978-1259723223 Test Bank TBChap007 Part 3

A c c e s s i b i l i t y :

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73. Which of the following statements is correct?

74. Noncash gifts

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75. If you receive a gift whose market price is $20, but you consider it to be worth only $10,

then

76. According to economists, gift registries, returning gifts for cash refunds, and “recycling

gifts”

77. (Consider This) When the federal government started requiring restaurants to print calorie

counts next to menu items,

A. restaurants changed their prices, systematically lowering prices for healthier items and

raising prices for high-calorie entrees.

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B. there was no meaningful change in consumption behavior, indicating that marginal utility is

driven solely by tastes for the food items and not by health information.

C. consumption of higher calorie items decreased, suggesting consumers’ marginal utility for

these items dropped.

D. consumption of higher-calorie items increased, contrary to the law’s objective.

AACSB: Knowledge Application

A c c e s s i b i l i t y :

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Blooms: Remember

Di f f i c u l ty : 0 1 Ea s y

Gr a d a b l e : au t o m a t i c

Learning Objective: 07–01 Define and explain the relationship between total utility,

marginal utility, and the law of diminishing marginal utility.

Test Bank: I

Topic: Law of Diminishing Marginal Utility

78. (Consider This) When the federal government started requiring restaurants to print calorie

counts next to menu items, some people increased their consumption of higher-calorie items.

Whichof the following best explains this phenomenon?

A. Consumers at restaurants are systematically irrational.

79. (Last Word) Theft and burglary

D. are less economically rational than crimes of passion and violence.

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AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 0 2 M e d i u m

G r a d a b l e : a u t o m a t i c

Learning Objective: 07–02 Describe how rational consumers maximize utility by

comparing the marginal utility-to-price ratios of all the products they could possibly

purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

80. (Last Word) Most people do not steal, because

A. stolen goods are subject to the law of diminishing marginal utility.

81. (Last Word) All of the following would reduce property crime by increasing its “price,”

except

A. imposing greater penalties for those who are caught and convicted.

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purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

True / False Questions

82. If marginal utility is diminishing, total utility must also be declining.

83. Marginal utility is total utility divided by the number of units consumed.

84. When total utility is at a maximum, marginal utility is zero.

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Test Bank: I

Topic: Law of Diminishing Marginal Utility

85. When a consumer shifts purchases from X to Y, the marginal utility of X falls and the

marginal utility of Y rises.

86. The limited money income of consumers results in a so-called budget constraint.

87. A rational consumer will cease purchasing a product at that quantity where marginal utility

begins to diminish.

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written consent of McGraw-Hill Education.

Blooms: Understand

D i f f i c u l t y : 0 2 M e d i u m

G r a d a b l e : a u t o m a t i c

Learning Objective: 07–02 Describe how rational consumers maximize utility by

comparing the marginal utility-to-price ratios of all the products they could possibly

purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

88. When a consumer has maximized total utility, he or she cannot increase total utility by

reallocating expenditures among different products.

89. When the price of a product falls, the income effect induces the consumer to purchase more

of it, while the substitution effect prompts her to buy less.

90. The consumer demand curve for a product is downsloping because marginal utility is

constant when price declines.

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

92. The substitution effect suggests that when consumers judge product quality by price, they

will substitute high-priced products for low-priced products.

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the income and substitution effects of a price change.

Test Bank: I

Topic: Income and Substitution Effects

Topic:

Utility Maximization and the Demand Curve

93. Noncash gift-giving involves value loss when the marginal utility of the gift to the receiver

is less than the product price.

Multiple Choice Questions

94. The budget line shows

95. Which of the following statements is not correct?

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B. A reduction in money income accompanied by an increase in product prices will necessarily

shift the budget line to the left.

C. An increase in product prices will shift the budget line to the left.

D. An increase in money income will shift the budget line to the right.

96. Refer to the budget line shown in the diagram. If the consumer’s money income is $20, the

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Blooms: Understand

D i f f i c u l t y : 0 2 M e d i u m

G r a d a b l e : a u t o m a t i c

Learning Objective: 07–06 Appendix: Relate how the indifference curve model of

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: I

Topic: Indifference Curve Analysis

97. Refer to the budget line shown in the diagram. Given the same money income, reductions in

the prices of both products C and D will

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utility maximization.

Test Bank: I

Topic: Indifference Curve Analysis

Type: Graph

98. Refer to the budget line shown in the diagram. The absolute value of the slope of the budget

line is

99. In moving along a given budget line,

100. Increases in product prices shift the consumer’s

101. A change in the slope of a budget line is solely the result of a change in

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A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 0 2 M e d i u m

G r a d a b l e : a u t o m a t i c

Learning Objective: 07–06 Appendix: Relate how the indifference curve model of

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: I

Topic: Indifference Curve Analysis

102. The shift of the budget line from cd to ab in the figure is consistent with

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written consent of McGraw-Hill Education.

Topic: Indifference Curve Analysis

Type: Graph

103. The budget line shift from ab to cd in the figure is consistent with

104. Any combination of goods lying outside of the budget line

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105. If money income increases and the prices of products A and B both increase, then the

budget line

106. The movement of the budget line from BB to bb in the figure suggests that income has

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107. Suppose you have money income of $10, all of which you spend on Coke and popcorn. In

the diagram, the prices of Coke and popcorn, respectively, are

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108. If the budget line shifts from BB to bb in the diagram, we can infer that the

109. A budget line shows the

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written consent of McGraw-Hill Education.

Blooms: Understand

D i f f i c u l t y : 0 2 M e d i u m

G r a d a b l e : a u t o m a t i c

Learning Objective: 07–06 Appendix: Relate how the indifference curve model of

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: I

Topic: Indifference Curve Analysis

110. The slope of a budget line reflects the

111. If the price of A is $12 and the price of B is $3, the budget line tells us that a consumer in

effect can trade