41
23) Refer to Table 6.1. Assume that a store is giving hamburgers and sodas away for free. Consumers can
have as many sodas and hamburgers as they want, but the food has to be consumed one unit at a time. If
George has already had one soda and two hamburgers, then George should
A) next consume a soda to maximize his utility.
B) next consume a hamburger to maximize his utility.
C) be indifferent between consuming the second soda or the third hamburger.
D) consume neither another soda nor another hamburger to maximize his utility.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
Refer to the information provided in Table 6.2 below to answer the question(s) that follow.
Table 6.2
Number of
Candy Bars per Day
Total Utility Marginal Utility
1
40
2
75
3
100
4
115
5
5
Number of
Hot Dogs per Day
Total Utility Marginal Utility
1
30
2
54
3
72
4
84
5
6
24) Refer to Table 6.2. The marginal utility of the second candy bar per day is
A) 10.
B) 15.
C) 35.
D) 55.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
42
25) Refer to Table 6.2. Diminishing marginal utility sets in after the ________ candy bar per day.
A) first
B) second
C) third
D) fourth
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
26) Refer to Table 6.2. The total utility of five candy bars per day is
A) 115.
B) 120.
C) 130.
D) indeterminate from this information.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
27) Refer to Table 6.2. If the price of a candy bar is $1, the price of a hot dog is $2, and Aaron has $6 of
income, Aaron’s utility–maximizing combination of candy bars and hot dogs per day is
A) 1 candy bar and 2 hot dogs.
B) 4 candy bars and 1 hot dog.
C) 2 candy bars and 1.5 hot dogs.
D) indeterminate from this information.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
28) Richard is consuming X and Y so that he is spending his entire income and MUx/Px = 6 and MUy/Py =
10. To maximize utility, he should
A) continue to consume the same amount of X and Y since he is already maximizing utility.
B) consume less of both X and Y.
C) consume more X and less Y.
D) consume less X and more Y.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
43
29) Jon is consuming X and Y so that he is spending his entire income and MUx/Px = 8 and MUy/Py = 4.
To maximize utility, he should consume
A) the same amount of X and Y since he is already maximizing utility.
B) less of both X and Y.
C) more X and less Y.
D) less X and more Y.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
30) Jon is consuming X and Y so that he is spending his entire income and MUx/Px = 4 and MUy/Py = 4.
To maximize utility, he should consume
A) the same amount of X and Y since he is already maximizing utility.
B) less of both X and Y.
C) more X and less Y.
D) less X and more Y.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
31) If MUx/Px < MUy/Py, then
A) spending a dollar less on Y and a dollar more on X increases utility.
B) spending a dollar less on X and a dollar more on Y increases utility.
C) X is more expensive than Y.
D) Y is more expensive than X.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–10
32) Sue is maximizing her utility. Her MUx/Px = 10 and MUy = 40. Then the price of Y must be
A) $1.
B) $4.
C) $10.
D) $40.
Topic: The Basis of Choice: Utility
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
44
33) Ellen is spending her entire income on goods X and Y. Her marginal utility from the last units of X
and Y that she consumes is 25. Ellen’s utility is only maximized if
A) the prices of X and Y are the same.
B) the price of good X is twice that of good Y.
C) the price of good Y is twice that of good X.
D) We cannot determine whether Ellen is maximizing her utility.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro–10
34) Ellie is spending her entire income on goods X and Y. Her marginal utility from the last unit of X is
100 and the marginal utility from the last unit of Y that she consumes is 50. Ellie’s utility is only
maximized if
A) the prices of X and Y are the same.
B) the price of good X is twice that of good Y.
C) the price of good Y is twice that of good X.
D) We cannot determine whether Ellie is maximizing her utility.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro–10
45
Refer to the information provided in Figure 6.10 below to answer the question(s) that follow.
Figure 6.10
35) Refer to Figure 6.10. The current price of a turkey sandwich is $6. If Kyle is currently buying five
turkey sandwiches a week, he ________ maximizing utility because the marginal utility ________ than its
price.
A) is; from the fifth sandwich is greater
B) is; from the fifth sandwich is less
C) is not; gained from the fifth sandwich is less
D) is not; gained from the fifth sandwich is greater
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-2
36) Refer to Figure 6.10. The current price of a turkey sandwich is $6. If Kyle is currently buying nine
turkey sandwiches a week, he ________ maximizing utility because the marginal utility ________ than its
price.
A) is; from the ninth sandwich is greater
B) is; from the ninth sandwich is less
C) is not; gained from the ninth sandwich is less
D) is not; gained from the ninth sandwich is greater
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-2
46
37) Refer to Figure 6.10. Kyle would increase his consumption of turkey sandwiches from 7 to 9 per week
if their price fell from $6 to $4. This illustrates the idea of
A) consumer surplus.
B) the law of diminishing marginal utility.
C) cross–price elasticity of demand.
D) technical efficiency.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-2
38) Refer to Figure 6.10. The current price of a turkey sandwich is $4. If Kyle is currently buying seven
turkey sandwiches a week, he ________ maximizing utility because the marginal utility ________ than its
price.
A) is; from the seventh sandwich is greater
B) is; from the seventh sandwich is less
C) is not; gained from the seventh sandwich is less
D) is not; gained from the seventh sandwich is greater
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-2
39) Refer to Figure 6.10. The current price of a turkey sandwich is $8. If Kyle is currently buying seven
turkey sandwiches a week, he ________ maximizing utility because the marginal utility ________ than its
price.
