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46) The price of coffee increases because of low crop yields. If the consumer's utility schedule
for coffee remains constant, we can predict that coffee consumption
A) will increase.
B) will decrease.
C) will stay the same.
D) will increase if the marginal utility of coffee diminishes and will decrease if the marginal
utility of coffee increases.
E) might change but we need more information to determine if it increased, decreased, or did not
change.
47) The consumption of bottled water increased dramatically during the 1990s. If consumers'
utility schedules for water remained constant over this time period, in order for consumers to stay
in equilibrium, the price of bottled water must have ________.
A) risen because marginal utility increased since people consumed more bottled water
B) fallen
C) remained constant because the marginal utility schedule did not change
D) risen because the supply of water must have increased
E) We don't have enough information to say what happened to the price.
48) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
The price of pizza is $2 per slice and the price of soda is $1 per bottle. His marginal utility from
the 4th slice of pizza is
A) 7.
B) 3.50.
C) 34.
D) 17.50.
E) 27.
49) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
The price of pizza is $2 per slice and the price of soda is $1 per bottle. His marginal utility from
the 4th bottle of soda is
A) 21.
B) 3.
C) 3 units for soda ÷ 7 units for pizza.
D) 34.
E) 5.25.
50) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
The price of pizza is $2 per slice and the price of soda is $1 per bottle. Ali has $14 in his budget.
When Ali maximizes his utility, how many bottles of soda does he buy?
A) fewer than 3
B) 3
C) 4
D) 5
E) more than 5
51) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
The price of pizza is $2 per slice and the price of soda is $1 per bottle. Ali has $14 in his budget.
When Ali maximizes his utility, how many slices of pizza does he buy?
A) fewer than 2
B) 2
C) 3
D) 4
E) more than 4
52) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
The price of pizza is $2 per slice and the price of soda is $1 per bottle. Ali has $14 in his budget.
When Ali maximizes his utility he buys ________ bottles of soda and ________ slices of pizza.
A) 4; 5
B) 6; 4
C) 2; 6
D) 6; 6
E) None of the above answers is correct.
53) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
The price of pizza is $2 per slice and the price of soda is $1 per bottle. Ali has $14 in his budget.
When Ali maximizes his utility, his total utility equals
A) 6.
B) 9.
C) 69.
D) 61.
E) None of the above answers is correct.
54) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.
Suppose the price of a slice of pizza increases. As a result, Ali's
A) marginal utility per dollar from pizza decreases.
B) total utility increases.
C) purchases of pizza might increase.
D) marginal utility from all the slices of pizza he consumes decreases.
E) marginal utility per dollar from soda increases.
55) Chase has a budget of $14 which he must allocate between steak and cranberry juice. The
table gives his marginal utility and the marginal utility per dollar for both of those goods. The
price of steak is $10 per serving and the price of cranberry juice is $2 per serving. To maximize
his utility, Chase should buy
A) 2 servings of steak and 2 servings of cranberry juice.
B) 2 servings of steak and 4 servings of cranberry juice.
C) 1 serving of steak because this has the highest marginal utility.
D) 1 serving of steak and 2 servings of cranberry juice.
E) 4 servings of steak and 4 servings of cranberry juice.
56) Liz consumes two goods, candy bars and potato chips. Her budget is $4 per day. The price of
a candy bar is $1.00 and the price of a bag of chips is 50 cents. Her utility is in the table above.
How much marginal utility per dollar does the 3rd bag of potato chips give Liz?
A) 18
B) 4
C) 8
D) 36
E) We need more information to be able to answer the question.
57) Liz consumes two goods, candy bars and potato chips. Her budget is $4 per day. The price of
a candy bar is $1.00 and the price of a bag of chips is 50 cents. Her utility is in the table above.
For Liz to maximize her utility, what combination of candy bars and potato chips should she eat?
A) 4 candy bars and 0 bags of potato chips
B) 3 candy bars and 2 bags of potato chips
C) 2 candy bars and 4 bags of potato chips
D) 1 candy bar and 5 bags of potato chips
E) None of the above answers are correct.
