Exam 3 Chapter 8

B

1) Which of the following is consistent with the assumptions of marginal utility theory? A) As Jose consumes more of one good, his marginal utility from consuming more of all good increases. B) As Jose consumes more of one good, his marginal utility from consuming more of that good decreases. C) As Jose consumes more of one good, his marginal utility from consuming more of all goods decreases. D) As Jose consumes more of one good, his marginal utility from consuming more of that good increases.

D

35) Marginal utility theory predicts that if a consumer's income decreases, the consumer A) might either increase or decrease purchases of normal goods. B) buys fewer inferior goods. C) buys more of all goods. D) buys fewer normal goods.

D

10) As Goldilocks consumes more gummy bears, her total utility ________ and her marginal utility from gummy bears ________. A) increases; increases B) decreases; increases C) decreases; decreases D) increases; decreases

A

11) The principle of diminishing marginal utility says that A) total utility increases by smaller and smaller amounts as the quantity of the good consumed increases. B) total utility increases by larger and larger amounts as the quantity of the good consumed increases. C) marginal utility is negative as the quantity of the good consumed increases. D) total utility decreases as the quantity of the good consumed increases.

A

12) The above table gives some of Tammy's total and marginal utilities from comedy videos. Which of the following statements is true? A) Tammy's total utility from five comedy videos is 800. B) Tammy's marginal utility from the third comedy video is equal to 580/3. C) Tammy's marginal utility from the first comedy video is less than her marginal utility from the third comedy video. D) None of the above answers are correct.

A

13) Kelly's marginal utilities for magazines and packages of gummy bears are listed in the table above. For Kelly, what is the total utility received from consuming 5 magazines? A) 255 B) 25 C) 20 D) 5

D

14) A person's consumption possibilities is defined by the budget line because A) it marks the boundary between what can be produced and what is unattainable given the current state of technology and resources. B) it represents the individual's preference for different combinations of goods. C) all consumers must consume on their budget line. D) it marks the boundary between what is affordable and unaffordable

C

15) Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 24 for the last pound of mangos purchased and 10 for the last pound of bananas. To maximize his utility, Robinson should buy A) the present combination of goods. B) more mangos and fewer bananas. C) more bananas and fewer mangos. D) only mangos.

C

16) John either buys a steak or chicken when dining out. John's marginal utility for steak and chicken is given in the above table. If the price of a steak is $5 and the price of a chicken is $5 and John has $25 to spend on the two goods, what combination of steak and chicken will John consume to maximize his utility? A) 4 steaks & 3 chickens B) 1 steak & 4 chickens C) 3 steaks & 2 chickens D) 5 steaks & 6 chickens

D

17) George spends all his income on sandwiches and juice. George's utility is maximized when he is consuming sandwiches and juice so that the A) marginal utility from sandwiches equals the marginal utility from juice. B) total utility from sandwiches equals the total utility from juice. C) marginal utility from sandwiches is at a maximum. D) marginal utility per dollar spent on sandwiches equals the marginal utility per dollar spent on juice.

C

18) The table above gives the utility from pens and pencils. If pens and pencils both cost $.25 each and the consumer has an income of $2.25, which of the following combinations maximizes the consumer's utility? A) 4 pens and 5 pencils B) 3 pens and 6 pencils C) 5 pens and 4 pencils D) 6 pens and 3 pencils

D

19) The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. The price of a slice of pizza is $2 and of a can of Pepsi is $1. Suppose Priscilla has $6 to spend. If Priscilla chooses to eat 3 slices of pizza, A) she is maximizing her total utility. B) she is not equating marginal utility per dollar for pizza and Pepsi. C) she is not at a consumer equilibrium. D) Both answers B and C are correct.

B

2) The table shows Elaine's utility from pizza and Pepsi. If Elaine consumes 2 slices of pizza and 3 Pepsis, her marginal utility from the fourth Pepsi is ________ units. A) 220 B) 40 C) 54 D) 60

B

20) Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. If the price of a pizza is $10 and the price of a DVD is $10 and Lisa has $60 to spend on the two goods, what combination of pizza and DVDs will maximize her utility? A) 3 DVDs and 3 pizzas B) 2 DVDs and 4 pizzas C) 3 DVDs and 5 pizzas D) 4 DVDs and 2 pizzas

C

21) Given the data in the above table, if income is $16, and the price is $1 for a bottle of water and $2 for a hamburger, what is the quantity of water and the quantity of hamburgers that will maximize the consumer's total utility? A) 6 bottles of water and 6 hamburgers B) 5 bottles of water and 5 hamburgers C) 6 bottles of water and 5 hamburgers D) 4 bottles of water and 6 hamburgers

A

22) The above table shows Tammy's total utility from videos and CDs. If Tammy has $70 to spend on videos and CDs and if the price of a video is $10 and the price of a CD is $20, then Tammy maximizes her utility by purchasing A) 2 CDs and 3 videos. B) 1 CD and 5 videos. C) 3 CDs and 1 video. D) none of the above

A

23) Bobby spends $100 per month on pizza and CDs. His utility from these goods is shown in the table above. The price of a pizza is $10 and the price of a CD is $20. Bobby currently buys 2 pizzas and 4 CDs. To maximize his utility in the next period, he should A) buy more pizza and fewer CDs. B) stay with the current C) buy more of both goods. combination of goods. D) buy more CDs and fewer pizza.

C

24) Sonya's budget for magazines and chocolate bars is $50. Her marginal utility from these goods is shown in the table above. The price of a magazine is $5 and the price of a chocolate bar is $2.50. Sonya currently buys 2 magazines and 12 chocolate bars. To maximize her utility, she should A) buy more chocolate bars and fewer magazines. B) buy more magazines and fewer chocolate bars. C) buy more of both goods. D) stay with the current combination of goods.

