Chapter 20 Consumer Choice 115
92) What is utility analysis? What is the goal of this analysis?
93) What do we know about total utility when marginal utility is zero?
94) 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?
20.2 Graphical Analysis
1) If marginal utility is positive but decreasing, total utility is
A) decreasing. B) negative. C) increasing. D) constant.
2) When total utility is falling,
A) marginal utility is at a maximum.
B) marginal utility is at zero.
C) marginal utility is negative.
D) marginal utility has decreased, but is now increasing.
3) If marginal utility is positive but diminishing, then
A) average utility must be negative.
B) marginal utility must be above average utility.
C) total utility must be positive.
D) marginal utility must be more than total utility.
4) If marginal utility is zero, total utility is
A) falling. B) increasing.
C) at its maximum. D) negative.
5) If we are graphing total utility, then the total utility curve will
A) always be increasing.
B) always be decreasing.
C)
b
e increasing as long as marginal utility is positive.
D)
b
e horizontal if marginal utility is positive.
6) As marginal utility declines but remains positive, then
A) total utility continues to increase but at a decreasing rate.
B) total utility also declines.
C) total utility is unaffected.
D) none of the above.
7) Refer to the above figures. Which panel best represents marginal utility?
A) Panel A. B) Panel B. C) Panel C. D) Panel D.
8) Refer to the above figures. Amy s total utility for chocolate chip cookies reaches a maximum at 4
cookies. Which panel best represents marginal utility?
A) Panel A B) Panel B C) Panel C D) Panel D
9) Which of the following statements is not true about marginal utility when total utility is at its
maximum point?
A) Marginal utility is zero.
B) Marginal utility is decreasing.
C) A rational consumer will not consume additional units beyond this point.
D) Marginal utility is undefined.
10) If marginal utility is zero,
A) total utility increases at a decreasing rate.
B) total utility increases at an increasing rate.
C) total utility is at a maximum.
D) people will not consume the good even if the price is zero.
11) If the price of a good is zero, a rational consumer will
A)
b
uy all of the units available.
B) not consume the good at all since it must not be valuable if it has a zero price.
C) stop consuming the good when total utility is maximized.
D) consume the good up to the point where total utility is just below zero.
Slices of Pizza Total Utility Marginal Utility
1 50
2 90
3 120
4 130
5 137
6 120
12) In the above table, what is the marginal utility of the fourth slice of pizza consumed?
A) 10 B) 30 C) 120 D) 130
13) In the above table, what is the marginal utility of the second slice of pizza consumed?
A) 10 B) 90 C) 30 D) 40
14) In the above table, what is the marginal utility of the sixth slice of pizza consumed?
A) 7 B) 137 C) 120 D) 17
120 Miller Economics Today, 16th Edition
Number of Bottles of Soda Total Utility Marginal Utility
1 100
2 20
3 15
4 140
15) Using the above table, what is the total utility of consuming 2 bottles of soda?
A) 115 B) 120 C) 140 D) 240
16) Using the above table, what is the total utility of consuming 3 bottles of soda?
A) 115 B) 120 C) 240 D) 135
17) Using the above table, what is the marginal utility of the 4th soda?
A) 23.2 B) 5 C) 10 D) 15
18) Given the above figure, when Joey eats a third piece of pizza his marginal utility is ________
and his total utility is ________.
A) falling; falling B) falling; rising C) rising; falling D) rising; rising
19) Given the above figure, if Joey was a rational consumer he would NOT eat more than ________
piece(s) of pizza.
A) 1 B) 5 C) 4 D) 6
20) Given the above figure, marginal utility becomes negative when Joey consumes the ________
piece of pizza.
A) 1st B) 3rd C) 4th D) 5th
21) When marginal utility is positive, but decreasing, then total utility is
A) increasing at a decreasing rate. B) negative.
C) decreasing. D) increasing at an increasing rate.
