True / False
1. Because the consumer’s budget is limited, purchase decisions among available goods must of necessity be
interdependent.
a.
True
b.
False
True
Easy
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Analytic
Utility and consumer choice
Scarcity and Demand
2. The number of Compact Discs purchased by a consumer depends on the price of the discs as well as the prices of all
other goods purchased.
a.
True
b.
False
True
Moderate
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Analytic
Utility and consumer choice
Scarcity and Demand
3. Utility is the pleasure, satisfaction, or enjoyment derived from consumption.
a.
True
b.
False
True
Easy
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Analytic
Utility and consumer choice
Utility: A Tool to Analyze Purchase Decisions
4. Marginal utility is measured by the maximum amount of money a consumer is willing to pay for one more unit of a
commodity.
a.
True
b.
False
True
Easy
5. Total utility always decreases when additional amounts of a commodity are consumed.
a.
True
b.
False
False
Moderate
6. Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer.
a.
True
b.
False
False
Easy
7. Marginal utility can fall even as total utility from the consumption of a good is rising.
a.
True
b.
False
True
Moderate
8. Total utility increases if one more unit of a product is purchased and marginal utility is positive.
a.
True
b.
False
True
Moderate
9. The law of diminishing marginal utility holds that at some point consumption of additional units of a commodity adds
less to total utility.
a.
True
b.
False
True
Easy
10. The law of diminishing marginal utility states that total utility will increase at a decreasing rate as additional units of a
commodity are acquired.
a.
True
b.
False
True
Moderate
11. As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from that good.
a.
True
b.
False
False
Moderate
12. Total utility decreases when diminishing marginal utility is present.
a.
True
b.
False
False
Moderate
13. As a rule, as a consumer acquires more and more of a good, the marginal utility declines.
a.
True
b.
False
True
Easy
14. An optimal purchase is one that maximizes total utility.
a.
True
b.
False
True
Moderate
15. Consumers should purchase quantities of a good to the point where MU > P.
a.
True
b.
False
False
Easy
16. Consumers should purchase a good up to the point where MU = P.
a.
True
b.
False
True
Moderate
17. Given a typical demand curve and a decline in price, the consumer who wishes to maximize total utility must increase
the quantity purchased of a good to arrive at an optimal MU = P point.
a.
True
b.
False
True
Difficult
18. If the marginal net utility of beer is a positive number, the consumer should buy more beer in order to maximize
utility.
a.
True
b.
False
True
Moderate
19. If the marginal net utility of beer is negative, the consumer should buy more beer in order to increase the total utility.
a.
True
b.
False
False
Moderate
20. The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped
demand curve.
a.
True
b.
False
True
Easy
21. The law of diminishing marginal utility guarantees that demand curves will have positive slopes.
a.
True
b.
False
False
Easy
22. The real cost of a decision is the opportunity cost measured in the commodities forgone.
a.
True
b.
False
True
Easy
23. All decisions involve opportunity cost.
a.
True
b.
False
True
Easy
24. Consumer surplus is the difference between the worth of a commodity to the consumer and the price the consumer
pays for the commodity.
a.
True
b.
False
True
Easy
25. Consumer surplus is what one consumer is willing to pay for a commodity over what another consumer is willing to
pay for the same commodity.
a.
True
b.
False
False
Easy
26. Voluntary exchange requires that there must be mutual gain.
a.
True
b.
False
True
Easy
27. A consumer cannot gain consumer’s surplus if she purchases more than one unit of a good.
a.
True
b.
False
False
Moderate
28. The resolution of Adam Smith’s diamond-water puzzle is based on the distinction between marginal and total utility.
a.
True
b.
False
True
Moderate
29. Since price tends to equal marginal utility, the price of water is low and the price of diamonds is high.
a.
True
b.
False
True
Moderate
30. Since price tends to equal total utility, the price of water is low and the price of diamonds is high.
a.
True
b.
False
False
Moderate
31. Scarcity raises both price and marginal utility but generally reduces total utility.
a.
True
b.
False
True
Moderate
32. Quantity demanded is not only affected by price but by variables such as income and the prices of other goods.
a.
True
b.
False
True
Easy
33. An inferior good is one that consumers buy in smaller quantities when incomes rise.
a.
True
b.
False
True
Easy
34. If income rises, most consumers will increase the quantity demanded of an inferior good.
a.
True
b.
False
False
Easy
35. All inferior goods have upward-sloping demand curves.
a.
True
b.
False
False
Easy
36. The market demand curve represents the total quantity demanded at each price.
a.
True
b.
False
True
Easy
37. The market demand curve is the horizontal summation of all individual demand curves.
a.
True
b.
False
True
Easy
38. The law of demand ensures that a demand curve has a positive slope.
a.
True
b.
False
False
Easy
39. The law of demand holds that as prices of goods decrease, people are willing to buy more.
a.
True
b.
False
True
Easy
40. Even if all individual demand curves are downwardly sloped, the market demand curve may slope upward.
a.
True
b.
False
False
Easy
41. If a good has “snob appeal,” consumers may purchases less when the price falls.
a.
True
b.
False
True
Easy
42. Rolls Royce may actually sell fewer cars at lower prices due to the “snob effect.”
a.
True
b.
False
True
Moderate
43. Points along a budget line represent the maximum combinations of two commodities that a consumer can afford.
a.
