Question 1

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) B) and C)
F) A) and C)

Question 2

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 $6 and $2, respectively, and that the consumer's income is $22  How many units of the two products will the rational consumer purchase?

Accepted Answer

A)  3 of L and 3 of M
B)  4 of L and 2 of M
C)  2 of L and 4 of M
D)  2 of L and 5 of ME) B) and C)
F) None of the above

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 $3, and the price of product Y is $2. The income of the consumer is $15.  If the consumer buys both product X and product Y, how much will the consumer buy of each in order to maximize utility?

Accepted Answer

A)  4X and 2Y
B)  3X and 3Y
C)  2X and 4Y
D)  1X and 5YE) All of the above
F) B) and C)

Question 4

A consumer is making purchases of products Alpha and Beta such that the marginal utility of product Alpha is 30 and the marginal utility of product Beta is 40. The price of product Alpha is $5, and the price of product Beta is $10. The utility-maximizing rule suggests that, to stay within a given budget constraint, this consumer should

Accepted Answer

A)  increase consumption of product Beta and decrease consumption of product Alpha.
B)  increase consumption of product Beta and increase consumption of product Alpha.
C)  increase consumption of product Alpha and decrease consumption of product Beta.
D)  make no change in the consumption of Alpha or Beta.E) C) and D)
F) A) and B)

Question 5

Someone who pays $800 to fly from one city to another instead of paying only $100 for a bus trip between the two cities is making an irrational choice and is thus not maximizing his utility.

Accepted Answer

A) True 
 B)False

Question 6

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) A) and D)
F) B) and D)

Question 7

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

Accepted Answer

A)  the increase in the utility-maximizing quantity of that product demanded.
B)  the decrease in the utility-maximizing quantity of that product demanded.
C)  a substitution effect that encourages more consumption of that product.
D)  an income effect that encourages more consumption of that product.E) None of the above
F) A) and B)

Question 8

A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 units and that of Y is 16 units. If the unit price of X is $5, then the price of Y must be

Accepted Answer

A)  $1 per unit.
B)  $2 per unit.
C)  $3 per unit.
D)  $4 per unit.E) B) and D)
F) B) and C)

Question 9

The slope of a budget line reflects the

Accepted Answer

A)  elasticity of demand for the two products.
B)  price ratio of the two products.
C)  amount of the consumer's income.
D)  utility ratio of the two products.E) All of the above
F) A) and B)

Question 10

If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

Accepted Answer

A) True 
 B)False

Question 11

The income of a consumer is $40, the price of A is $8, and the price of B is $4. If the quantity of A is measured vertically, then the slope of the budget line is

Accepted Answer

A)  −0.5.
B)  −1.0.
C)  −2.0.
D)  −2.5.E) C) and D)
F) A) and B)

Question 12

What happens to the budget line when the price of a product falls? Use indifference curve analysis to explain how this change affects consumption of the product.

Accepted Answer

Changing the price of one product shifts...

Question 13

Indifference analysis assumes that utility is numerically measurable.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the diagram. If the budget line shifts from ab to ac, the

Accepted Answer

A)  consumer's level of total utility will increase.
B)  consumer will purchase more of both J and K.
C)  consumer will purchase less of both J and K.
D)  consumer will purchase more of J and less of K.E) B) and C)
F) C) and D)

Question 15

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 $25  What level of total utility does the rational consumer realize in equilibrium?

Accepted Answer

A)  162 utils
B)  86 utils
C)  58 utils
D)  51 utilsE) All of the above
F) B) and D)

Question 16

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) B) and C)

Question 17

From the viewpoint of potential criminals, the probability of being fined or imprisoned

Accepted Answer

A)  raises the marginal utility of criminal behavior.
B)  lowers the marginal utility of criminal behavior.
C)  raises the marginal cost or "price" of criminal behavior.
D)  lowers the marginal cost or "price" of criminal behavior.E) All of the above
F) None of the above

