CH 6

Which of the following statements describes the economic concept of utility? a. Utility measures the satisfaction, or pleasure, that people receive from consuming a good or service. b. Utility is the total number of units of a commodity that a consumer buys. c. Utility measures the usefulness of goods such as tools or food, so goods such as artwork or attractive landscaping by definition have no utility. d. Utility measures the purchasing power of individuals.

a. Utility measures the satisfaction, or pleasure, that people receive from consuming a good or service.

Developing numerical values for utility allows us to: a. be more specific about the utility of consumption. b. be more specific about the prices of goods and services. c. evaluate a consumer's purchasing power. d. evaluate the quality of a commodity.

a. be more specific about the utility of consumption.

Suppose a consumer has allocated his or her income between pizzas and movies such that total utility is maximized. At the equilibrium, if there is a fall in the price of pizza, this consumer will: a. consume more pizzas. b. consume more movies. c. consume less pizzas and less movies. d. consume less pizzas and the same amount of movies.

a. consume more pizzas.

Table 6.2 shows the total utility derived from the consumption of bread and meat per week by an individual with a weekly budget of $7. If the price of one pound of meat falls from $2 to $1 per pound and the price of bread increases to $3 per loaf, the marginal utility per dollar for each good at the consumer equilibrium equals _____. Table 6.2 lbs meat/week Total Utility Bread/week Total Utility 0 0 0 0 1 16 1 12 2 28 2 21 3 34 3 27 4 38 4 30 5 36 5 29 a. 2 b. 4 c. 8 d. 6

b. 4

Which of the following is true of marginal utility? a. Marginal utility is the total satisfaction that a consumer derives from all the units of a good or service consumed. b. Marginal utility is the change in total utility derived from a one-unit change in the consumption of a good. c. Marginal utility always increases with an increase in consumption. d. Marginal utility is equal to total utility divided by the total quantity consumed.

b. Marginal utility is the change in total utility derived from a one-unit change in the consumption of a good.

Suppose Pedro buys a mountain bike for $200, which he was willing to pay up to $300 for. Pedro's consumer surplus in this transaction equals _____. a. $200 b. $500 c. $100 d. $300

c. $100

As the price of a product falls, _____. a. total utility increases b. the consumer surplus decreases c. total utility decreases d. the consumer surplus increases

d. the consumer surplus increases

Which of the following defines the market demand curve? a. A market demand curve shows the total quantity demanded per period by all consumers having the same income. b. A market demand curve shows the total quantity demanded of various goods by an individual consumer at various prices. c. A market demand curve shows the total quantity demanded over a period of time by all consumers at various prices. d. A market demand curve shows the total quantity demanded of a good per period by all consumers at various prices.

a. A market demand curve shows the total quantity demanded per period by all consumers having the same income.

Which of the following is known to occur when consumer equilibrium is achieved for someone at a carnival? a. He has ample money in his budget for additional rides at the carnival. b. The marginal utility per dollar spent on the last roller coaster ride he took is equal to the marginal utility per dollar spent on the last hammerhead ride he took. c. He spent his money on the roller coaster ride till his marginal utility became negative. d. The total utility of the last ride he took on the roller coaster, a $7 ride, is equal to the total utility of the last ride he took on the hammerhead, a $3 ride.

b. The marginal utility per dollar spent on the last roller coaster ride he took is equal to the marginal utility per dollar spent on the last hammerhead ride he took.

Marginal utility is defined as: a. the difference in the total satisfaction derived from the consumption of any two products. b. the addition to total satisfaction resulting from an additional unit of consumption. c. the total satisfaction per unit of consumption. d. the total satisfaction derived from consuming a given amount of a product.

b. the addition to total satisfaction resulting from an additional unit of consumption.

Your willingness to pay more to fly to your vacation spot on the coast rather than incur the cost of driving there indicates that: a. you place a low value on your time. b. you place a high value on your time. c. you believe time has zero value. d. you believe time is valued at your wage level.

b. you place a high value on your time.

Along the demand curve for a good, the price reflects _____. a. a consumer's marginal cost for the good b. the consumer surplus from the good c. a consumer's marginal valuation of the good d. the total utility from the consumption of the good

c. a consumer's marginal valuation of the good

Consumer surplus, the net benefit that consumers get from market exchange, can be used to: a. measure economic growth. b. measure the purchasing power of consumers. c. measure economic welfare. d. measure market supply.

c. measure economic welfare.

