Question 1

Given the price of a good or service, what determines how much a person is willing to pay for that good or service?

Accepted Answer

A)   marginal utility
B)   total utility
C)   the substitution effect
D)   average utilityE) All of the above
F) A) and B)

Question 2

John has just eaten another potato chip and his total utility increased. This means that John's marginal utility for this additional potato chip is

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   not determinable without more information.E) All of the above
F) B) and C)

Question 3

The tendency of people to substitute cheaper commodities for more expensive commodities is the

Accepted Answer

A)   law of diminishing marginal utility.
B)   real-income effect.
C)   substitution effect.
D)   price income effect.E) None of the above
F) A) and B)

Question 4

-According to the above table, what is David's marginal utility of the 7th unit?

Accepted Answer

A)   420
B)   400
C)   120
D)   60E) All of the above
F) A) and B)

Question 5

Economists assume that people make decisions regarding consumption based on comparing

Accepted Answer

A)   additional units of satisfaction with additional costs.
B)   average satisfaction with additional costs.
C)   average satisfaction with average costs.
D)   additional units of satisfaction with average costs.E) A) and B)
F) A) and C)

Question 6

One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that

Accepted Answer

A)   people make different decisions in calm situations than in situations in which emotions come into play.
B)   people make the same decisions in calm situations than in situations in which emotions come into play.
C)   total utility is maximized when marginal utility is equal to zero.
D)   total utility is declining when marginal utility is negative.E) All of the above
F) None of the above

Question 7

Why is water much cheaper than diamonds even though water is essential to human lives while diamonds are not?

Accepted Answer

This is called the diamond-water paradox...

Question 8

If marginal utility is negative,

Accepted Answer

A)   total utility increases at a decreasing rate.
B)   the consumer considers extra units of the commodity to be a "bad."
C)   the consumer will want to consume the unit only if it is free.
D)   the consumer likes the commodity, but not as much as he or she once did.E) A) and D)
F) B) and D)

Question 9

Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing

Accepted Answer

A)   irrational behavior.
B)   the law of diminishing marginal utility.
C)   the income effect.
D)   the substitution effect.E) B) and C)
F) B) and D)

Question 10

Given the utility-optimizing rule and the presence of diminishing marginal utility for a good,

Accepted Answer

A)   the demand curve for the good will be vertical.
B)   there will not be a well-defined demand curve.
C)   there will not be a substitution effect.
D)   the demand curve for the good will be negatively sloped.E) A) and B)
F) B) and C)

Question 11

-Use the above figure. When the budget line rotates from "c" to "b"

Accepted Answer

A)   the price of product J increases and the quantity demanded of product J decreases.
B)   the price of product J decreases and the quantity demanded of product J increases.
C)   the price of product K increases and the quantity demanded of product K decreases.
D)   the price of product K decreases and the quantity demanded of product K increases.E) A) and B)
F) A) and C)

Question 12

Marginal utility is

Accepted Answer

A)   the utility received by the last consumer of a good.
B)   the total utility received from consuming a given quantity of a good divided by the number of units consumed.
C)   the change in total utility from consuming an additional unit of a good.
D)   the utility received from consuming the first unit of a good.E) None of the above
F) A) and B)

Question 13

-In the above figure, the budget line will change from line DE to line DF when

Accepted Answer

A)   income rises.
B)   the price of bagels increases.
C)   the price of coffee increases.
D)   the price of coffee decreases.E) A) and B)
F) A) and C)

Question 14

The marginal rate of substitution is

Accepted Answer

A)   equal to unit changes in the quantities of both goods so that utility rises.
B)   the slope of the budget line at all points.
C)   the change in the quantity of one good that just offsets a unit change in another good, keeping utility constant.
D)   found by adding additional units.E) A) and D)
F) B) and C)

Question 15

-After consuming what quantity of pizza does the consumer in the table below experience diminishing marginal utility?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) All of the above
F) A) and B)

Question 16

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jack will eat using utility theory?