D

25) 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) 1 slice of pizza and 5 Diet Pepsis B) 0 slices of pizza and 7 Diet Pepsis C) 3 slices of pizza and 1 Diet Pepsi D) 2 slices of pizza and 3 Diet Pepsis

D

26) Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 200 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. To maximize his utility, Bobby should A) buy no vanilla ice cream. B) buy more vanilla ice cream and less chocolate ice cream. C) not change his purchases between chocolate ice cream and vanilla ice cream. D) buy more chocolate ice cream and less vanilla ice cream.

D

27) The table above gives Jane's total utility from magazines and CDs. The price of a magazine is $4 and the price of a CD is $10. What is the marginal utility per dollar from CDs when the sixth CD is purchased? A) 15 units B) 30 units C) 40 units D) 5 units

C

28) The table above gives Jane's total utility from magazines and CDs. The price of a magazine is $4 and the price of a CD is $10. If Jane's total budget for magazines and CDs is $70.00 per week, what is her total utility at her utility maximizing consumer equilibrium? A) 30 units B) 1870 units C) 2480 units D) 210 units

C

29) Michael consumes only steak and lobster. Suppose that the price of steak rises. After Michael is back at equilibrium, compared to the situation when steak was cheaper, the marginal utility from the last steak will A) not have changed. B) have decreased. C) have increased. D) not be comparable with the marginal utility before the price hike.

B

3) Which of the following is NOT an assumption of marginal utility theory? A) Consumers maximize their total utility. B) As more of a good is consumed, the decrease in the marginal utility from the good means that the total utility from the good decreases also. C) A consumer derives utility from the goods consumed. D) Each additional unit of consumption yields additional utility.

D

30) Jeremiah spends all of his income on oranges and cookies, which are normal goods. If Jeremiah's income decreases, he will buy ________ oranges and ________ cookies. His marginal utility from oranges will ________ and his marginal utility from cookies will ________. A) the same quantity of; fewer; remain constant; decrease B) fewer; fewer; decrease; increase C) more; more; decrease; decrease D) fewer; fewer; increase; increase

C

31) The paradox of value is illustrated by the fact that A) teens buy designer jeans. B) gold and diamonds occupy little space. C) a pound of bread is cheaper than a pound of gold. D) if diamonds were free they would no longer be useful for engagement rings.

C

32) According to marginal utility theory, a rise in income will A) increase the marginal utility of all goods. B) increase consumption of all goods. C) increase a consumer's total utility. D) None of the above answers is correct.

C

33) Marginal utility theory shows us that water, which is very common, has a ________ marginal utility and a ________ total utility. A) large; large B) small; small C) small; large D) large; small

C

34) The paradox of value can be resolved by distinguishing between A) supply and quantity supplied. B) normative and positive statements. C) total utility and marginal utility. D) quantity demanded and quantity supplied.

A

36) Marginal utility theory predicts that as the price of coffee rises, the ________ a substitute for coffee ________ and the ________ coffee ________. A) demand for; increases; quantity demanded of; decreases B) supply of; decreases; supply of; increases C) demand for; decreases; demand for; increases D) supply of; increases; demand for; decreases

B

37) The fact that rubies are more expensive than milk reflects the fact that for most consumers, A) the marginal utility from rubies equals that from milk. B) more milk is consumed than rubies. C) a quart of rubies is considered to be prettier than a quart of milk. D) the total utility from rubies exceeds that from milk.

B

38) With respect to water and diamonds, water A) has a higher marginal utility than diamonds. B) has a lower marginal utility than diamonds. C) is cheaper than diamonds because it has a higher total utility. D) is cheaper than diamonds because it has a lower total utility.

D

39) Renee consumes pizza and rice. An increase in her income causes her to consume fewer pizzas and more rice. The change in pizzas consumed means that A) her total utility from consuming pizzas had been negative. B) her marginal utility from consuming pizzas had been zero. C) her marginal utility from consuming pizzas had been negative. D) pizza is an inferior good for Renee.

A

4) Utility is best defined as A) the satisfaction from consuming a good. B) the price of a good. C) the practical usefulness of a good. D) the amount one is willing to pay for a good

A

40) Water has a ________ marginal utility and brings a ________ consumer surplus; diamonds have a ________ marginal utility and bring a ________ consumer surplus. A) small; large; large; small B) large; large; small; small C) small; small; large; large D) large; small; small; large

D

5) Which of the following is NOT an assumption of marginal utility theory? A) More consumption yields more total utility. B) Marginal utility diminishes with more consumption. C) People derive utility from their consumption. D) Utility can be measured and the units of utility are precisely defined.

B

6) In the figure above, the marginal utility of the third crate of tomatoes for the person with total utility curve C is A) 45 units of utility. B) 13 units of utility. C) 32 units of utility. D) 16 units of utility.

D

7) Total utility describes A) an increase in consumption multiplied by the gain in utility. B) total consumption multiplied by marginal utility. C) total consumption divided by marginal utility. D) the benefit gained from all consumption.

A

8) If marginal utility is positive but diminishing, as more units of a good are consumed, then the total utility from the good must be A) positive and rising at a decreasing rate. B) positive and rising at any rate. C) falling. D) positive and rising at an increasing rate.

D

9) Marginal utility measures the A) additional cost of an additional unit of consumption. B) average utility from an additional unit of consumption. C) total utility from consumption. D) additional utility from an additional unit of consumption.