consumer derives from a product will increase slower and slower as more of the product is consumed.

Correct AnswerverifiedTrue

The budget line shows

Correct AnswerverifiedShow Answer

As a consumer moves down a given indifference curve, his or her total utility will diminish.

Correct AnswerverifiedShow Answer

AA is Al's indifference curve, and BB is Betty's. Al and Betty have the same budget line, LL. This information implies that

Correct AnswerverifiedShow Answer

(Consider This) When the federal government started requiring restaurants to print calorie counts next to menu items,

Correct AnswerverifiedShow Answer

At each point on an indifference curve,

Correct AnswerverifiedShow Answer

The increase in demand for iPad tablet computers can be explained by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an assumption of the theory of consumer behavior described in this chapter?

Correct AnswerverifiedShow Answer

If money income increases and the prices of products A and B both increase, then the budget line

Correct AnswerverifiedShow Answer

The movement of the budget line from BB to bb in the figure suggests that income has

Correct AnswerverifiedShow Answer

An increase in the price of product X causes a decrease in the quantity demanded for product X. One basic explanation for this is

Correct AnswerverifiedD

To derive the demand curve of a product in indifference curve analysis, the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A change in the slope of a budget line is solely the result of a change in

Correct AnswerverifiedShow Answer

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D

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