True
b.
False
True
Moderate
44. The slope of the budget line is determined only by the prices of the commodities purchased.
a.
True
b.
False
True
Moderate
45. An increase in income produces a parallel, outward shift in the budget line.
a.
True
b.
False
True
Easy
46. A change in the price of one good results in a rotation of the budget line, so that it is steeper or flatter.
a.
True
b.
False
True
Moderate
47. A decrease in the price of one good results in a parallel shift in the budget line.
a.
True
b.
False
False
Moderate
48. The budget line represents a consumer’s preferences for a commodity.
a.
True
b.
False
False
Easy
49. Indifference curves show all combinations of commodities that are equally desirable to the consumer.
a.
True
b.
False
True
Easy
50. A change in the price of a good will shift the indifference curves.
a.
True
b.
False
False
Moderate
51. Any point on the lowest indifference curve is preferable to a point on a higher indifference curve.
a.
True
b.
False
False
Moderate
52. If point A on an indifference curve lies higher (measured vertically) than point B on the same curve, Point A
automatically represents higher total utility than point B.
a.
True
b.
False
False
Moderate
53. The budget line and the indifference curve are geometric devices used to provide a closer look at consumer choice.
a.
True
b.
False
True
Easy
54. All points on an indifference curve represent combinations of two goods that are equally desirable to the consumer.
a.
True
b.
False
True
Easy
55. An increase in income shifts indifference curves outward.
a.
True
b.
False
False
Moderate
56. The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up
in exchange for one more unit of another commodity.
a.
True
b.
False
True
Moderate
57. The slope of an indifference curve represents the maximum amount of one commodity that a consumer is willing to
give up in exchange for one more unit of another commodity.
a.
True
b.
False
True
Moderate
58. The slope of the budget line is the amount of one commodity that a consumer must give up in order to obtain an
additional unit of the other commodity.
a.
True
b.
False
True
Easy
59. The demand curve can be derived from indifference curves by varying the price of the commodity in question.
a.
True
b.
False
True
Moderate
60. A change in consumer preferences will shift the budget line.
a.
True
b.
False
False
Moderate
61. A consumer will go to a point on the highest attainable indifference curve.
a.
True
b.
False
True
Easy
62. A consumer will consume the combination of goods at the point of tangency between the budget line and the
indifference curve.
a.
True
b.
False
True
Easy
63. A consumer will consume the combination of goods at the crossing point of a budget line and indifference curve.
a.
True
b.
False
False
Moderate
64. An increase in a consumer’s income will always increase the demand for a good.
a.
True
b.
False
65. A change in the price of one good, such as staples, may affect the quantity demanded of another good, such as rubber
bands.
a.
True
b.
False
True
Easy
66. By changing the amount of income a consumer has to spend, a change in the price of one good may affect the quantity
demanded of another good.
a.
True
b.
False
67. Economic theory has traditionally focused on optimality in decision-making.
a.
True
b.
False
True
Easy
68. Economic behavior is always rational.
a.
True
b.
False
False
Easy
economics
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
Behavioral Economics: Are Economic Decisions Really Made “Rationally”?
Multiple Choice
69. Scarcity
a.
necessitates choice among consumer goods.
b.
of income renders purchase decisions interdependent.
c.
affects all consumer decisions.
d.
may involve forgoing the pleasure of one good in order to enjoy another.
e.
All of the above answers are correct.
e
1
Easy
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Scarcity and Demand
70. Which of the following factors is always present in consumer decision making?
a.
taxes
b.
high prices
c.
scarcity
d.
changing consumer tastes
e.
cost-of-living adjustments to income
c
1
Easy
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Analytic
Utility and consumer choice
Scarcity and Demand
71. Total utility can be thought of as the
a.
total satisfaction derived from a bundle of goods.
b.
minimum amount of money a consumer is willing to spend on a bundle of goods.
c.
additional satisfaction a consumer receives from the marginal unit of a good.
d.
willingness to pay for the marginal unit of a good.
a
1
Moderate
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Analytic
Utility and consumer choice
Utility: A Tool to Analyze Purchase Decisions
72. Lana spent $5 to see a movie. We know
a.
the movie was worth 500 utils.
b.
Lana’s total utility from movies was $5.
c.
the movie was worth at least $5 worth of other goods.
d.
the movie increased marginal utility.
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Reflective Thinking – BPROG: Analysis
Utility and consumer choice
Utility: A Tool to Analyze Purchase Decisions
73. Modern economists measure how much utility Fred gets from a hot dog by
a.
asking Fred how many utils he gets from its consumption.
b.
examining the price of the hamburger Fred chose not to buy.
c.
asking Fred how much of some other good he would give up to get the hot dog. The “other good” can be any
good except money.
d.
asking Fred how much of some other good he would give up to get the hot dog. The “other good” can be any
good, including money.
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Reflective Thinking – BPROG: Analysis
Utility and consumer choice
Utility: A Tool to Analyze Purchase Decisions
74. When the price of a commodity rises, we can expect
a.
marginal utility of the last unit purchased will rise.
b.
marginal utility of the last unit purchased will fall.
c.
marginal utility of the last unit purchased will be unaffected.
d.
purchases to rise because of the increased marginal utility.
DISC: Utility and consumer choic – DISC: Utility and consumer choice
United States – BPROG: Analytic
Utility and consumer choice