Question 1

Exhibit 20-1
 
-Refer to Exhibit 20-1. The marginal utility of the third plum is

Accepted Answer

A)  17 utils.
B)  10 utils.
C)  8 utils.
D)  3 utils.
E)  cannot be determinedF) A) and B)
G) A) and C)

Question 2

Exhibit 20-3
​
 
-Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, what is Linda's total utility from consuming the optimal bundle of goods?

Accepted Answer

A)  85
B)  86
C)  88
D)  209
E)  279F) C) and E)
G) B) and D)

Question 3

If a person's income and the prices of both goods all rise by the same percentage, then her budget constraint

Accepted Answer

A)  moves inward toward the origin, and its slope remains the same.
B)  moves outward away from the origin, and its slope changes.
C)  moves outward away from the origin, and its slope remains the same.
D)  does not change in any way.E) C) and D)
F) A) and C)

Question 4

A person is in consumer equilibrium, and then the price rises for one of the goods she purchases. If she wants to restore herself to consumer equilibrium, she will (most likely)

Accepted Answer

A)  buy less of the good whose price has risen and more of the relatively lower priced goods.
B)  try to increase the marginal utility she receives from the good whose price has risen.
C)  try to decrease the marginal utility she receives from the goods whose prices did not rise.
D)  buy more of both the good whose price has risen and of the goods whose prices have not risen.
E)  There is not enough information to answer the question.F) A) and B)
G) A) and E)

Question 5

Smith, who has $10,000, receives an extra dollar, as does Jones, who has $100,000. Smith receives more utility from the extra dollar than does Jones. This is an example of

Accepted Answer

A)  an interpersonal utility comparison.
B)  the law of diminishing marginal utility.
C)  the diamond-water paradox.
D)  a and bE) A) and B)
F) B) and D)

Question 6

The theory of consumer choice assumes that consumers attempt to maximize

Accepted Answer

A)  the difference between total utility and marginal utility.
B)  average utility.
C)  total utility.
D)  marginal utility.E) A) and B)
F) None of the above

Question 7

Exhibit 20-4
 
-Refer to Exhibit 20-4. What value goes in blank (A) ?

Accepted Answer

A)  55
B)  110
C)  80
D)  95
E)  There is not enough information to answer this question.F) B) and E)
G) C) and D)

Question 8

The marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis. What does this imply must be true about the total utility curve for units 1 through 5 of good Z?

Accepted Answer

A)  That portion of good Z's total utility curve must be upward sloping.
B)  That portion of good Z's total utility curve must be downward sloping.
C)  That portion of good Z's total utility curve must be horizontal.
D)  That portion of good Z's total utility curve must also lie above the horizontal axis.E) A) and B)
F) B) and D)

Question 9

Suppose Valerie is consuming lipstick (L)  and eye shadow (E)  and nothing else. MUL = 40 and MUE = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

Accepted Answer

A)  Consume more eye shadow and less lipstick.
B)  Consume more lipstick and less eye shadow.
C)  Consume less of both.
D)  Consume more of both.
E)  Not change her consumption of either good.F) B) and E)
G) A) and B)

Question 10

This is the solution to the diamond-water paradox: Those things that have high value in use sometimes have low prices because they are consumed at low __________ utility; those things that have low value in use sometimes have high prices because they are consumed at high __________utility.

Accepted Answer

A)  marginal; total
B)  total; total
C)  total; marginal
D)  marginal; marginal
E)  none of the aboveF) B) and C)
G) D) and E)

Question 11

Marginal utility is computed by dividing total utility by the quantity consumed of a good.

Accepted Answer

A) True 
 B)False

Question 12

Indifference curves are generally downward sloping, they are convex to the origin, and they do not cross.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 20-7
​
 
-Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (1)  and (2) 
E)  This cannot be determined from the information provided.F) A) and B)
G) B) and E)

Question 14

Implicit in the solution to the diamond-water paradox is the idea that prices reflect __________ utility instead of __________ utility.