A) is; from the seventh sandwich is greater
B) is; from the seventh sandwich is less
C) is not; gained from the seventh sandwich is less
D) is not; gained from the seventh sandwich is greater
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-2
47
40) Refer to Figure 6.10. Kyle would increase his consumption of turkey sandwiches from 5 to 7 per week
if their price fell from $8 to $6. This illustrates the idea of
A) consumer surplus.
B) the law of diminishing marginal utility.
C) cross–price elasticity of demand.
D) technical efficiency.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-2
41) The marginal utility of the first cup of coffee that Tom drinks in the morning is worth $2.00. The
marginal utility of the 9th cup of coffee he drinks is positive while the marginal utility of the 10th cup of
coffee he drinks in the morning is worth $0. This implies that at a price of $0, Tom would drink
A) zero cups of coffee per morning.
B) at most 10 cups of coffee per morning.
C) more than 10 cups of coffee per morning, but the actual number is indeterminate from this
information.
D) an infinite number of cups of coffee each morning.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro–10
42) For Matthew, the marginal utility of the 9th soda in a day is positive and the marginal utility of the
10th soda in a day is zero. This
A) implies that Matthew’s demand curve for sodas per day will become upward sloping at 10 sodas per
day.
B) is impossible because each additional unit of consumption of any good must provide positive marginal
utility.
C) implies that at a zero price Matthew’s demand curve will intersect the quantity axis at 10.
D) implies that Matthew maximizes utility by consuming 9 sodas per day.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro–10
48
43) Total utility is
A) the total amount of satisfaction yielded by the consumption of a good or service.
B) the additional satisfaction gained by consuming one more unit of something.
C) used to compare different people’s likes and dislikes.
D) relatively easy to measure.
Topic: The Basis of Choice: Utility
Skill: Definition
Learning Outcome: Micro–10
44) The law of diminishing marginal utility refers to
A) a consumer’s decrease in total satisfaction as she consumes more units of a good.
B) a consumer‘s decrease in additional satisfaction as she consumes more and more units of a good.
C) the idea that total utility is negative.
D) the idea that marginal utility is negative.
Topic: The Basis of Choice: Utility
Skill: Definition
Learning Outcome: Micro–10
45) A utility–maximizing consumer buys so as to make ________ for all pairs of goods.
A) Px(MUx) = Py(MUy)
B) TUx/Px = TUy/Py
C) MUx/MUy = Px/Py
D) MUx = MUy
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–10
46) The ratio of the marginal utility of coffee to the marginal utility of donuts is four for an individual
maximizing utility. This implies that
A) a donut is four times more valuable than a cup of coffee.
B) the coffee to donuts price ratio is one to four.
C) the coffee to donuts price ratio is four to one.
D) this person always eats donuts with coffee.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–10
49
47) Kathleen likes avocado and crab dip. After eating avocado and crab dip with four crackers, she
switches to cheese with crackers. We can conclude that
A) the avocado and crab dip cannot have tasted that good.
B) the avocado and crab dip with crackers now has a marginal utility of zero.
C) at this point cheese and crackers have a higher marginal utility per dollar spent than that of avocado
and crab dip with crackers.
D) Kathleen is no longer maximizing her utility.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–10
48) The law of diminishing marginal utility implies that
A) demand curves always slope downward and to the right.
B) supply curves always slope upward and to the right.
C) a consumer will always buy positive amounts of all goods.
D) total utility will always increase by an increasing amount as consumption increases.
Topic: The Basis of Choice: Utility
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–10
49) The diamond/water paradox states that things with the ________ value in use frequently have
________ value in exchange.
A) least; the least
B) least; little or no
C) greatest; little or no
D) greatest; the greatest
Topic: The Basis of Choice: Utility
Skill: Definition
Learning Outcome: Micro–10
50
50) Related to the Economics in Practice on page 121: Before the imposition of an excise tax on beer, name–
brand beer sold for $20 per case and generic beer sold for $12 per case. After the imposition of the tax,
name–brand beer sold for $28 per case and generic beer sold for $20 per case. The slope of the budget line
for a consumer choosing between name–brand and generic beer before the tax was imposed was
A) 0.6.
B) 0.71.
C) 1.4.
D) 1.67.
Topic: The Basis of Choice: Utility: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
51) Related to the Economics in Practice on page 121: Before the imposition of an excise tax on beer, name–
brand beer sold for $20 per case and generic beer sold for $12 per case. After the imposition of the tax,
name–brand beer sold for $28 per case and generic beer sold for $20 per case. The slope of the budget line
for a consumer choosing between name–brand and generic beer after the tax was imposed was
A) 0.6.
B) 0.71.
C) 1.4.
D) 1.67.
Topic: The Basis of Choice: Utility: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
52) Related to the Economics in Practice on page 121: Before the imposition of an excise tax on beer, name–
brand beer sold for $20 per case and generic beer sold for $12 per case. After the imposition of the tax,
name–brand beer sold for $28 per case and generic beer sold for $20 per case. Without the tax, the relative
price of the name–brand beer
A) is higher.
B) is lower.
C) did not change.
D) More information is needed to determine the answer.
Topic: The Basis of Choice: Utility: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10