What is the marginal utility of the third chocolate bar to this consumer? a) 10 b) 9 c) 8 d) 7

Transcription

1 Chapter 5 Review Quiz 1. Which of the following best expresses the law of diminishing marginal utility? a) the more a person consumes of a product, the smaller becomes the utility received from its consumption b) the more a person consumes of a product, the smaller becomes the extra utility received as a result of consuming an additional unit c) the less a person consumes of a product, the smaller becomes the utility received from its consumption d) the less a person consumes of a product, the smaller becomes the extra utility received as a result of consuming an additional unit of the product 2) Chocolate bars consumed Total utility What is the marginal utility of the third chocolate bar to this consumer? a) 10 b) 9 c) 8 d) 7

2 3) Chocolate bars consumed Total utility What is the marginal utility of the fifth chocolate bar to this consumer? a) 9 b) 8 c) 7 d) 6 4) Chocolate bars consumed Total utility If chocolate bars are $2 each, what is the marginal utility per dollar of the third chocolate bar? a) 13.5 b) 8 c) 4 d) 3.5

3 5) The utility-maximization rule states that a consumer will choose to consume goods so that a) the total utility is the same for both goods b) the total marginal utility is the same for both goods c) the marginal utility per dollar is the same for both goods d) the total expenditure is the same for both goods 6) The substitution effect deals with the change in consumption of a good due to: a) the change in the consumer's preferences b) the change in the consumer's actual money income c) the change in the real buying power of the consumer's money income d) the change in the price of the good relative to others 7) An individual consumes two products, A and B, with prices P A, P B. Utility is maximized when, if all income is spent, the following condition is met: a) MU A = MU B b) MU A is less than MU B c) MU A / P A = MU B / P B d) MU A / P B = MU B / P A 8) Suppose that the price of A is $3 and the price of B is $6 and the consumer is maximizing utility. If MU A = 7 at this point, it can be concluded that: a) the utility received from good A must equal the utility received from good B b) the consumer must be purchasing an equal number of units of good A and good B c) the two goods are substitutes d) MU B = 14

4 9) Units of A Total Utility MU of A Units of B Total Utility MU of B If the individual has an income of $35 and the prices of A and B are $4 and $5 respectively, how many units of A and B will be purchased? a) 5 of A and 3 of B b) 5 of A and 4 of B c) 5 of A and 5 of B d) 4 of A and 4 of B 10) Units of A Total Utility MU of A Units of B Total Utility MU of B If the consumer's income were reduced to $22, the consumer would maximize satisfaction by consuming: a) 2 of A and 2 of B b) 3 of A and 3 of B c) 2 of A and 3 of B d) 3 of A and 2 of B

5 11) The full price of a product to a consumer is: a) its market price b) its market price plus the value of its consumption time c) its market price less the value of its consumption time d) the value of its consumption time less its market price 12) Compared to cash gifts, non-cash gifts are: a) of greater total utility but of less marginal utility b) of less total utility but of greater marginal utility c) more efficient because they do not waste resources d) less efficient because they do not generally match recipients' preferences 13) A decrease in income will: a) shift the budget line inward and increase its slope b) shift the budget line outward and increase its slope c) shift the budget line outward and have no effect on its slope d) shift the budget line inward and have no effect on its slope 14) If good Y is on the vertical axis and good X is on the horizontal axis, a lower price for X will, ceteris paribus: a) rotate the budget line outward, leaving fixed the Y axis intercept b) rotate the budget line inward, leaving fixed the X axis intercept c) shift the budget line outward in a parallel fashion d) shift the budget line inward in a parallel fashion

6 15) If the consumer's income is $200, the prices are $10 for good X and $20 for good Y, the budget line can be found by joining the intercept terms, which are: a) 10 on the X axis and 5 on the Y axis b) 20 on the X axis and 10 on the Y axis c) 20 on the X axis and 20 on the Y axis d) 10 on the X axis and 20 on the Y axis 16) An indifference curve shows the different combinations of two goods that: a) give the consumer equal marginal utilities b) cost the same c) give a consumer equal total utility d) can be purchased with a given income 17) Use the diagram to answer the question Which combination is currently unattainable for this consumer? a) A b) B c) C d) D

7 KEY 1b 2c 3c 4c 5c 6d 7c 8d 9s 10d 11b 12d 13d 14a 15b 16c 17c