Quantity of
pizza
Total utility
from pizza
Quantity of
Diet Pepsi
Total utility
from Diet
Pepsi
0
0
0
0
1
24
1
14
2
44
2
26
3
60
3
36
4
72
4
44
5
76
5
50
6
79
6
54
7
80
7
56
58) Suppose that you consume only pizza and Diet Pepsi. The table above gives your utility from
consuming these two goods. What is the marginal utility you get from the fourth slice of pizza?
A) 36
B) 18
C) 12
D) 4
E) 72
59) Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs
$2 each. The table above gives your utility from consuming these two goods. If your income is
$14, which of the following consumption combinations will you choose?
A) 3 slices of pizza and 1 Diet Pepsi
B) 2 slices of pizza and 3 Diet Pepsis
C) 1 slice of pizza and 5 Diet Pepsis
D) 0 slices of pizza and 7 Diet Pepsis
E) None of the above answers are correct.
60) Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs
$2 each. The table above gives your utility from consuming these two goods. If your income is
$20, which of the following consumption combinations will you choose?
A) 5 slices of pizza and no Diet Pepsi
B) 4 slices of pizza and 2 Diet Pepsis
C) 3 slices of pizza and 4 Diet Pepsis
D) 2 slice of pizza and 6 Diet Pepsis
E) None of the above answers is correct.
61) If the price of steak rises, a consumer who had been maximizing his or her utility before will
buy less steak because its
A) total utility falls.
B) ratio of marginal utility to price is now less than that for other goods.
C) marginal utility has fallen.
D) ratio of marginal utility to total utility falls.
E) ratio of marginal utility to price is now larger than that for other goods.
62) Moving downward along a demand curve, so that the price falls and the quantity demanded
increases, the marginal utility of each additional unit of the good consumed
A) always increases.
B) always decreases.
C) stays the same.
D) could increase, decrease, or stay the same.
E) at first increases and then decreases
63) The demand curve for macadamia nuts is downward sloping. This slope is because
consumers maximize their utility and an increase in the price of macadamia nuts leads to
A) no change in quantity demanded.
B) an increase in the marginal utility per dollar from macadamia nuts.
C) a decrease in the marginal utility per dollar from macadamia nuts.
D) consumers' budget lines rotating outward with their slopes changing.
E) consumers' budget lines shifting outward with no change in their slope.
64) Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100.
Juan spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5
per pint. To maximize his utility, Juan should
A) buy more cream and fewer strawberries.
B) buy less cream and more strawberries.
C) buy more cream and more strawberries.
D) buy less cream and fewer strawberries.
E) change nothing because Juan is maximizing his utility now.
65) Paula is currently spending all of her budget and she finds that the marginal utility per dollar
from dresses exceeds the marginal utility per dollar from hats. To maximize her utility, Paula
should therefore buy
A) more dresses and fewer hats.
B) more hats and fewer dresses.
C) more dresses and hats.
D) fewer dresses and hats.
E) probably change her purchases but more information is needed to determine if she should buy
more or fewer dresses and hats.
66) In economics, utility
A) always decreases as income increases.
B) equals opportunity cost.
C) is an index of satisfaction.
D) is measured by the same units as relative price.
E) and relative price are the same thing.
67) Marginal utility is the
A) change in total utility that results from a one-unit increase in the quantity of a good
consumed.
B) total benefit from the consumption of a good or service.
C) quantity of a good a consumer prefers.
D) average utility per unit consumed.
E) change in total utility that results from a one dollar increase in the price of a good consumed.
68) Sushi costs $3 per piece. Cynthia's total utility after eating one piece is 30 and her total utility
after eating 2 pieces is 51, so her marginal utility from the second piece is
A) 17.
B) 10.
C) 51.
D) 7.
E) 21.
69) As Shaniq drinks additional cups of tea at breakfast, Shaniq's
A) marginal utility from tea decreases.
B) total utility from tea increases.
