Question 1

The satisfaction or pleasure one gets from consuming a good or service is called

Accepted Answer

A)  price.
B)  utility.
C)  income.
D)  profits.E) B) and C)
F) A) and C)

Question 2

The income effect of a price increase for a normal good causes an increase in the consumption of the good.

Accepted Answer

A) True 
 B)False

Question 3

Answer the question based on the table below showing the marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $4, and the price of product Y is $2. The income of the consumer is $20.  When the consumer purchases the utility-maximizing combination of product X and product Y, total utility will be

Accepted Answer

A)  72.
B)  84.
C)  136.
D)  156.E) C) and D)
F) A) and D)

Question 4

Refer to the table. At what consumption level for this product does diminishing marginal utility set in?

Accepted Answer

A)  4 units
B)  5 units
C)  8 units
D)  7 unitsE) C) and D)
F) A) and B)

Question 5

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that

Accepted Answer

A)  their marginal utilities are the same.
B)  their total utilities are the same.
C)  their marginal and total utilities are proportionate.
D)  the income and substitution effects associated with each are equal.E) B) and C)
F) C) and D)

Question 6

Refer to the diagram, in which the downsloping lines are budget lines and I₁, I₂, and I₃ comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that

Accepted Answer

A)  all three imply the same level of utility.
B)  1 and 5 imply a higher level of utility than does 3.
C)  3 implies a higher level of utility than does 1 or 5.
D)  the person is indifferent among the three combinations.E) B) and C)
F) A) and D)

Question 7

The graph shows two indifference curves, and QR and QS represent different budget lines. A change in the equilibrium position on the diagram from point 1 to point 2 could result, other things being equal, from

Accepted Answer

A)  an increase in the price of B.
B)  a decrease in the price of A.
C)  a decrease in the consumer's money income.
D)  an equal percentage increase in the consumer's money income and in the price of B.E) A) and B)
F) A) and C)

Question 8

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18.  If the price of X decreases to $2, then the utility-maximizing combination of the two products is

Accepted Answer

A)  2 of X and 5 of Y.
B)  4 of X and 6 of Y.
C)  6 of X and 3 of Y.
D)  4 of X and 5 of Y.E) A) and B)
F) All of the above

Question 9

Which of the following best expresses the law of diminishing marginal utility?

Accepted Answer

A)  The more of a product consumed, the smaller is the total utility from the product.
B)  The less of a product consumed, the greater is the marginal utility of the product.
C)  The more of a product consumed, the greater is the total utility from the product.
D)  The less of a product consumed, the smaller is marginal utility of the product.E) B) and C)
F) A) and D)

Question 10

Refer to the diagram, where xy is the relevant budget line and I₁, I₂, and I₃ are indifference curves. If the consumer is initially at point L, he or she should

Accepted Answer

A)  strive for point N by obtaining a larger money income.
B)  purchase more of X and less of Y.
C)  remain at that point to maximize utility.
D)  purchase more of Y and less of X.E) None of the above
F) A) and B)

Question 11

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

Question 12

Suppose that MU x/ Pₓ exceeds MU y/ Pᵧ . To maximize utility, the consumer who is spending all her money income should buy

Accepted Answer

A)  less of X only if its price rises.
B)  more of Y only if its price rises.
C)  more of Y and/or less of X.
D)  more of X and/or less of Y.E) B) and C)
F) A) and D)

Question 13

Why is it not sufficient to just compare the marginal utility of two goods when maximizing utility?

Accepted Answer

Because the goods may have different pri...

Question 14

The law of diminishing marginal utility states that

Accepted Answer

A)  total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed.
B)  beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.
C)  price must be lowered to induce firms to supply more of a product.
D)  it will take larger and larger amounts of resources beyond some point to produce successive units of a product.E) B) and C)
F) None of the above

Question 15

Describe how marginal utility and demand are related.

Accepted Answer

The utility-maximizing rule an...

