Exam #3 (WS 7)

Question 1

The Law of Diminishing Marginal Utility explains:

a. why there are automatic checkout lanes at a grocery store
b. why more is preferred to less
c. scarcity
d. why we consume a variety of food

Answer 1

d.

Question 2

The Law of Diminishing Marginal Utility implies that:

a. consumes like to eat the same thing every day
b. the last unit consumed is the most favored
c. the rate of change in TU increases as more units of a good are consumed
d. the first unit consumed is the best

Answer 2

d.

Question 3

A rational individual would never:

a. drive a truck across someone else’s yard
b. study all night for an examination
c. prefer oranges over apples, apples over bananas, and bananas over oranges.
d. desire more money than he/she could spend

Answer 3

c.

Question 4

When an economist says that an apple gives a quantifiable level of utility, this is:
a. marginal utility
b. cardinal utility
c. ordinal utility
d. total utility

Answer 4

b.

Question 5

An economist should never:

a. make value judgements about consumer purchases
b. use normative economics to analyze consumer purchases
c. assume that “crazy” behavior is irrational
d. all of the above

Answer 5

d.

Question 6

If the price of gasoline increases significantly for several months:

a. consumers will purchase fewer large sports utility vehicles
b. consumers will not change their automobile purchasing decisions
c. consumers will purchase less ethanol than previously
d. all of the above

Answer 6

a.

Question 7

An increase in the per-capita income in China would result in:

a. increased beef exports to China
b. a decrease in the per-capita consumption of cars in China
c. no impact on US agriculture
d. decreased grain exports to China

Answer 7

a.

Question 8

To an economist, rational behavior means:

a. that an individual is sane
b. that consumers and producers are purposeful and consistent
c. that people do the best that they can given the constraints that they face
d. B and C

Answer 8

d.

Question 9

If TU is increasing, then MU is:

a. increasing
b. positive
c. zero
d. negative

Answer 9

b.

Question 10

A person who has eaten so much that she is physically sick has:

a. negative MU
b. negative TU
c. decreasing MU
d. decreasing TU

Answer 10

a.

Question 11

The marginal rate of substitution is the slope of the:

a. indifference curve
b. budget line
c. isocost line
d. production possibilities

Answer 11

a.

Question 12

Convexity of the indifference curve is due to:

a. nonsatiation
b. completeness
c. consistency of preferences
d. the Law of Diminishing Marginal Utility

Answer 12

d.

Question 13

Convex indifference curves suggest that:

a. consumers prefer a variety of goods
b. consumers prefer the consistency of the same good
c. consumers are indifferent about variety
d. more is always better than less

Answer 13

a.

Question 14

The limit to consumption is caused by:

a. the budget constraint
b. the indifference curve
c. the Law of Diminishing Marginal Utility
d. convexity of the indifference curve

Answer 14

a.

Question 15

Consumer choices depend on:

a. preferences
b. relative prices
c. the interaction of preferences and relative prices
d. technology

Answer 15

c.

Question 16

Economist use the term _______ to refer to the amount of satisfaction that a consumer receives from the consumption of a good:

a. positive economics
b. utility
c. marginal utility
d. MRPS

Answer 16

b.

Question 17

Goods that are completely substitutable, so that consumers are indifferent between the two goods is known as:

a. complements
b. The Law of Diminishing Marginal Utility
c. perfect substitutes
d. MRPS

Answer 17

c.

Question 18

The opportunity set is:

a. the collection of all combinations of goods that are affordable
b. rectangular in shape
c. triangular in shape
d. A and C

Answer 18

d.

Question 19

An equilibrium is:

a. a point where all things are equal
b. a point where there is no tendency to change
c. ceteris paribus
d. a movement along the demand curve

Answer 19

b.

Question 20

The mathematical representation of a consumer’s equilibrium is: (^ is delta)

a. MRS=MU
b. MRS=P1/P2
c. ^Y2/ ^Y1 = MU
d. ^Y2/ ^Y1 = TU

Answer 20

b.

Question 21

An individual demand curve for pizza can be derived with the following:

a. the price of pizza, the price of one other good, and income
b. price of pizza and two other goods
c. income
d. price of pizza alone

Answer 21

a.

Question 22

Utils are:

a. imaginary numbers that measure satisfaction
b. real, measurable numbers that measure satisfaction
c. the number represented on the budget line
d. the number represented by marginal decisions

Answer 22

a.

Question 23

If consumers were not subject to the budget constraint, they would consume:

a. an infinite amount
b. just enough to get by
c. enough to be well off, and live in the suburbs
d. less than they would otherwise

Answer 23

a.

Question 24

A consumer equilibrium is found where:

a. the budget line and indifference curve are tangent
b. the budget line and price ratio are tangent
c. the price ratio and MRS are tangent
d. the budget line and indifference curve are equal

Answer 24

a.

Question 25

Marginal utility refers to:

a. the extra level of electricity from a public utility
b. the level of satisfaction from consuming a good
c. utility derived from consuming a good
d. a change in utility when consumption is increased by one unit

Answer 25

b.

Question 26

When a consumer is indifferent between consuming an additional unit of a good:

a. TU is negative
b. MU is equal to zero
c. TU is equal to zero
d. MU is negative

Answer 26

b.