Table 6.2 shows the total utility derived from the consumption of bread and meat per week by an individual with a weekly budget of $7. The individual experiences disutility from: Table 6.2 lbs meat/week Total Utility Bread/week Total Utility 0 0 0 0 1 16 1 12 2 28 2 21 3 34 3 27 4 38 4 30 5 36 5 29 a. the fifth loaf of bread and the fourth pound of meat. b. the fourth loaf of bread and the fourth pound of meat. c. the fifth loaf of bread and the fifth pound of meat. d. the fourth loaf of bread and the fifth pound of meat.

c. the fifth loaf of bread and the fifth pound of meat.

If a good is free, _____. a. people will continue to increase consumption until total utility is equal to zero. b. people will continue to increase consumption until total utility is equal to marginal utility. c. people will continue to increase consumption until total utility is equal to opportunity cost. d. people will continue to increase consumption until marginal utility is equal to zero.

d. people will continue to increase consumption until marginal utility is equal to zero.

A consumer can be said to have achieved equilibrium when: a. the marginal utility of each product consumed is the same. b. the total utility of each product consumed is at a maximum. c. the marginal utility of each product consumed is at a maximum. d. the last dollar spent on each product yields the same marginal utility.

d. the last dollar spent on each product yields the same marginal utility.

Which of the following is true of consumer equilibrium? a. In equilibrium, higher-priced products yield lesser marginal utility than lower-priced products. b. In equilibrium, a consumer has an incentive to consume more. c. In equilibrium, a consumer derives negative total utility. d. In equilibrium, higher-priced products yield more marginal utility than lower-priced products.

not a. In equilibrium, higher-priced products yield lesser marginal utility than lower-priced products.

Table 6.1 shows the total utility derived from hamburgers by an individual. The marginal utility from the third hamburger equals _____. Table 6.1 # of Burgers Consumed total utility 0 0 1 10 2 20 3 25 4 22 a. 5 b. 0 c. 8 d. 10

a. 5

Figure 6.1 shows the market demand curve for a product. Which of the following represents the consumer surplus in the market if the price falls to 0? Figure 6.1 a. A + B + C + D + E. b. B + C + D + E. c. B + C + E. d. A + B.

a. A + B + C + D + E.

Which of the following is true of total utility? a. At any level of consumption, the sum of the marginal utilities derived from the consumption of all the units of a commodity yields the total utility from the consumption of the commodity. b. At any level of consumption, the product of the marginal utilities derived from the consumption of all the units of a commodity yields the total utility from the consumption of the commodity. c. At any level of consumption, the difference between the marginal utilities derived from the consumption of the first and the last unit of a commodity yields the total utility from the consumption of that commodity. d. At any level of consumption, the ratio of the marginal utilities derived from the consumption of the first and the last unit of a commodity yields the total utility from the consumption of that commodity.

a. At any level of consumption, the sum of the marginal utilities derived from the consumption of all the units of a commodity yields the total utility from the consumption of the commodity.

Figure 6.1 shows the market demand curve for a product. The consumer surplus in the market when the price is $200 is represented by the area labeled _____. Figure 6.1 a. C b. D c. B d. A

Not C. B

Figure 6.1 shows the market demand curve for a product. Which of the following represents the gain in consumer surplus if the price falls to $100? Figure 6.1 a. D + E. b. C + D. c. B + E. d. A + B.

Not d. A + B.

John's total utility from the consumption of two ice creams is 10, and his total utility from the consumption of three ice creams is 9.7. John's marginal utility from the third ice cream is _____. a. -0.3 b. -1 c. 9.7 d. 10

a. -0.3

Which of the following properties does a demand curve exhibit due to the substitution and income effects of a price change? a. It slopes downward. b. It is convex to the origin. c. It slopes upward. d. It is concave to the origin.

a. It slopes downward.

Which of the following equations expresses consumer equilibrium when a consumer allocates his or her income between two goods, X and Y? a. Marginal utility of X/Price of X = Marginal utility of Y/Price of Y. b. Marginal utility of X × Price of X = Marginal utility of Y × Price of Y. c. Marginal utility of X/Price of Y = Marginal utility of Y/Price of X. d. Marginal utility of X + Marginal utility of Y = Price of X + Price of Y.

a. Marginal utility of X/Price of X = Marginal utility of Y/Price of Y.

Which of the following statements is true of the law of diminishing marginal utility? a. The law of diminishing marginal utility states that as more units of a good are consumed, the marginal utility from the consumption of the next unit becomes lesser. b. The law of diminishing marginal utility states that as more units of a good are consumed, total utility becomes lesser. c. The law of diminishing marginal utility states that as more units of a good are consumed, the marginal utility from the consumption of the next unit becomes higher. d. The law of diminishing marginal utility states that as more units of a good are consumed, total utility becomes higher.

a. The law of diminishing marginal utility states that as more units of a good are consumed, the marginal utility from the consumption of the next unit becomes lesser.