Question 16

The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

Accepted Answer

A) True 
 B)False

Question 17

Total utility is best defined as the

Accepted Answer

A)  change in marginal utility multiplied by the price of a product.
B)  maximum amount of satisfaction from consuming a product.
C)  total satisfaction received from consuming a given amount of a product.
D)  additional satisfaction received from consuming one more unit of a product.E) B) and C)
F) A) and D)

Question 18

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)  marginal utility of the third unit is 18.
C)  total utility of 2 units is 16.
D)  total utility of 6 units is 35.E) All of the above
F) A) and B)

Question 19

The goal of a rational consumer is to maximize

Accepted Answer

A)  the quantities of all goods consumed.
B)  the MU/P of all goods consumed.
C)  marginal utility of all goods consumed.
D)  total utility from all goods consumed.E) B) and D)
F) C) and D)

Question 20

Marginal utility can be

Accepted Answer

A)  positive, but not negative.
B)  positive or negative, but not zero.
C)  positive, negative, or zero.
D)  decreasing, but not negative.E) B) and C)
F) A) and B)

Exam 7: Utility Maximization

Which of the following best expresses the law of diminishing marginal utility?

Correct Answer
verified

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

Correct Answer
verified

Describe how marginal utility and demand are related.

Correct Answer
verified
The utility-maximizing rule an...
View Answer

Suppose that MU x/ Pₓ exceeds MU y/ Pᵧ . To maximize utility, the consumer who is spending all her money income should buy

Correct Answer
verified

The income effect of a price increase for a normal good causes an increase in the consumption of the good.

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

The law of diminishing marginal utility states that

Correct Answer
verified

Total utility is best defined as the

Correct Answer
verified

Refer to the diagram, in which the downsloping lines are budget lines and I₁, I₂, and I₃ comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that

Correct Answer
verified

Refer to the table. At what consumption level for this product does diminishing marginal utility set in?

Correct Answer
verified

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that

Correct Answer
verified

The satisfaction or pleasure one gets from consuming a good or service is called

Correct Answer
verified

The graph shows two indifference curves, and QR and QS represent different budget lines. A change in the equilibrium position on the diagram from point 1 to point 2 could result, other things being equal, from

Correct Answer
verified

Why is it not sufficient to just compare the marginal utility of two goods when maximizing utility?

Correct Answer
verified
Because the goods may have different pri...
View Answer

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. If the price of X decreases to $2, then the utility-maximizing combination of the two products is

Correct Answer
verified

The goal of a rational consumer is to maximize

Correct Answer
verified

Marginal utility can be

Correct Answer
verified

The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

Correct Answer
verified

Refer to the diagram, where xy is the relevant budget line and I₁, I₂, and I₃ are indifference curves. If the consumer is initially at point L, he or she should

Correct Answer
verified

Exam 7: Utility Maximization

Which of the following best expresses the law of diminishing marginal utility?

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Describe how marginal utility and demand are related.

Correct AnswerverifiedThe utility-maximizing rule an...View AnswerShow Answer

Suppose that MU x/ Pₓ exceeds MU y/ Pᵧ . To maximize utility, the consumer who is spending all her money income should buy

Correct AnswerverifiedShow Answer

The income effect of a price increase for a normal good causes an increase in the consumption of the good.

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

The law of diminishing marginal utility states that

Correct AnswerverifiedShow Answer

Total utility is best defined as the

Correct AnswerverifiedShow Answer

Refer to the diagram, in which the downsloping lines are budget lines and I₁, I₂, and I₃ comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that

Correct AnswerverifiedShow Answer

Refer to the table. At what consumption level for this product does diminishing marginal utility set in?

Correct AnswerverifiedShow Answer

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that

Correct AnswerverifiedShow Answer

The satisfaction or pleasure one gets from consuming a good or service is called

Correct AnswerverifiedShow Answer

The graph shows two indifference curves, and QR and QS represent different budget lines. A change in the equilibrium position on the diagram from point 1 to point 2 could result, other things being equal, from

Correct AnswerverifiedShow Answer

Why is it not sufficient to just compare the marginal utility of two goods when maximizing utility?

Correct AnswerverifiedBecause the goods may have different pri...View AnswerShow Answer

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. If the price of X decreases to $2, then the utility-maximizing combination of the two products is

Correct AnswerverifiedShow Answer

The goal of a rational consumer is to maximize

Correct AnswerverifiedShow Answer

Marginal utility can be

Correct AnswerverifiedShow Answer

The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

Correct AnswerverifiedShow Answer

Refer to the diagram, where xy is the relevant budget line and I₁, I₂, and I₃ are indifference curves. If the consumer is initially at point L, he or she should

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The utility-maximizing rule an...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Because the goods may have different pri...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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