22) What is the relationship between marginal utility and total utility? What happens to total utility
as marginal utility declines?
23) As an individual consumes more units of a good, her total utility falls because of the law of
diminishing marginal utility. Do you agree or disagree? Explain.
20.3 Diminishing Marginal Utility
1) The principle that as more of a good is consumed, its extra benefit declines is known as
A) the law of demand.
B) the law of diminishing marginal product.
C) the law of diminishing marginal utility.
D) the law of comparative advantage.
2) If a dinner guest is serious when claiming he just could not get enough of your lasagna and that
the more he ate the more he wanted, you would conclude that for him the marginal utility of
lasagna was
A) increasing. B) decreasing. C) zero. D) constant.
3) If a person claims, I wouldn t eat liver if you paid me, we can assume that his marginal utility
of liver is
A) positive. B) positive, but decreasing.
C) zero. D) negative.
4) If someone complains that she doesn t feel very well because she ate too much pizza, we would
conclude that the marginal utility of the last piece of pizza eaten was
A) positive. B) zero. C) very large. D) negative.
5) The law of diminishing marginal utility implies that the marginal utility for a particular product
A) remains constant, regardless of how much of the product is consumed.
B) remains constant as long as the product is still considered useful.
C) decreases as more of the product is consumed.
D) increases as more of the product is consumed.
6) Typically, an individual takes only one newspaper from the bin because
A) of the low marginal utility of additional newspapers.
B) total utility will rise with consumption of more than one newspaper.
C) marginal utility increases with the first consumption of newspapers.
D) there are limited amounts of newspapers in the bin.
7) The principle of diminishing marginal utility suggests that
A) total utility falls with additional consumption.
B) total utility is usually negative.
C) the consumer will never tire of additional units of a good.
D) the rate at which utility increases diminishes as more of a good is consumed.
8) Regretting a last unit of consumption of cake implies that
A) the total utility from eating cake was negative.
B) cake is an inferior good.
C) the marginal utility of the last unit of cake consumed was negative.
D) the demand curve for cake is horizontal.
9) A rational individual will never consume a unit of a good if its
A) marginal utility is diminishing.
B) marginal utility is less than average utility.
C) marginal utility is increasing.
D) marginal utility is negative.
10) If marginal utility is negative,
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.
11) As an individual consumes more of a particular commodity, the total level of utility derived
from that consumption usually
A) increases at a constant rate. B) increases at an increasing rate.
C) increases at a decreasing rate. D) decreases at an increasing rate.
12) Which economic principle accounts for the fact that all you can eat buffet restaurants can be
profitable?
A) The law of demand
B) The principle of diminishing marginal utility
C) The principle of diminishing marginal product
D) The law of supply
Quantity Total Utility
0 0
1 15
2 35
3 55
4 75
5 85
6 90
13) Refer to the above table. At what quantity does diminishing marginal utility set in?
A) 1st. B) After 4. C) After 5. D) After 6.
126 Miller Economics Today, 16th Edition
Quantity Total Utility
0 0
1 10
2 25
3 35
4 42
5 47
6 49
14) Refer to the above table. At what quantity does diminishing marginal utility set in?
A) After 0. B) After 1. C) After 2. D) After 10.
Quantity Total Utility
0 0
1 10
2 25
3 45
4 60
5 68
6 72
15) Refer to the above table. At what quantity does diminishing marginal utility set in?
A) After 3. B) After 2. C) After 10. D) After 15.
Chapter 20 Consumer Choice 127
Quantity Total Utility
Per Week Amy Robert David Michelle
0 0 0 0 0
1 5.0 100 600 60
2 9.9 190 1200 130
3 14.7 270 1800 220
4 19.4 340 2400 310
5 24.0 400 3000 425
6 28.5 450 3600 575
7 32.9 490 4200 900
8 37.2 520 4800 1275
9 41.4 510 5400 1770
16) Refer to the above table. Which of the four people have utility schedules characterized by the
law of diminishing marginal utility?