Accepted Answer

Utility theory predicts that Jacob will ...

Question 17

-Refer to the above figure. Which point represents the second highest level of utility?

Accepted Answer

A)   Point A
B)   Point B
C)   Point C
D)   Point DE) B) and D)
F) B) and C)

Question 18

A certain athlete loves donuts. He receives 100 units of utility for the first donut, an additional 80 for the second, an additional 60 for the third, another 40 for the fourth, and another 20 for the fifth. The marginal utility of the fourth donut is ________ and the total utility from consuming four donuts is ________.

Accepted Answer

A)   40; 40
B)   40; 280
C)   140; 280
D)   280; 100E) All of the above
F) B) and D)

Exam 20: Consumer Choice

-After consuming what quantity of pizza does the consumer in the table below experience diminishing marginal utility?

Correct Answer
verified

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jack will eat using utility theory?

Correct Answer
verified
Utility theory predicts that Jacob will ...
View Answer

Economists assume that people make decisions regarding consumption based on comparing

Correct Answer
verified

-According to the above table, what is David's marginal utility of the 7th unit?

Correct Answer
verified

If marginal utility is negative,

Correct Answer
verified

-Refer to the above figure. Which point represents the second highest level of utility?

Correct Answer
verified

Why is water much cheaper than diamonds even though water is essential to human lives while diamonds are not?

Correct Answer
verified
This is called the diamond-water paradox...
View Answer

Correct Answer
verified

The tendency of people to substitute cheaper commodities for more expensive commodities is the

Correct Answer
verified

-Use the above figure. When the budget line rotates from "c" to "b"

Correct Answer
verified

Given the price of a good or service, what determines how much a person is willing to pay for that good or service?

Correct Answer
verified

The marginal rate of substitution is

Correct Answer
verified

Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing

Correct Answer
verified

Given the utility-optimizing rule and the presence of diminishing marginal utility for a good,

Correct Answer
verified

One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that

Correct Answer
verified

-In the above figure, the budget line will change from line DE to line DF when

Correct Answer
verified

John has just eaten another potato chip and his total utility increased. This means that John's marginal utility for this additional potato chip is

Correct Answer
verified

Marginal utility is

Correct Answer
verified

Exam 20: Consumer Choice

-After consuming what quantity of pizza does the consumer in the table below experience diminishing marginal utility?

Correct AnswerverifiedShow Answer

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jack will eat using utility theory?

Correct AnswerverifiedUtility theory predicts that Jacob will ...View AnswerShow Answer

Economists assume that people make decisions regarding consumption based on comparing

Correct AnswerverifiedShow Answer

-According to the above table, what is David's marginal utility of the 7th unit?

Correct AnswerverifiedShow Answer

If marginal utility is negative,

Correct AnswerverifiedShow Answer

-Refer to the above figure. Which point represents the second highest level of utility?

Correct AnswerverifiedShow Answer

Why is water much cheaper than diamonds even though water is essential to human lives while diamonds are not?

Correct AnswerverifiedThis is called the diamond-water paradox...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The tendency of people to substitute cheaper commodities for more expensive commodities is the

Correct AnswerverifiedShow Answer

-Use the above figure. When the budget line rotates from "c" to "b"

Correct AnswerverifiedShow Answer

Given the price of a good or service, what determines how much a person is willing to pay for that good or service?

Correct AnswerverifiedShow Answer

The marginal rate of substitution is

Correct AnswerverifiedShow Answer

Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing

Correct AnswerverifiedShow Answer

Given the utility-optimizing rule and the presence of diminishing marginal utility for a good,

Correct AnswerverifiedShow Answer

One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that

Correct AnswerverifiedShow Answer

-In the above figure, the budget line will change from line DE to line DF when

Correct AnswerverifiedShow Answer

John has just eaten another potato chip and his total utility increased. This means that John's marginal utility for this additional potato chip is

Correct AnswerverifiedShow Answer

Marginal utility is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Utility theory predicts that Jacob will ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
This is called the diamond-water paradox...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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