Question 27

All of the following are assumptions about consumer behavior except:

a. complete preferences
b. consistent consumers
c. nonsatiation
d. relativity

Answer 27

d.

Question 28

Economists use cardinal utility to measure:

a. the number of utils of each good consumed
b. ranking of goods
c. TU
d. the Law of Diminishing Utility

Answer 28

a.

Question 29

When the price of gasoline increases, consumers will:

a. drive less
b. use public transportation more
c. carpool more
d. all of the above

Answer 29

d.

Question 30

increase in per-capita income, ceteris paribus, will lead to:

a. increase in beef consumption
b. decrease in beef consumption
c. not affect beef consumption
d. result in a substitution out of pork into beef

Answer 30

a.

Question 31

If the price of chicken increases:

a. consumer purchases of chicken will increase, and purchases of beef will decrease
b. consumer purchases of chicken will decrease, and purchases of beef will decrease
c. consumer purchases of chicken will increase, and purchases of beef will increase
d. consumer purchases of chicken will decrease, and purchases of beef will increase

Answer 31

d.

Question 32

A general inflation will:

a. decrease the consumption of beef
b. increase the consumption of beef
c. no change in the consumption of beef
d. not enough information to answer

Answer 32

c.

Question 33

Sugar (sucrose) and corn syrup (fructose) are:

a. perfect substitutes in production and consumption
b. imperfect substitutes in production and consumption
c. perfect substitutes in production only
d. perfect substitutes in consumption only

Answer 33

d.

Question 34

Beef and chicken are:

a. substitutes in consumption
b. substitutes in production
c. complements in production
d. complements in consumption

Answer 34

a.

Question 35

A consumer maximizes utility by looking at the tangency of:

a. the budget line and the isocost line
b. the budget line and the isorevenue line
c. the budget line and the indifference curve
d. the budget and the production possibilities frontier

Answer 35

c.

Question 36

An increase in the price of pork will affect:

a. the amount of chicken purchased
b. the amount of pork purchased
c. relative prices of pork and chicken
d. all of the above

Answer 36

d.

Question 37

Apples and oranges are examples of:

a. perfect substitutes
b. perfect complements
c. imperfect substitutes
d. unrelated goods

Answer 37

c.

Question 38

Hamburgers and hamburger buns are an example of:

a. substitutes
b. complements
c. unrelated goods
d. not enough information to determine

Answer 38

b.

Question 39

The MRS:

a. represents consumer expenditures
b. reflects a constant price ratio
c. changes value due to the Law of Diminishing Marginal Utility
d. remains constant due to the assumption of complete preferences

Answer 39

c.

Question 40

The slope of the indifference curve is equal to:

a. MRS
b. the marginal valuation of the two goods
c. the rate of exchange of one good for another that leaves utility unchanged
d. all of the above

Answer 40

d.

Question 41

Which term refers to the “rate of change”?

a. marginal
b. additional
c. incremental
d. all of the above

Answer 41

d.

Question 42

Which of the following is not needed to construct a budget line:

a. the price of the goods being consumed
b. total utility from the consumption of the goods
c. total expenditures on the goods being consumed
d. all of the above

Answer 42

b.

Question 43

At all points along an indifference curve, an individual is:

a. realizing the same level of utility
b. spending the same amount of money
c. minimizing costs
d. all of the other three answers

Answer 43

a.

Question 44

An indifference curve that is convex to the origin and negatively sloped shows:

a. constant substitutability
b. imperfect substitutability
c. perfect substitutability
d. none of the above

Answer 44

b.

Question 45

To determine the combination of pizza and tacos that will maximize a student’s utility, an economist must know:

a. the slope of the indifference curve
b. the marginal rate of substitution between the pizza and tacos and the price ratio
c. the slope of the relevant budget line
d. the marginal rate of substitution between pizza and tacos

Answer 45

b.

Question 46

Two indifferent curves for a given consumer:

a. can never intersect
b. may intersect if the price of one of the goods represented by the curve changes
c. will shift whenever there is a change in the price of the other good
d. none of the above

Answer 46

a.

Question 47

The traditional convex indifference curve that is associated with an average consumer gets its shape from:

a. constant substitutability of goods
b. the diminishing utility in the consumption process
c. the complementarity between the two goods
d. none of the above

Answer 47

b.

Question 48

If an indifference curve intersects a budget line at two points, we can surmise that:

a. there are two choices of utility-maximizing product combinations
b. no utility-maximizing combination is possible
c. there is a lower budget line where the indifference curve will intersect at only one point
d. none of the above

Answer 48

c.

Question 49

The tangency of an indifference curve and a budget line:

a. gives the profit-maximizing combination of two goods
b. gives the cost-minimizing combination of two goods
c. can be determined without regard to the prices of the two goods
d. is found where the slope of the indifference curve (MRS) is equal to the price ratio

Answer 49

d.

Question 50

If you are eating pizza at a wedding reception where the pizza is free, you should:

a. continue eating pizza as long as the reception lasts
b. stop eating pizza when your marginal utility begins to decrease
c. stop eating pizza when your marginal utility is positive
d. stop eating pizza when your total utility of eating pizza is at a maximum

Answer 50

d.