Question 1

Noncash gifts:

Accepted Answer

A)   increase the utility of recipients by introducing them to products they have not consumed before.
B)   reduce recipient utility relative to a cash gift because noncash gifts often fail to match recipient preferences.
C)   entail as much utility as do cash gifts.
D)   increase the utility of recipients because many people are uncertain of their own preferences.E) A) and B)
F) None of the above

Question 2

What do the income effect,the substitution effect,and diminishing marginal utility have in common?

Accepted Answer

A)   All are required to explain the utility-maximizing position of a consumer.
B)   They are all empirically measurable.
C)   They all help explain the upsloping supply curve.
D)   They all help explain the downsloping demand curve.E) None of the above
F) A) and B)

Question 3

Assume the price of product Y (the quantity of which is plotted on the vertical axis) is initially $15 and the price of X (the quantity of which is plotted on the horizontal axis) is initially $3.Assume money income is initially $60.If the prices of Y and X now increase to $30 and $6 respectively and money income increases to $120,then the budget line will:

Accepted Answer

A)   shift rightward and become steeper.
B)   shift rightward and become flatter.
C)   shift rightward,but its slope will not change.
D)   be unchanged.E) A) and C)
F) None of the above

Question 4

(Last Word) Most people do not steal because:

Accepted Answer

A)   stolen goods are subject to the law of diminishing marginal utility.
B)   the marginal utilities of stolen goods are negative.
C)   their marginal costs,including guilt costs,are too high.
D)   stolen goods can only be sold at deep discounts.E) B) and C)
F) B) and D)

Question 5

The income effect explains an exception to the law of demand.

Accepted Answer

A) True 
 B)False

Question 6

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) A) and D)
F) C) and D)

Question 7

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) None of the above
F) A) and C)

Question 8

At each point on an indifference curve:

Accepted Answer

A)   money income is the same.
B)   the prices of the two products are the same.
C)   total utility is the same.
D)   marginal utility is the same.E) A) and C)
F) None of the above

Question 9

The fact that most medical care purchases are financed through insurance:

Accepted Answer

A)   has no effect on health care consumption because aggregate costs are the same regardless of payment method.
B)   reduces the amount of health care consumed by raising the price of additional units of care.
C)   has decreased health care costs and therefore reduced aggregate health care expenditures.
D)   increases the amount of health care consumed by reducing the price of additional units of care.E) C) and D)
F) A) and D)

Question 10

If a rational consumer is in equilibrium,which of the following conditions will hold true?

Accepted Answer

A)   MUa = MUb = MUc = ...= MUn.
B)   The marginal utility of each good purchased will be zero.
C)   The marginal utility of the last dollar spent on each good purchased will be the same.
D)   The total utility obtained from each good purchased will be the same.E) None of the above
F) C) and D)

Question 11

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

Question 12

Indifference curves are linear and budget lines are convex to the origin.

Accepted Answer

A) True 
 B)False

Question 13

In introducing the opportunity cost of time into the theory of consumer behavior,we find that,all else equal:

Accepted Answer

A)   one should consume less of time-intensive goods.
B)   one should consume more of time-intensive goods.
C)   the consumer's equilibrium position is not altered.
D)   the marginal utility derived from each product must be multiplied by consumption time in determining equilibrium.E) All of the above
F) A) and B)

Question 14

With a fixed money income,an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Accepted Answer

A) True 
 B)False

Question 15

While eating at Alex's "Pizza by the Slice" restaurant,Kara experiences diminishing marginal utility.She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice,at the same price.Based on this information we can conclude that:

Accepted Answer

A)   Alex may have to lower the price to convince Kara to buy a second slice.
B)   Kara will not eat a second slice,even if it is given to her at no charge.
C)   Kara will definitely want to buy a second slice of pizza.
D)   even if Kara buys a second slice,she will not buy a third slice.E) B) and C)
F) None of the above

Question 16

To maximize utility,a consumer should allocate money income so that the:

Accepted Answer

A)   elasticity of demand on all products purchased is the same.
B)   marginal utility obtained from the last dollar spent on each product is the same.
C)   total utility derived from each product consumed is the same.
D)   marginal utility of the last unit of each product consumed is the same.E) C) and D)
F) None of the above

Question 17

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) C) and D)
F) A) and D)

Question 18

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Accepted Answer

A) True 
 B)False

Question 19

Indifference curve analysis:

Accepted Answer

A)   presumes,as does utility analysis,that satisfaction is numerically measurable.
B)   presumes,unlike utility analysis,that satisfaction is numerically measurable.
C)   presumes only that the consumer can say one combination of two goods yields more or less utility than some other combination.
D)   is in conflict with the idea of a downsloping demand curve.E) A) and D)
F) A) and C)

Question 20

Diminishing marginal utility explains why:

Accepted Answer

A)   the income effect exceeds the substitution effect.
B)   the substitution effect exceeds the income effect.
C)   supply curves are upsloping.
D)   demand curves are downsloping.E) All of the above
F) B) and C)

Exam 7: Utility Maximization

Indifference curves are linear and budget lines are convex to the origin.

Correct Answer
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What do the income effect,the substitution effect,and diminishing marginal utility have in common?

Correct Answer
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At each point on an indifference curve:

Correct Answer
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Indifference curve analysis:

Correct Answer
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With a fixed money income,an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Correct Answer
verified

In introducing the opportunity cost of time into the theory of consumer behavior,we find that,all else equal:

Correct Answer
verified

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Correct Answer
verified

If a rational consumer is in equilibrium,which of the following conditions will hold true?

Correct Answer
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The fact that most medical care purchases are financed through insurance:

Correct Answer
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Marginal utility can be:

Correct Answer
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The utility of a good or service:

Correct Answer
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Correct Answer
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Increases in product prices shift the consumer's:

Correct Answer
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An indifference map implies that:

Correct Answer
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Diminishing marginal utility explains why:

Correct Answer
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To maximize utility,a consumer should allocate money income so that the:

Correct Answer
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Noncash gifts:

Correct Answer
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Correct Answer
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(Last Word) Most people do not steal because:

Correct Answer
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The income effect explains an exception to the law of demand.

Correct Answer
verified

Exam 7: Utility Maximization

Indifference curves are linear and budget lines are convex to the origin.

Correct AnswerverifiedShow Answer

What do the income effect,the substitution effect,and diminishing marginal utility have in common?

Correct AnswerverifiedShow Answer

At each point on an indifference curve:

Correct AnswerverifiedShow Answer

Indifference curve analysis:

Correct AnswerverifiedShow Answer

With a fixed money income,an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Correct AnswerverifiedShow Answer

In introducing the opportunity cost of time into the theory of consumer behavior,we find that,all else equal:

Correct AnswerverifiedShow Answer

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Correct AnswerverifiedShow Answer

If a rational consumer is in equilibrium,which of the following conditions will hold true?

Correct AnswerverifiedShow Answer

The fact that most medical care purchases are financed through insurance:

Correct AnswerverifiedShow Answer

Marginal utility can be:

Correct AnswerverifiedShow Answer

The utility of a good or service:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Increases in product prices shift the consumer's:

Correct AnswerverifiedShow Answer

An indifference map implies that:

Correct AnswerverifiedShow Answer

Diminishing marginal utility explains why:

Correct AnswerverifiedShow Answer

To maximize utility,a consumer should allocate money income so that the:

Correct AnswerverifiedShow Answer

Noncash gifts:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Last Word) Most people do not steal because:

Correct AnswerverifiedShow Answer

The income effect explains an exception to the law of demand.

Correct AnswerverifiedShow Answer

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