AP Micro Unit 2 Chapter 21

Refer to the above data. The value for X is: A) 15. B) 5. C) 55. D) 10.

A

Refer to the above data. The value for Z is: A) -5. B) + 5. C) -10. D) zero. Answer:

A

2. If the price of a product falls, that product becomes cheaper and people will want to purchase more of it in place of other goods. This statement best describes: A) the income effect. B) the substitution effect. C) a complementary good. D) an inferior good.

B

Every day Molly spends her lunch money consuming apples, at $1 each, and oranges, at $2 each. At her current level of consumption, Molly's marginal utility of apples is 12 and her marginal utility of oranges is 18. If she has already spent all of her lunch money, how should Molly change her consumption decision to maximize utility? A) She should increase her apple consumption and decrease her orange consumption until the marginal utility per dollar is equal for both. B) She should decrease her apple consumption and increase her orange consumption until the marginal utility per dollar is equal for both. C) She should increase her apple consumption and decrease her orange consumption until the marginal utility is equal for both. D) She should decrease her apple consumption and increase her orange consumption until the marginal utility is equal for both.

A

In the above diagram: A) the consumer is indifferent between points A and B, but neither point maximizes his utility. B) the consumer is indifferent between points A and B and either point will maximize his utility. C) any combination of X and Y entailing more of Y and less of X than shown at B would be preferred. D) any combination of X and Y entailing more of X and less of Y than shown at A would be preferred.

A

Refer to the above data. What level of total utility will the utility-maximizing consumer realize? A) 96 utils B) 108 utils C) 72 utils D) 142 utils

A

Utility refers to the: A) satisfaction that a consumer derives from a good or service. B) rate of decline in a product demand curve. C) relative scarcity of a product. D) usefulness of a product.

A

According to the law of diminishing marginal utility, which of the following is true? A) Total satisfaction decreases as more units of a good are consumed. B) The additional satisfaction received from consuming extra units of good decreases as consumption of the good increases. C) The additional satisfaction received from consuming extra units of good decreases as consumption of the good decreases. D) The additional satisfaction received from consuming extra units of good increases as consumption of the good increases.

B

Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase: A) more of A and less of B. C) more of both A and B. B) more of B and less of A. D) less of both A and B.

B

Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D, the respective prices of which are Pc and P d. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially: A) MUd < MUc B) C) D) MUc > MUd

C

At her current level of consumption, a consumer is willing to pay up to $1.50 for a bottle of water and up to $1,500 for a diamond ring because the A) total utility of diamond rings is greater than the total utility of water B) total utility of water is less than the marginal utility of a diamond ring C) marginal utility of a bottle of water is less than the marginal utility of a diamond ring D) marginal utility of a bottle of water is greater than the marginal utility of a diamond ring

C

In a given time period, a person consumes more and more of a good or service and, as a result, enjoys each additional unit less and is willing to pay less for each additional unit. This behavior is consistent with the law of A) diminishing returns B) diminishing marginal product C) diminishing marginal utility D) increasing costs

C

Refer to the above data. If the consumer has a money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing: A) 2 units of J and 7 units of K. C) 4 units of J and 5 units of K. B) 5 units of J and 5 units of K. D) 6 units of J and 3 units of K. Answer:

C

Refer to the above data. What level of total utility is realized from the equilibrium combination of J and K determined in the previous question? A) 156 utils B) 124 utils C) 276 utils D) 36 utils

C

Refer to the above data. What quantities of X and Y should be purchased to maximize utility? A) 2 of X and 1 of Y B) 4 of X and 5 of Y C) 2 of X and 5 of Y D) 2 of X and 6 of Y

C

1. The income effect indicates that: A) a rise in money income will cause consumers to buy smaller quantities of normal goods. B) when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper. C) consumers should substitute among various products until the marginal utility from the last unit of each product purchased is the same. D) when the price of a product falls, a consumer will be able to buy more of it with a specific money income.

D

Assume that Clark spends his entire income on the purchase of two goods, X and Y. If his income and the prices of good X and Y all double, Clark will A) double the purchase of goods X and Y B) buy more of good X and less of good Y C) buy less of good X and more of good Y D) buy the same amounts of goods X and Y Answer:

D

Refer to the above data. If the consumer's money income were cut from $52 to $28, she would maximize her satisfaction by purchasing: A) 3 units of J and 3 units of K. C) 4 units of J and 1 unit of K. B) 1 unit of J and 3 units of K. D) 2 units of J and 3 units of K.

D

Refer to the above diagram. If the budget line shifts from ab to ac the: A) consumer's level of total utility will increase. B) consumer will purchase more of both J and K. C) consumer will purchase less of both J and K. D) consumer will purchase more of J and less of K.

D

Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy: A) less of X only if its price rises. C) more of Y and less of X. B) more of Y only if its price rises. D) more of X and less of Y.

D

What do the income effect, the substitution effect, and diminishing marginal utility have in common? A) All are required to explain the utility-maximizing position of a producer. B) They are all empirically measurable. C) They all help explain the upsloping supply curve. D) They all help explain the downsloping demand curve. Answer:

D