C) total utility from tea decreases.
D) Both answers A and B are correct.
E) Both answers B and C are correct.
70) Marginal utility per dollar is calculated by ________ the price of the good.
A) multiplying the marginal utility from a good by
B) dividing the marginal utility from a good by
C) multiplying the total utility from a good by
D) dividing the total utility from a good by
E) averaging the marginal utility from the good with
71) Sushi costs $3 per piece. Cynthia's total utility after eating one piece is 30 and her total utility
after eating 2 pieces is 51, so her marginal utility per dollar from the second piece is
A) 17.
B) 10.
C) 51.
D) 7.
E) 21.
72) When Chris maximizes his total utility, then his entire available budget is allocated in such a
way that the
A) marginal utility of all goods is equal.
B) marginal utility per dollar is equal for all goods.
C) marginal utility is as large as possible for goods.
D) marginal utility will start decreasing if it consumes fewer goods.
E) quantities consumed of each good are equal.
73) Suppose that Misty likes pizza and hotdogs. If her marginal utility per dollar from pizza is 6
and from hotdogs it is 5, Misty
A) is maximizing her total utility.
B) could increase her total utility by buying more hotdogs and less pizza.
C) could increase her total utility by buying more pizza and fewer hotdogs.
D) is maximizing her marginal utility.
E) must obtain more income in order to reach her consumer equilibrium.
74) You can use marginal utility theory to find the demand curve by changing
A) only the price of one good.
B) only income.
C) the utility schedule.
D) only the prices of both goods.
E) income and the prices of both goods.
75) Suppose that Hank consumes only Mountain Dew and pizza. If Hank's total utility from all
amounts of both Mountain Dew and pizza double from what they were before, then Hank's
demand for
A) both goods must double.
B) one of the goods must double.
C) both goods must decrease by one-half.
D) one of the goods must decrease by one-half.
E) neither good changes.
12.3 Efficiency, Price, and Value
1) The maximum price a consumer is willing to pay for an extra unit of a good or service when
total utility is maximized is known as
A) demand.
B) marginal benefit.
C) quantity demanded.
D) total utility.
E) marginal utility.
2) Jen consumes 5 CDs and 2 tacos. She receives 500 units of utility from her 5th CD and 200
units of utility from her 2nd taco. The price of a CD is $10, the price of a taco is $4, and she is
spending her entire budget. Which of the following is true regarding Jen's choices?
A) Jen is operating on her demand curve for tacos.
B) Jen is maximizing utility.
C) Jen is operating on her demand curve for CDs.
D) Only answers A and B are correct
E) Answers A, B, and C are correct.
3) The fact that diamonds have a much higher price than water
A) violates the rules of utility maximization because water is necessary for life.
B) does not violate the rules of utility maximization because globally, fresh water is actually very
rare.
C) does not violate the rules of utility maximization because water's marginal utility is low.
D) violates the rules of utility maximization because diamonds are not necessities.
E) violates the rules of utility maximization because the consumer actually consumes a large
amount of water.
4) Which of the following is the best statement of the paradox of value?
A) Why does the amount people are willing to pay for a good vary with the amount consumed?
B) Why do some goods like water, which is necessary for life, have a low price while other
goods like diamonds have a high price?
C) What is the logical relationship between value and price?
D) Why is efficiency so valuable for a society?
E) None of the above states the paradox of value.
5) To resolve the paradox of value, you must
A) compare price elasticities of demand across goods.
B) distinguish between marginal and total utility.
C) sacrifice efficiency.
D) minimize consumer surplus.
E) distinguish between marginal utility and price.
6) The solution to the paradox of value is found by looking at which of the following?
A) total usefulness of different goods
B) the difference between marginal utility and total utility
C) relative prices and total utility
D) the difference between marginal utility and price
E) None of the above helps solve the paradox of value.
7) One reason why the price of diamonds is so high is because the
A) marginal utility of diamonds is zero.
B) marginal utility of diamonds is high.
C) marginal utility of diamonds is low.