Which of the following statements is true of utility? a. Utility levels across consumers cannot be compared by attaching a numerical value to utility. b. Utility scale for every consumer is objective in nature. c. Utility levels across consumers can be compared by attaching a numerical measure to utility. d. Utilities provided by identical commodities are identical to all consumers.

a. Utility levels across consumers cannot be compared by attaching a numerical value to utility.

The utility derived by a consumer from consuming a good depends on: a. the consumer's tastes and preferences. b. the price of the good. c. the market demand for the good. d. his or her income.

a. the consumer's tastes and preferences.

At a given price, the consumer surplus in a market is the: a. product of the total quantity demanded of product being sold and the price of the product. b. difference between what most consumers are willing to pay for a given quantity of the product being sold and what they actually pay. c. product of the total quantity supplied of the product being sold in the market and the price of the product. d. difference between the quantity demanded and the quantity supplied of the product being sold.

b. difference between what most consumers are willing to pay for a given quantity of the product being sold and what they actually pay.

Economists assume that individuals consume products to: a. minimize marginal utility. b. maximize total utility. c. minimize marginal utility. d. minimize total utility.

b. maximize total utility.

A consumer continues to buy a product as long as: a. the price of the product exceeds the value that consumer places on the product. b. the value that consumer places on the product is greater than the price of the product. c. the consumer surplus from the good is negative and the producer surplus for the sellers is positive. d. the marginal utility derived from the product is negative.

b. the value that consumer places on the product is greater than the price of the product.

Table 6.2 shows the total utility derived from the consumption of bread and meat per week by an individual with a weekly budget of $7. If the price of one loaf of bread is $1, the marginal utility per dollar from the first loaf of bread is _____. Table 6.2 lbs meat/week Total Utility Bread/week Total Utility 0 0 0 0 1 16 1 12 2 28 2 21 3 34 3 27 4 38 4 30 5 36 5 29 a. 6 b. 8 c. 12 d. 4

c. 12

Consider a consumer of beef steaks and fried fish fillets. Suppose the price of a plate of beef steak is $8 and that of fried fish fillets is $10 at a restaurant. If the marginal utility of baked beefsteak to the consumer is 20 units, the marginal utility of fried fish fillets is _____, assuming that the consumer maximizes his utility. a. 80 units b. 12 units c. 25 units d. 20 units

c. 25 units

Which of the following situations is clearly inconsistent with the law of diminishing marginal utility? a. Some western ski areas closing down when there is still considerable snow in the mountains in May because they can no longer attract enough skiers to the slopes. b. A person with a huge appetite eventually turning away food at an all-you-can-eat buffet. c. Diamond jewelry consumption having no disutility to the elite class as it signals prestige. d. New residents of the California coast visiting the beach much more frequently than long-term residents or natives.

c. Diamond jewelry consumption having no disutility to the elite class as it signals prestige.

Which of the following is true of a market demand curve? a. It is derived by the vertical summation of individual demand curves of all consumers in the market. b. It shows the total quantity demanded over a period of time at various price levels by a consumer. c. It is derived by the horizontal summation of individual demand curves of all consumers in the market. d. Unlike individual demand curves, it is positively sloped.

c. It is derived by the horizontal summation of individual demand curves of all consumers in the market.

Which of the following statements is true of the law of diminishing marginal utility? a. The total utility derived from the consumption of a good starts falling once consumer equilibrium is achieved. b. The total utility derived from the consumption of a good increases proportionately with the marginal utility. c. The total utility derived from the consumption of a good remains constant after consumer equilibrium is achieved. d. The total utility derived from the consumption of a good continues to increase even after consumer equilibrium is achieved.

c. The total utility derived from the consumption of a good remains constant after consumer equilibrium is achieved.

Table 6.2 shows the total utility derived from the consumption of bread and meat per week by an individual with a weekly budget of $7. If the price of one pound of meat falls from $2 to $1 per pound and the price of bread increases to $3 per loaf, the individual should _____ to maximize satisfaction from the consumption of both the goods. Table 6.2 lbs meat/week Total Utility Bread/week Total Utility 0 0 0 0 1 16 1 12 2 28 2 21 3 34 3 27 4 38 4 30 5 36 5 29 a. decrease the consumption of meat and increase the consumption of bread b. decrease the consumption of both bread and meat c. increase the consumption of meat and decrease the consumption of bread d. increase the consumption of both bread and meat

