Question 1

An indifference map implies that

Accepted Answer

A)  money income is constant, but the prices of the two products vary directly with the quantities purchased.
B)  the two products under consideration are perfectly substitutable for one another.
C)  a consumer is better off to be at some point high on a given curve as opposed to a point low on the same curve.
D)  curves farther from the origin yield higher levels of total utility.E) A) and C)
F) None of the above

Question 2

The utility of a good or service

Accepted Answer

A)  is synonymous with usefulness.
B)  is the satisfaction or pleasure one gets from consuming it.
C)  is easy to quantify.
D)  rarely varies from person to person.E) B) and C)
F) A) and B)

Question 3

Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1.Which of the following combinations is on the consumer's budget line?

Accepted Answer

A)  4A and 9B
B)  5A and 6B
C)  6A and 6B
D)  3A and 8BE) A) and D)
F) A) and C)

Question 4

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) C) and D)

Question 5

If the price of a good increases, the substitution effect will

Accepted Answer

A)  always tend to make the quantity decrease, while the income effect could go either way.
B)  always tend to make the quantity increase, while the income effect could go either way.
C)  go either way, but the income effect will always make the quantity increase.
D)  go either way, but the income effect will always make the quantity decrease.E) A) and B)
F) B) and C)

Question 6

Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

An indifference curve shows

Accepted Answer

A)  the maximum combinations of two products that a consumer can afford to buy, given prices and the consumer's income.
B)  the quantities of two products a consumer is willing to buy at different income levels.
C)  all combinations of two products from which the consumer derives a specific level of total utility.
D)  combinations of two products that yield the same marginal utilities.E) C) and D)
F) B) and C)

Question 9

If total utility is increasing, then marginal utility

Accepted Answer

A)  must be declining.
B)  must be increasing.
C)  must be increasing at an increasing rate.
D)  may either be increasing or decreasing, but it must be greater than zero.E) B) and C)
F) B) and D)

Question 10

The diamond-water paradox occurs because

Accepted Answer

A)  the price of a product is related to its total utility, not its marginal utility.
B)  the price of a product is related to its marginal utility, not its total utility.
C)  water is, in fact, very scarce in certain regions of the world.
D)  diamonds are more useful than water.E) C) and D)
F) B) and C)

Question 11

Most economists contend that

Accepted Answer

A)  noncash gifts are more efficient than cash gifts.
B)  noncash gifts are less efficient than cash gifts.
C)  noncash and cash gifts are equally efficient.
D)  government can assess consumer preferences better than can consumers themselves.E) A) and B)
F) None of the above

Question 12

A consumer has an income of $200, and the price of X is $5, while the price of Y is $10.If the consumer buys 8 units of X, then the maximum quantity of Y that she could also buy is

Accepted Answer

A)  16.
B)  18.
C)  20.
D)  14.E) A) and C)
F) None of the above

Question 13

The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.Topic: Income and Substitution Effects Topic: Utility
Maximization and the Demand Curve

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

Increases in product prices shift the consumer's

Accepted Answer

A)  budget line to the right.
B)  budget line to the left.
C)  indifference curves to the left.
D)  indifference curves to the right.E) None of the above
F) B) and C)

Question 16

(Consider This)  The lines on a topographical map are analogous to a(n)

Accepted Answer

A)  series of demand curves.
B)  series of supply curves.
C)  indifference map.
D)  series of budget constraints.E) C) and D)
F) B) and C)

Question 17

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 18

In a topographic map, each line represents a particular elevation above sea level, and in an indifference map, each line represents a particular level of

Accepted Answer

A)  total utility.
B)  marginal utility.
C)  income.
D)  demand.Difficulty: 02 MediumE) A) and B)
F) All of the above

Question 19

A consumer has two basic choices in making a trip: rent a car for $30.00 a day and spend two days of travel to the destination, or spend $400 for an airplane ticket and fly to the destination in two hours.The marginal utilities of the car rental and the airline ticket are the same.The consumer values time at $5 an hour.The rational consumer will most likely

Accepted Answer

A)  rent a car.
B)  buy an airline ticket.
C)  find the full cost of the two modes to be equal.
D)  not make the trip.E) None of the above
F) B) and C)

Question 20

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium

Accepted Answer

A)  cannot be determined from the information given.
B)  are $105 and $140, respectively.
C)  are $105 and $175, respectively.
D)  are $100 and $200, respectively.E) A) and B)
F) C) and D)

Exam 7: Utility Maximization

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 Answer
verified

Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Correct Answer
verified

The utility of a good or service

Correct Answer
verified

Increases in product prices shift the consumer's

Correct Answer
verified

If total utility is increasing, then marginal utility

Correct Answer
verified

An indifference curve shows

Correct Answer
verified

Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1.Which of the following combinations is on the consumer's budget line?

Correct Answer
verified

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium

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

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

Correct Answer
verified

A consumer has an income of $200, and the price of X is $5, while the price of Y is $10.If the consumer buys 8 units of X, then the maximum quantity of Y that she could also buy is

Correct Answer
verified

Most economists contend that

Correct Answer
verified

Correct Answer
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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

If the price of a good increases, the substitution effect will

Correct Answer
verified

(Consider This) The lines on a topographical map are analogous to a(n)

Correct Answer
verified

An indifference map implies that

Correct Answer
verified

The diamond-water paradox occurs because

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.Topic: Income and Substitution Effects Topic: Utility Maximization and the Demand Curve

Correct Answer
verified

In a topographic map, each line represents a particular elevation above sea level, and in an indifference map, each line represents a particular level of

Correct Answer
verified

Exam 7: Utility Maximization

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 AnswerverifiedShow Answer

Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Correct AnswerverifiedShow Answer

The utility of a good or service

Correct AnswerverifiedShow Answer

Increases in product prices shift the consumer's

Correct AnswerverifiedShow Answer

If total utility is increasing, then marginal utility

Correct AnswerverifiedShow Answer

An indifference curve shows

Correct AnswerverifiedShow Answer

Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1.Which of the following combinations is on the consumer's budget line?

Correct AnswerverifiedShow Answer

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium

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

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

Correct AnswerverifiedShow Answer

A consumer has an income of $200, and the price of X is $5, while the price of Y is $10.If the consumer buys 8 units of X, then the maximum quantity of Y that she could also buy is

Correct AnswerverifiedShow Answer

Most economists contend that

Correct AnswerverifiedShow Answer

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

If the price of a good increases, the substitution effect will

Correct AnswerverifiedShow Answer

(Consider This) The lines on a topographical map are analogous to a(n)

Correct AnswerverifiedShow Answer

An indifference map implies that

Correct AnswerverifiedShow Answer

The diamond-water paradox occurs because

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.Topic: Income and Substitution Effects Topic: Utility Maximization and the Demand Curve

Correct AnswerverifiedShow Answer

In a topographic map, each line represents a particular elevation above sea level, and in an indifference map, each line represents a particular level of

Correct AnswerverifiedShow Answer

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