Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
indifference curve.
143. In drawing a particular budget line, money income and the prices of the two products are
fixed.
144. 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.
7-82
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Indifference Curve Analysis
145. In moving northeasterly from the origin, we encounter indifference curves that reflect
higher and higher levels of total utility.
146. Each point on a single indifference curve reflects the same level of total utility for a
consumer.
147. It is possible for a consumer's indifference curves to intersect.
7-83
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
consumer behavior derives demand curves from budget lines, indifference curves, and
utility maximization.
Test Bank: I
Topic: Indifference Curve Analysis
148. A rational consumer will try to achieve the highest indifference curve that his or her
income will allow.
149. Indifference analysis assumes that utility is numerically measurable.
150. As a consumer moves down a given indifference curve, his or her total utility will
diminish.
7-84
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
Multiple Choice Questions
151. The satisfaction or pleasure one gets from consuming a good or service is called
152. The utility from a specific product is
153. Total utility is best defined as the
A. change in marginal utility multiplied by the price of a product.
B. maximum amount of satisfaction from consuming a product.
7-85
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. total satisfaction received from consuming a given amount of a product.
D. additional satisfaction received from consuming one more unit of a product.
154. Which of the following statements is correct?
155. Which of the following defines marginal utility?
156. Which of the following best expresses the law of diminishing marginal utility?
157. After eating four slices of pizza, you are offered a fifth slice for free. You turn down the
fifth slice. Your refusal indicates that the
158. When diminishing marginal utility starts happening as a person consumes more and more
of a given good,
7-87
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di f f i c u l ty :
01 Easy
Learning Objective: 07-01 Define and explain the relationship between total utility,
marginal utility, and the law of diminishing marginal utility.
Test Bank: II
Topi c :
Law of Diminishing Marginal Utility
159. Which situation is consistent with the law of diminishing marginal utility?
160. Which of the following statements is correct?
161. Children who dislike Brussels sprouts exemplify the notion that the marginal utility of
Brussels sprouts is
7-88
162.
Number of Units of Commodity
Total Utility
3
36
4
80
5
150
6
252
7
350
8
440
Refer to the table. What is the marginal utility of the fourth unit?
163.
Number of Units of Commodity
Total Utility
3
36
4
80
5
150
6
252
7
350
8
440
Refer to the table. The addition of which unit has the greatest marginal utility?
164.
Number of Units of Commodity
Total Utility
3
36
4
80
5
150
6
252
7
350
8
440
Refer to the table. At what consumption level for this product does diminishing marginal utility
set in?
7-90
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. 5 units
C. 8 units
D. 7 units
165. The table below shows the utility schedule for a consumer of candy bars.
Number
Consumed
Total
Utility
0
0
1
5
2
11
3
18
4
24
5
30
6
35
7
32
This consumer begins to experience diminishing marginal utility when consuming the
166. The table below shows the utility schedule for a consumer of candy bars.
7-91
Number Consumed
Total Utility
0
0
1
5
2
11
3
18
4
24
5
30
6
35
7
32
Marginal utility becomes negative with the consumption of the
167. The table shows the utility schedule for a consumer of candy bars.
Number
Consumed
Total
Utility
0
0
1
5
2
11
3
18
4
24
5
30
6
35
7
32
Based on the data in the table, you can conclude that the
168. The table shows the utility schedule for a consumer of candy bars.
Number
Consumed
Total
Utility
0
0
1
5
2
11
3
18
4
24
5
30
6
35
7
32
The consumption of which bar yields the greatest marginal utility?
7-93
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topi c :
Law of Diminishing Marginal Utility
169. If total utility is increasing, then marginal utility
170. If a product has a diminishing, but positive, marginal utility, then
171. Suppose that football tickets at your university are given away for free and that there are
still empty seats for all games. Ignoring all other costs of going to the games, you should
continue attending until your
D. total utility reaches zero.
7-94
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e ss i b i li t y :
Keyboard Navigation
Blooms: Remember
Di f f i c u l ty :
01 Easy
Learning Objective: 07-01 Define and explain the relationship between total utility,
marginal utility, and the law of diminishing marginal utility.
Test Bank: II
Topi c :
Law of Diminishing Marginal Utility
172. The table shows a consumer's utility schedule.
Number of Units
Consumed
Total
Utility
0
0
1
4
2
10
3
18
4
23
5
25
Marginal utility begins to diminish with the consumption of the
173. The table shows a consumer's utility schedule.
Number of Units
Consumed
Total
Utility
0
0
1
4
2
10
3
18
4
23
5
35
Based on the data, you can conclude that the consumer
174. When total utility reaches a maximum, then marginal utility is
175. If total utility has reached a maximum level, and assuming that diminishing marginal utility
already applies, then what will happen as the consumer consumes additional units of the
product?
A. Marginal utility of the additional units will be greater than zero.
7-96
176. If the total utility from consuming the fifth unit of a product is 6 and the total utility from all
five units is 162, then the total utility from consuming four units must be
177. If the total utility from consuming five units of a product is 245 and the marginal utility of a
sixth unit is 5, then the total utility from consuming six units would be
178. To the average consumer, the marginal utility of a second copy of today's newspaper is
A. constant.
179. Which of the following is an assumption of the theory of consumer behavior described in
this chapter?
180. Which of the following is not an assumption of the theory of consumer behavior described
in this chapter?
7-98
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i c u l t y :
02 Medium
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: II
Topi c :
Theory of Consumer Behavior
181. A consumer with a fixed income will maximize utility when each good is purchased in
amounts such that the
182. In deciding what to buy, the consumer will choose the good with the
183. A consumer currently spends a given budget on two goods, X and Y, in such quantities that
the marginal utility of X is 10 and the marginal utility of Y is 8. The unit priceof X is $5 and the
7-99
unit price of Y is $2. The utility-maximizing rule suggests that this consumer should
184. Assume that a consumer purchases a combination of product A and product B such that the
MUa/Pa = 8 and MUb/Pb = 6. To maximize utility without spending more money, the consumer
should
185. Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie
has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The
marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This indicates that
A. Ellie should make no change in consumption.
7-100
186. "Consumer equilibrium" refers to the situation when the consumer is getting
187. A child is given $4 of pocket money to be spent on either hard candies or chocolates.
Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from
each product are as shown in the following table.
Number
of Items
MU of
Chocolat
es
MU of
Hard
Candies
1
60
150
2
50
140
3
40
120
4
30
100
5
20
80
6
10
70
7
5
50
8
0
20