c. increase the consumption of meat and decrease the consumption of bread

According to the law of diminishing marginal utility, the more of a product a person consumes per time period, other things constant, _____. a. the larger will be the satisfaction derived per unit b. the higher will be the price of the product in the market c. the smaller will be the addition to total utility d. the smaller will be the total utility

c. the smaller will be the addition to total utility

Suppose the dollar value of the total utility from the consumption of 4 units of a product is $30 for a consumer. If the price of the product is $5 per unit, the consumer surplus equals _____. a. $5 b. $30 c. $20 d. $10

d. $10

Lori clips coupons out of the Sunday newspaper, but Jon does not. Which of the following does this imply? a. Lori's opportunity cost of time is higher than Jon's opportunity cost of time. b. Lori's probability of winning a lottery is higher than that of Jon's. c. Lori's probability of winning a lottery is lower than that of Jon's. d. Lori's opportunity cost of time is lower than Jon's opportunity cost of time.

d. Lori's opportunity cost of time is lower than Jon's opportunity cost of time.

There are two restaurants that serve equally good Mexican food in a small college town. One of them charges an average of $7 per plate, and there is usually a waiting time of an hour. The other restaurant charges an average of $9 per plate, and you get a seat when you walk in. Which of the following is true? a. People with a low opportunity cost of time compared to others would prefer the restaurant with the higher money price because they do not have to pay a higher time price. b. The restaurant with the higher money price would be preferred by all regardless of their opportunity costs. c. The restaurant with the lower money price would be preferred by all regardless of their opportunity costs. d. People with a very high opportunity cost of time compared to others would prefer the restaurant with the higher money price because they are willing to accept a higher money price in return for a lower time price.

d. People with a very high opportunity cost of time compared to others would prefer the restaurant with the higher money price because they are willing to accept a higher money price in return for a lower time price.

The utility derived from a particular good, service, or activity depends on an individual's tastes and preferences. Economists assume that the tastes and preferences of individuals are: a. constantly in flux. b. determined by market demand for products. c. determined by product prices. d. given and are relatively stable.

d. given and are relatively stable.

You are willing to wait in a queue for an hour to ride the new roller coaster at an amusement park, but your friend has no interest in waiting that long. This indicates that the _____ cost of your time is different from that of your friend's. a. sunk b. average c. variable d. opportunity

d. opportunity

Consumer surplus is represented by: a. the total area under the demand curve. b. the area under the demand curve and below the price. c. the area above the supply curve but below the price. d. the area under the demand curve but above the price.

d. the area under the demand curve but above the price.

Table 6.1 shows the total utility derived from hamburgers by an individual. If the marginal utility from the consumption of the fifth hamburger is -4, then the total utility derived from the consumption of the five hamburgers will be _____. # of Burgers Consumed total utility 0 0 1 10 2 20 3 25 4 22 a. 24 b. 18 c. 23 d. 20

not 20

Table 6.2 shows the total utility derived from the consumption of bread and meat per week by an individual with a weekly budget of $7. If the price of one loaf of bread is $1 and the price of one pound of meat is $2, consumer equilibrium is achieved when the individual consumes: Table 6.2 lbs meat/week Total Utility Bread/week Total Utility 0 0 0 0 1 16 1 12 2 28 2 21 3 34 3 27 4 38 4 30 5 36 5 29 a. 3 loaves of bread and 1 pound of meat. b. 3 loaves of bread and 2 pounds of meat. c. 1 loaves of bread and 3 pounds of meat. d. 1 loaf of bread and 1 pound of meat.

not a. 3 loaves of bread and 1 pound of meat.

Table 6.2 shows the total utility derived from the consumption of bread and meat per week by an individual with a weekly budget of $7. If the price of one pound of meat is $2, the marginal utility per dollar from the second pound of meat is _____. Table 6.2 lbs meat/week Total Utility Bread/week Total Utility 0 0 0 0 1 16 1 12 2 28 2 21 3 34 3 27 4 38 4 30 5 36 5 29 a. 4 b. 8 c. 6 d. 2

not b. 8

Table 6.1 shows the total utility derived from hamburgers by an individual. The individual experiences disutility from the consumption of the _____ hamburger. Table 6.1 # of Burgers Consumed total utility 0 0 1 10 2 20 3 25 4 22 a. second b. third c. fourth d. first

not b. third

Table 6.1 shows the total utility derived from hamburgers by an individual. The marginal utilities derived from the _____ hamburgers are the same. Table 6.1 # of Burgers Consumed total utility 0 0 1 10 2 20 3 25 4 22 a. first and the third b. second and the third c. third and the fourth d. first and the second

not c. third and the fourth