ECON 111 Quiz 2 Demand

Marie-Louise has an income of $10 to buy peanuts and popcorn. The price of a bag of peanuts is $1 and the price of a bag of popcorn is $2. What is Marie-Louise's real income in terms of popcorn?

5 bags of popcorn

In consumer equilibrium

total utility is maximized given the consumer's income and the prices of goods.

If a consumer spends all his income and his marginal utility per dollar is equal for all goods, then

total utility is maximized.

If the price of the good measured on the vertical axis increases, the budget line

becomes flatter.

If the price of the good measured on the horizontal axis increases, the budget line

becomes steeper.

Bikes and roller blades are substitutes. Marginal utility theory predicts that when the price of a bike rises, the quantity of bikes demanded

decreases and the demand curve for roller blades shifts rightward.

Which one of the following statements about the budget line is false? The budget line

is based on fixed quantities.

To determine consumer equilibrium we need to know only

prices, income, and marginal utility.

Good X is measured on the horizontal axis and good Y is measured on the vertical axis. The marginal rate of substitution is

the rate at which a consumer will give up good Y to obtain an additional unit of good X while remaining indifferent.

Which one of the following statements is always true of the substitution effect?

It is negative.

Shelly's budget line is shown in Figure 9.1.1 Which point is unaffordable given her income and current prices?

B only

Chuck and Barry have identical total utility schedules but Chuck has a much higher income. If each is maximizing his total utility, then

Chuck will have lower marginal utility than Barry for each normal good consumed.

Which one of the following statements is true?

If the marginal utility per dollar of good X is less than the marginal utility per dollar of good Y, then the consumer should shift some spending from X to Y.

The high price of diamonds relative to the price of water reflects the fact that, at typical levels of consumption,

None of the above is true.

Which one of the following statements about Figure 9.3.2 is true?

Point T is preferred to point Q, but T is not affordable.

Which statement is true for a normal good?

The income effect reinforces the substitution effect.

Figure 9.2.2 shows three indifference curves for Brenda. Which one of the following is not true?

The marginal rate of substitution is higher at point C than at point B.

Which one of the following is not an assumption of marginal utility theory?

Utility can be measured.

An indifference curve is

a line that shows combinations of goods among which a consumer is indifferent

What is a distinguishing characteristic of an inferior good?

a negative income effect

A preference map is

a series of indifference curves.

Real income in terms of a good is defined as

income divided by the price of a good.

Total utility is always

increasing when marginal utility is positive.

In consumer equilibrium, a consumer equates the

marginal utility per dollar on each good.

The change in total utility that results from a one-unit increase in the quantity of a good consumed is

marginal utility.

John likes to eat apples, oranges, and pears. If John increases his consumption of oranges, ceteris paribus, marginal utility theory tell us that John's marginal utility of

oranges decreases.

Utility is

the benefit or satisfaction from consuming goods and services.

The shape of a person's indifference curves between two goods depends on

the degree of substitutability between the two goods.

If income falls, then in the new consumer equilibrium

the marginal utility from normal goods increases.

If a consumer's income increases and if all goods are normal goods,

the quantity bought of each good increases.