Question 18

The price of diamonds is substantially greater than the price of water because

Accepted Answer

A)  the total utility of water is greater than the total utility of diamonds.
B)  the total utility of diamonds is greater than the total utility of water.
C)  the marginal utility of the last diamond purchased is significantly greater than the marginal utility of the last gallon of water purchased by a typical person.
D)  the marginal utility of the last diamond purchased is significantly less than the marginal utility of the last gallon of water purchased by a typical person.E) C) and D)
F) B) and D)

Question 19

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 price of 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 D)

Question 20

A consumer who has a limited budget will maximize utility or satisfaction when the

Accepted Answer

A)  ratios of the marginal utility of each product purchased divided by its price are equal.
B)  total utility derived from each product purchased is the same.
C)  marginal utility of each product purchased is the same.
D)  price of each product purchased is the same.E) A) and C)
F) B) and D)

Exam 7: Utility Maximization

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 price of X is $5 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should

Correct Answer
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An indifference curve shows

Correct Answer
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Correct Answer
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If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

Correct Answer
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From the viewpoint of potential criminals, the probability of being fined or imprisoned

Correct Answer
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Indifference analysis assumes that utility is numerically measurable.

Correct Answer
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What happens to the budget line when the price of a product falls? Use indifference curve analysis to explain how this change affects consumption of the product.

Correct Answer
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Changing the price of one product shifts...
View 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 $6 and $2, respectively, and that the consumer's income is $22 How many units of the two products will the rational consumer purchase?

Correct Answer
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The price of diamonds is substantially greater than the price of water because

Correct Answer
verified

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

Correct Answer
verified

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 $25 What level of total utility does the rational consumer realize in equilibrium?

Correct Answer
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A consumer who has a limited budget will maximize utility or satisfaction when the

Correct Answer
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Refer to the diagram. If the budget line shifts from ab to ac, the

Correct Answer
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A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 units and that of Y is 16 units. If the unit price of X is $5, then the price of Y must be

Correct Answer
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The lines on a topographical map are analogous to a(n)

Correct Answer
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The income of a consumer is $40, the price of A is $8, and the price of B is $4. If the quantity of A is measured vertically, then the slope of the budget line is

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

Correct Answer
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Someone who pays $800 to fly from one city to another instead of paying only $100 for a bus trip between the two cities is making an irrational choice and is thus not maximizing his utility.

Correct Answer
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The slope of a budget line reflects the

Correct Answer
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Exam 7: Utility Maximization

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 price of X is $5 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should

Correct AnswerverifiedShow Answer

An indifference curve shows

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

Correct AnswerverifiedShow Answer

From the viewpoint of potential criminals, the probability of being fined or imprisoned

Correct AnswerverifiedShow Answer

Indifference analysis assumes that utility is numerically measurable.

Correct AnswerverifiedShow Answer

What happens to the budget line when the price of a product falls? Use indifference curve analysis to explain how this change affects consumption of the product.

Correct AnswerverifiedChanging the price of one product shifts...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 $6 and $2, respectively, and that the consumer's income is $22 How many units of the two products will the rational consumer purchase?

Correct AnswerverifiedShow Answer

The price of diamonds is substantially greater than the price of water because

Correct AnswerverifiedShow Answer

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

Correct AnswerverifiedShow 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 $25 What level of total utility does the rational consumer realize in equilibrium?

Correct AnswerverifiedShow Answer

A consumer who has a limited budget will maximize utility or satisfaction when the

Correct AnswerverifiedShow Answer

Refer to the diagram. If the budget line shifts from ab to ac, the

Correct AnswerverifiedShow Answer

A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 units and that of Y is 16 units. If the unit price of X is $5, then the price of Y must be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The income of a consumer is $40, the price of A is $8, and the price of B is $4. If the quantity of A is measured vertically, then the slope of the budget line is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Someone who pays $800 to fly from one city to another instead of paying only $100 for a bus trip between the two cities is making an irrational choice and is thus not maximizing his utility.

Correct AnswerverifiedShow Answer

The slope of a budget line reflects the

Correct AnswerverifiedShow Answer

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Changing the price of one product shifts...
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