Question 1

Marginal utility is the accumulation of the total utility from successive units of a good or service consumed.

Accepted Answer

A) True 
 B)False

Question 2

The utility from a specific product is

Accepted Answer

A)  determined by a consumer's income.
B)  determined by the price of the product.
C)  a measure of one's preference or taste for it.
D)  constant as one consumes more units of it.E) A) and B)
F) None of the above

Question 3

Suppose that football tickets at your university are given away for free and that there are still empty seats for all games.Ignoring all other costs of going to the games, you should continue attending until your

Accepted Answer

A)  total utility stops increasing.
B)  marginal utility begins to diminish.
C)  marginal utility stops increasing.
D)  total utility reaches zero.E) B) and C)
F) A) and B)

Question 4

After eating four slices of pizza, you are offered a fifth slice for free.You turn down the fifth slice.Your refusal indicates that the

Accepted Answer

A)  marginal utility for four pizza slices is negative.
B)  total utility for five pizza slices is negative.
C)  marginal utility is positive for the fourth slice and negative for the fifth slice.
D)  marginal utility for the fourth slice is the largest among all slices.E) C) and D)
F) None of the above C

Question 5

Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget.Both are normal goods for Tonya.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) C

Question 6

Marginal utility is the

Accepted Answer

A)  sensitivity of consumer purchases of a good to changes in the price of that good.
B)  change in total utility obtained by consuming one more unit of a good.
C)  change in total utility obtained by consuming another unit of a good divided by the change in the price of that good.
D)  total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.E) B) and C)
F) All of the above

Question 7

The consumer demand curve for a product is downsloping because marginal utility is constant when price declines.

Accepted Answer

A) True 
 B)False

Question 8

The financing of health care through insurance has

Accepted Answer

A)  decreased absolute total expenditures on health care.
B)  resulted in consumers directly paying less than the full price of health care.
C)  increased the marginal utility of health care services.
D)  made no change in health care consumption.E) A) and D)
F) A) and B)

Question 9

The ability of a good or service to satisfy wants is called

Accepted Answer

A)  utility maximization.
B)  opportunity cost.
C)  revenue potential.
D)  utility.E) B) and C)
F) A) and B)

Question 10

Which of the following statements is correct?

Accepted Answer

A)  Marginal utility is the cumulation or summation of total utility.
B)  Total utility is the cumulation or summation of marginal utility.
C)  Total utility is the product of multiplying price times marginal utility.
D)  Total utility is the change in marginal utility as quantity consumed increases.E) None of the above
F) A) and B)

Question 11

(Consider This)  When the federal government started requiring restaurants to print calorie counts next to menu items, some people increased their consumption of higher-calorie items.Whichof the following best explains this phenomenon?

Accepted Answer

A)  Consumers at restaurants are systematically irrational.
B)  Consumers are more interested in maximizing calories per dollar than health per dollar.
C)  Restaurants lowered the prices of healthier items, signaling to consumers that they are less appealing.
D)  Restaurants cut portion sizes on all items to reduce calorie counts.E) A) and D)
F) A) and C)

Question 12

Which of the following statements about utility is true?

Accepted Answer

A)  It is the same as usefulness.
B)  Total utility diminishes as soon as additional units of a good are consumed.
C)  Utility is objectively determined, meaning a good should provide the same satisfaction to whomever consumes it.
D)  Utility is difficult to measure quantitatively.E) A) and C)
F) C) and D)

Question 13

Indifference curves are linear, and budget lines are convex to the origin.

Accepted Answer

A) True 
 B)False

Question 14

If a consumer has an income of $200, the price of X is $5, and the price of Y is $10, what is the maximum quantity of X the consumer is able to purchase?

Accepted Answer

A)  5
B)  10
C)  20
D)  40E) C) and D)
F) None of the above

Question 15

In spending all his income on beer and pizza, Fred finds that the marginal utility of the last pizza he consumed is 8, and the marginal utility of the last bottle of beer is 4.The price of a bottle of beer is $1.50.If Fred has maximized his utility, the price of pizza must be

Accepted Answer

A)  $0.75.
B)  $1.00.
C)  $3.00.
D)  $4.50.E) None of the above
F) A) and B)

Question 16

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and the marginal utility of Y is 8.The unit priceof X is $5 and the unit price of Y is $2.The utility-maximizing rule suggests that this consumer should

Accepted Answer

A)  increase consumption of product X and decrease consumption of product Y.
B)  increase consumption of product X and increase consumption of product Y.
C)  increase consumption of product Y and decrease consumption of product X.
D)  stick with the current consumption mix because it yields maximum utility.E) All of the above
F) B) and C)

Question 17

An increase in the real income of a consumer is one result from an increase in the price of a product that the consumer is buying.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

When DVD players start becoming obsolete then, to potential thieves, the

Accepted Answer

A)  marginal utility of stealing them increases.
B)  marginal utility of stealing them decreases.
C)  marginal cost of stealing them increases.
D)  marginal cost of stealing them decreases.E) A) and B)
F) A) and C)

Question 20

A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the

Accepted Answer

A)  price of one product has decreased in relation to the other.
B)  prices of both products have decreased in the same proportion.
C)  consumer's money income has increased and the prices of both products have also increased but proportionately less.
D)  consumer's money income has increased but the prices of both products have increased proportionately more.E) A) and B)
F) C) and D) D

Exam 7: Utility Maximization

Marginal utility is the accumulation of the total utility from successive units of a good or service consumed.

Correct AnswerverifiedShow Answer

The utility from a specific product is

Correct AnswerverifiedShow Answer

Suppose that football tickets at your university are given away for free and that there are still empty seats for all games.Ignoring all other costs of going to the games, you should continue attending until your

Correct AnswerverifiedShow Answer

After eating four slices of pizza, you are offered a fifth slice for free.You turn down the fifth slice.Your refusal indicates that the

Correct AnswerverifiedC

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

Correct AnswerverifiedC

Marginal utility is the

Correct AnswerverifiedShow Answer

The consumer demand curve for a product is downsloping because marginal utility is constant when price declines.

Correct AnswerverifiedShow Answer

The financing of health care through insurance has

Correct AnswerverifiedShow Answer

The ability of a good or service to satisfy wants is called

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

(Consider This) When the federal government started requiring restaurants to print calorie counts next to menu items, some people increased their consumption of higher-calorie items.Whichof the following best explains this phenomenon?

Correct AnswerverifiedShow Answer

Which of the following statements about utility is true?

Correct AnswerverifiedShow Answer

Indifference curves are linear, and budget lines are convex to the origin.

Correct AnswerverifiedShow Answer

If a consumer has an income of $200, the price of X is $5, and the price of Y is $10, what is the maximum quantity of X the consumer is able to purchase?

Correct AnswerverifiedShow Answer

In spending all his income on beer and pizza, Fred finds that the marginal utility of the last pizza he consumed is 8, and the marginal utility of the last bottle of beer is 4.The price of a bottle of beer is $1.50.If Fred has maximized his utility, the price of pizza must be

Correct AnswerverifiedShow Answer

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and the marginal utility of Y is 8.The unit priceof X is $5 and the unit price of Y is $2.The utility-maximizing rule suggests that this consumer should

Correct AnswerverifiedShow Answer

An increase in the real income of a consumer is one result from an increase in the price of a product that the consumer is buying.

Correct AnswerverifiedShow Answer

The law of diminishing marginal utility explains why

Correct AnswerverifiedShow Answer

When DVD players start becoming obsolete then, to potential thieves, the

Correct AnswerverifiedShow Answer

A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the

Correct AnswerverifiedD

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C

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C

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D