Accepted Answer

A)  marginal; total
B)  total; marginal
C)  average; total
D)  total; average
E)  none of the aboveF) A) and E)
G) A) and C)

Question 15

Total utility is defined as the

Accepted Answer

A)  change in marginal utility a person derives from the consumption of a good.
B)  change in total utility a person derives from the consumption of a good divided by the price of that good.
C)  change in total utility a person derives from the consumption of a good divided by the change in the consumption of that good.
D)  sum of the amounts of satisfaction a person receives from consuming a good.
E)  change in total utility a person derives from the consumption of a good.F) A) and B)
G) C) and D)

Question 16

Exhibit 20-6
​
 1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. The equilibrium position for the consumer is at A) any point on the budget constraint. B) point M. C) point J. D) point T. E) point R." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 20-6. I1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. The equilibrium position for the consumer is at

Accepted Answer

A)  any point on the budget constraint.
B)  point M.
C)  point J.
D)  point T.
E)  point R.F) B) and D)
G) B) and C)

Question 17

Joe is currently in consumer equilibrium by consuming cheese and crackers, such that the last cracker consumed yielded 8 utils and the last piece of cheese consumed yielded 12 utils. Assume the price of crackers is two cents per cracker and the price of cheese is three cents per piece. If the price of crackers increases to four cents, Joe should __________ his consumption of crackers and his marginal utility from crackers will __________ and also __________ his consumption of cheese and his marginal utility from cheese will __________.

Accepted Answer

A)  increase; increase; increase; increase
B)  increase; increase; decrease; decrease
C)  increase; decrease; increase; decrease
D)  decrease; increase; decrease; increase
E)  decrease; increase; increase; decreaseF) B) and D)
G) A) and D)

Question 18

The law of diminishing marginal utility

Accepted Answer

A)  allows us to make interpersonal utility comparisons.
B)  tells us that an additional dollar is worth less to a millionaire than to a poor person.
C)  tells us the worth of an additional dollar of income.
D)  tells us that an additional dollar of income is worth less than the preceding dollar of income.
E)  a, b, and dF) B) and D)
G) None of the above

Question 19

The point where the slope of the budget constraint equals the slope of the indifference curve is termed consumer equilibrium.

Accepted Answer

A) True 
 B)False

Question 20

A consumer is in equilibrium if he or she derives the same

Accepted Answer

A)  total utility from each good consumed.
B)  total utility per dollar spent on each good consumed.
C)  marginal utility from each good consumed.
D)  marginal utility per dollar spent on each good consumed.E) None of the above
F) C) and D)

Exam 20: Consumer Choice and Behavioral Economics

Exhibit 20-1 -Refer to Exhibit 20-1. The marginal utility of the third plum is

Correct Answer
verified

Smith, who has $10,000, receives an extra dollar, as does Jones, who has $100,000. Smith receives more utility from the extra dollar than does Jones. This is an example of

Correct Answer
verified

Implicit in the solution to the diamond-water paradox is the idea that prices reflect utility instead of utility.

Correct Answer
verified

A person is in consumer equilibrium, and then the price rises for one of the goods she purchases. If she wants to restore herself to consumer equilibrium, she will (most likely)

Correct Answer
verified

The point where the slope of the budget constraint equals the slope of the indifference curve is termed consumer equilibrium.

Correct Answer
verified

Exhibit 20-6 -Refer to Exhibit 20-6. I₁, I₂ and I₃ are indifference curves and line ab is the relevant budget constraint. The equilibrium position for the consumer is at

Correct Answer
verified

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MU_L = 40 and MU_E = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

Correct Answer
verified

The law of diminishing marginal utility

Correct Answer
verified

Exhibit 20-7 -Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

Correct Answer
verified

Total utility is defined as the

Correct Answer
verified

Exhibit 20-4 -Refer to Exhibit 20-4. What value goes in blank (A) ?

Correct Answer
verified

This is the solution to the diamond-water paradox: Those things that have high value in use sometimes have low prices because they are consumed at low utility; those things that have low value in use sometimes have high prices because they are consumed at high utility.