A) Amy, Robert, and David only B) Michelle only
C) Michelle and David only D) Amy and Robert only
17) Refer to the above table. Amy s utility schedule shows
A) diminishing marginal utility throughout the entire schedule.
B) initially increasing marginal utility and then decreasing marginal utility.
C) initially decreasing marginal utility and then increasing marginal utility.
D) increasing marginal utility throughout the entire schedule.
18) Refer to the above table. Robert s utility schedule shows
A) diminishing marginal utility throughout the entire schedule.
B) initially increasing marginal utility and then decreasing marginal utility.
C) initially decreasing marginal utility and then increasing marginal utility.
D) increasing marginal utility throughout the entire schedule.
19) Refer to the above table. David s utility schedule is characterized by
A) diminishing marginal utility. B) increasing marginal utility.
C) constant marginal utility. D) decreasing marginal utility.
20) Refer to the above table. Michelle s utility schedule is characterized by
A) diminishing marginal utility. B) increasing marginal utility.
C) constant marginal utility. D) constant total utility.
21) Refer to the above table. The one who likes the good the most is
A) David.
B) Michelle.
C) Robert.
D) uncertain since we cannot compare utility across people.
22) As an individual consumes more of a particular commodity, the total level of utility derived
from that consumption will
A) increase at an increasing rate. B) increase at a decreasing rate.
C) increase at a constant rate. D) remain constant.
23) Which of the following is NOT consistent with the law of diminishing marginal utility?
A) Newspaper vending machines are not as secure as soft drink machines.
B) A student selects to eat at an all you can eat restaurant rather than at a restaurant that
charges for refills.
C) A student s enjoyment of opera increases the more she listens to it.
D) A symphony has free throat lozenges in their lobby.
24) Increases in total utility from the consumption of a good decrease as more is consumed. This
statement is
A) the law of diminishing marginal utility. B) the law of average utility.
C) the consumer optimum. D) false.
25) 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
A) irrational behavior. B) the law of diminishing marginal utility.
C) the income effect. D) the substitution effect.
26) On a hot summer day, a construction worker enters a McDonald s fast food restaurant. He
orders the first Big Mac. He consumes it within 3 minutes. He then orders a second Big Mac
and consumes it in 10 minutes. He eats only half of the third one in 18 minutes and throws
away the rest. The store manager offers him the fourth for free. The construction worker says:
No thanks. Why?
A) For the construction worker, total utility increased at an increasing rate.
B) Marginal utility increased at an increasing rate.
C) Marginal utility declined as he consumed additional Big Macs.
D) The law of diminishing marginal utility does not apply to consumption of Big Macs.
27) On a hot summer day, a construction worker enters a McDonald s fast food restaurant. He
orders the first Big Mac. He consumes it within 3 minutes. He then orders a second Big Mac
and consumes it in 10 minutes. He eats only half of the third one in 18 minutes and throws
away the rest. The store manager offers him the fourth for free. The construction worker says:
No thanks. For the construction worker described above, we can say that
A) diminishing marginal utility set in only after he had consumed the second Big Mac.
B) diminishing marginal utility began as soon as he had eaten the first Big Mac.
C) diminishing marginal utility did not occur, he simply wanted to quit eating.
D) the law of diminishing marginal utility only applies to durable goods.
28) Carol is very hungry. She has just sat down to eat. Her first bite gives her a certain level of
utility. Her second bite increases her utility by more than the first bite. Her third bite increases
her utility by more than the second bite. Carol has 40 bites left before she finishes. Which of the
following statements is true about Carol?
A) Carol is being inconsistent with the law of diminishing marginal utility.
B) Carol s total utility decreases with each bite.
C) Carol s marginal utility will be negative when she takes her last bite.
D) Carol will eventually experience diminishing marginal utility by the time she finishes
eating, if her marginal utility begins to decline.
29) Bill ate four hot dogs at the baseball game. The first one tasted best, but he found that as he ate
more hot dogs the amount of extra satisfaction he was receiving was beginning to fall. This
would demonstrate
A) the law of total utility maximization. B) the law of zero utility.
C) the law of diminishing marginal utility. D) the law of diminishing costs.
30) The reason that all you can eat restaurants can make a profit is due to
A) the law of demand.
B) the law of increasing relative costs.
C) the law of diminishing marginal utility.
D) the law of diminishing marginal returns.
31) If your dinner guest said, Every bite, including the last bite, tasted as good as the first, then the
marginal utility for him
A) is decreasing. B) is increasing. C) is constant. D) is positive.
32) Diminishing marginal utility means that as more of a good is consumed,
A) the rate at which total utility increases starts to diminish.
B) the rate at which total utility increases stays the same.
C) the rate at which total utility increases starts to increase.
D) there is no impact on the rate of change of total utility.
33) Which of the following statements is true with respect to total utility and marginal utility?
A) Marginal utility always rises as total utility increases.
B) Marginal utility can decline as total utility rises.
C) Total utility is not related to marginal utility.
D) Total utility can decline while marginal utility rises.
Slices of Pizza Total Utility Marginal Utility
0 0
1 20
2 50
3 20
4 10
5 0
34) In the above table, the marginal utility of the second slice of pizza is
A) 20. B) 30. C) 50. D) 10.
35) In the above table, the total utility of 4 slices of pizza is
A) 50. B) 70. C) 80. D) 20.
36) In the above table, marginal utility begins to diminish after consumption of the
A) second slice of pizza. B) third slice of pizza.
C) fourth slice of pizza. D) fifth slice of pizza.
37) After consuming what quantity of pizza does the consumer in the table below experience
diminishing marginal utility?
Quantity Marginal Utility
of Pizza of Pizza
1 100
2 80
3 60
4 40
A) 1 B) 2 C) 3 D) 4
Quantity Marginal Utility
of Pizza of Pizza
1 50
2 25
3 0
425
38) Using the above table, what is the maximum number of slices of pizza a rational consumer
would buy?
A) 4 B) 3 C) 2 D) 1
39) Using the above table, what is the total utility of the third piece of pizza?
A) 75 utils B) 0 utils C) 25 utils D) 25 utils
40) Using the above table, what is the total utility of the first piece of pizza?
A) 0 utils B) 50 utils C) 75 utils D) 100 utils
41) When you tell your mother, I ll never be tired of your cooking, you are saying the
A) total utility of her cooking to you is constant.
B) total utility of her cooking to you is equal to 1.
C) marginal utility of her cooking to you is 0.
D) marginal utility of her cooking to you will never be 0.
Glasses of
Water Total Utility Marginal Utility
1 100
2 175
3 225
4 250
5 260
6 255
42) Using the above table, diminishing marginal utility begins after the ________ glass of water is
consumed.
A) 1st B) 2nd C) 6th D) 5th
43) Using the above table, the marginal utility for the sixth glass of water is
A) 5 utils. B) 255 utils. C) 5 utils. D) 260 utils.
44) Newspaper vending machines are often built so that customers can pay to lift a door and take a
paper off a pile of daily newspapers. Newspaper distributors are not concerned about customers
taking the whole stack of papers because
A) the total utility of a daily newspaper is zero.
B) the marginal utility of any one daily newspaper is zero.
C) the marginal utility of a second daily newspaper is zero.
D) the price of a daily newspaper is relatively low.
45) Why does total utility rise at a decreasing rate as an individual s consumption of an item
increases?
46) What is the principle of diminishing marginal utility?
47) Restaurants that allow customers to eat as much as they want for a fixed price must make
money or they would not remain in business. How can they earn profits when people can
always eat more so that the restaurant s costs keep getting higher? What practice that regular
restaurants use will not be used by all you can eat places?