D) total utility of diamonds is low.
E) total utility of diamonds is high.
8) Why does the paradox of value between diamonds and water arise?
A) because water has a low price and a low total utility, while diamonds have a high price and a
high total utility
B) because water has a low price and a low marginal utility, while diamonds have a high price
and a high marginal utility
C) because necessities like water are higher priced than luxuries like diamonds
D) because diamonds have a higher value to people even though water is essential to life
E) because water has a low price and a low total utility, while diamonds have a high price but
also a low total utility
9) Related to the paradox of value, which of the following statements is correct?
A) The marginal utility of water is enormous but the total utility is small.
B) We consume so much water so its marginal utility is enormous.
C) The marginal utility of water is small but the total utility is enormous.
D) The consumer surplus from water is small.
E) The total utility of water is equal to the marginal utility of water.
10) The paradox of value with respect to water and diamonds can be explained using consumer
surplus because
A) water is cheap but provides a large consumer surplus, while diamonds are expensive with a
small consumer surplus.
B) diamonds are in large supply relative to their demand, while water is scarce in supply relative
to its demand.
C) water is cheap but provides a small consumer surplus, while diamonds are expensive but
provide a large consumer surplus.
D) the total consumer surplus from diamonds is greater than the total consumer surplus from
water.
E) None of the above answers is correct.
11) At all points on a demand curve, the
i. consumer's budget has been allocated to maximize total utility.
ii. quantity is the quantity demanded at each price when total utility is maximized.
iii. price represents the marginal benefit the consumer gets from an extra unit of a good.
A) i only
B) ii only
C) i and ii
D) i and iii
E) i, ii, and iii
12) As more of a good is consumed, the marginal utility of an additional unit ________, so
consumers are willing to pay ________ for an additional unit.
A) decreases; less
B) increases; less
C) decreases; more
D) increases; more
E) does not change; less
13) The paradox of value refers to the
A) utility maximizing rule.
B) fact that water is vital but cheap while diamonds are relatively useless but expensive.
C) fact that consumers have different preferences and utility schedules.
D) law of demand.
E) issue of why the consumer surplus from water equals the consumer surplus from diamonds.
14) One reason why water is cheap compared to diamonds is because the
A) marginal utility of water is enormous.
B) marginal utility of water is small.
C) total utility of water is enormous.
D) total utility of water is small.
E) total utility of water and diamonds must be equal but the marginal utility of water is much
lower than the marginal utility of diamonds.
15) In the paradox of value between expensive diamonds and inexpensive water, we see that
A) the consumer surpluses are very high for both goods.
B) diamonds have a low consumer surplus while water has a high consumer surplus.
C) diamonds have a high consumer surplus while water has a low consumer surplus.
D) the consumer surpluses are very low for both goods.
E) the consumer surpluses for the two goods cannot be compared.
12.4 Chapter Figures
The figure above shows three budget lines.
1) Based on the figure above, which of the following would lead the consumer's budget line to
shift from BL0 to BL1?
A) A rise in the price of water.
B) A fall in the price of water.
C) A rise in the price of water and the price of gum.
D) A decrease in the consumer's budget.
E) An increase in the consumer's budget.
2) Based on the figure above, which of the following would lead the consumer's budget line to
shift from BL0 to BL2?
A) A rise in the price of water.
B) A fall in the price of water.
C) A rise in the price of water and the price of gum.
D) A decrease in the consumer's budget.
E) An increase in the consumer's budget.
3) Based on the figure above, on which budget line is the relative price of gum the highest?
A) Budget line BL2.
B) Budget line BL0.
C) Budget line BL1.
D) The relative price is the same along all three budget lines.
E) An increase in income.
The figure above shows two budget lines.
4) Based on the figure above, which of the following would lead the budget line to change from
BL0 to BL1?
A) A rise in the price of water.
B) A fall in the price of water.
C) A rise in the price of water and the price of gum.
D) A decrease in the consumer's budget.
E) An increase in the consumer's budget.