Correct Answer
verified

Exhibit 20-3 -Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, what is Linda's total utility from consuming the optimal bundle of goods?

Correct Answer
verified

A consumer is in equilibrium if he or she derives the same

Correct Answer
verified

The marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis. What does this imply must be true about the total utility curve for units 1 through 5 of good Z?

Correct Answer
verified

If a person's income and the prices of both goods all rise by the same percentage, then her budget constraint

Correct Answer
verified

The theory of consumer choice assumes that consumers attempt to maximize

Correct Answer
verified

Indifference curves are generally downward sloping, they are convex to the origin, and they do not cross.

Correct Answer
verified

Marginal utility is computed by dividing total utility by the quantity consumed of a good.

Correct Answer
verified

Correct Answer
verified

Exam 20: Consumer Choice and Behavioral Economics

Exhibit 20-1 -Refer to Exhibit 20-1. The marginal utility of the third plum is

Correct AnswerverifiedShow Answer

Smith, who has $10,000, receives an extra dollar, as does Jones, who has $100,000. Smith receives more utility from the extra dollar than does Jones. This is an example of

Correct AnswerverifiedShow Answer

Implicit in the solution to the diamond-water paradox is the idea that prices reflect __________ utility instead of __________ utility.

Correct AnswerverifiedShow Answer

A person is in consumer equilibrium, and then the price rises for one of the goods she purchases. If she wants to restore herself to consumer equilibrium, she will (most likely)

Correct AnswerverifiedShow Answer

The point where the slope of the budget constraint equals the slope of the indifference curve is termed consumer equilibrium.

Correct AnswerverifiedShow Answer

Exhibit 20-6 ​ -Refer to Exhibit 20-6. I1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. The equilibrium position for the consumer is at

Correct AnswerverifiedShow Answer

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MUL = 40 and MUE = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

Correct AnswerverifiedShow Answer

The law of diminishing marginal utility

Correct AnswerverifiedShow Answer

Exhibit 20-7 ​ -Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

Correct AnswerverifiedShow Answer

Total utility is defined as the

Correct AnswerverifiedShow Answer

Exhibit 20-4 -Refer to Exhibit 20-4. What value goes in blank (A) ?

Correct AnswerverifiedShow Answer

This is the solution to the diamond-water paradox: Those things that have high value in use sometimes have low prices because they are consumed at low __________ utility; those things that have low value in use sometimes have high prices because they are consumed at high __________utility.

Correct AnswerverifiedShow Answer

Exhibit 20-3 ​ -Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, what is Linda's total utility from consuming the optimal bundle of goods?

Correct AnswerverifiedShow Answer

A consumer is in equilibrium if he or she derives the same

Correct AnswerverifiedShow Answer

The marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis. What does this imply must be true about the total utility curve for units 1 through 5 of good Z?

Correct AnswerverifiedShow Answer

If a person's income and the prices of both goods all rise by the same percentage, then her budget constraint

Correct AnswerverifiedShow Answer

The theory of consumer choice assumes that consumers attempt to maximize

Correct AnswerverifiedShow Answer

Indifference curves are generally downward sloping, they are convex to the origin, and they do not cross.

Correct AnswerverifiedShow Answer

Marginal utility is computed by dividing total utility by the quantity consumed of a good.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Implicit in the solution to the diamond-water paradox is the idea that prices reflect utility instead of utility.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 20-6 -Refer to Exhibit 20-6. I₁, I₂ and I₃ are indifference curves and line ab is the relevant budget constraint. The equilibrium position for the consumer is at

Correct Answer
verified

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MU_L = 40 and MU_E = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

Correct Answer
verified

Correct Answer
verified

Exhibit 20-7 -Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

This is the solution to the diamond-water paradox: Those things that have high value in use sometimes have low prices because they are consumed at low utility; those things that have low value in use sometimes have high prices because they are consumed at high utility.

Correct Answer
verified

Exhibit 20-3 -Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, what is Linda's total utility from consuming the optimal bundle of goods?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified