ch 5

The law of diminishing marginal utility captures the tendency for the _____ gained from consuming an additional unit of a good to diminish as consumption increases beyond some point. Multiple choice question. total utility average utility additional utility

additional utility

The law of _states that people do less of what they want to do as the cost of doing it rises

demand

The affordable combination of goods that yields the highest total utility for a consumer Multiple choice question. is consumer surplus. occurs where price equals marginal utility. occurs where marginal utility equals zero. is the optimal combination of goods for a consumer.

is the optimal combination of goods for a consumer.

The law of demand states that people do _____ of what they want to do as the cost of doing it rises. Multiple choice question. less more

less

he absolute value of the slope of an indifference curve is called the Multiple choice question. price ratio. optimal consumption bundle. marginal rate of substitution. total rate of substitution.

marginal rate of substitution

Total utility refers to the Multiple choice question. the total amount that people consume. amount of money that people spend on all of their consumption activities. total satisfaction that people derive from all of their consumption activities.

total satisfaction that people derive from all of their consumption activities.

Economists refer to the total satisfaction that people derive from all of their consumption activities as _____. Multiple choice question. total utility demand marginal utility reservation price

total utility

True or false: Once people have acquired the food, shelter, and clothing required to maintain their health, economists refer primarily to the goods and services people "want" rather than those they "need". True false question. True False

true

If a bundle lies outside a consumer's budget triangle, then the consumer: Multiple choice question. will not purchase the bundle because they always prefer bundles that lie inside their budget triangle will purchase the bundle because it will be preferred to any bundle in their budget triangle will purchase the bundle because it's affordable will not purchase the bundle because they can't afford it

will not purchase the bundle because they can't afford it

In general, the best affordable bundle will lie: Multiple choice question. outside a consumer's affordable triangle below a consumer's budget constraint on a consumer's budget constraint

on a consumer's budget constraint

Utility maximization refers to the process whereby Multiple choice question. the government collects taxes and makes spending decisions to as to maximize the welfare of its citizens. firms use inputs in order to produce output in such a way that they maximize their profit. people allocate their income between different goods and services in order to maximize their total satisfaction.

people allocate their income between different goods and services in order to maximize their total satisfaction.

Which of the following best illustrates the substitution effect of a decrease in the price of pasta? Multiple choice question. The change in the quantity of pasta demanded that results because people are able to afford more of everything. The decrease in the quantity of pasta demanded that results because people switch from eating pasta to rice. The increase in the quantity of pasta demanded that results because people switch from eating rice to pasta.

The increase in the quantity of pasta demanded that results because people switch from eating rice to pasta.

Marginal utility is the _____ gained from consuming an additional unit of a good. Multiple choice question. average utility total utility additional utility

additional utility

Economists assume that people ______. Multiple choice question. spend as little money as they possibly can on different goods and services allocate their income between different goods and services to make themselves as happy as possible only purchase things they need

allocate their income between different goods and services to make themselves as happy as possible

The difference between a buyer's reservation price for a product and the price a buyer actually paid is _____. Multiple choice question. marginal utility total surplus excess demand consumer surplus

consumer surplus

True or false: Economists believe that our preferences for different goods and services do not change over time. True false question. True False

false

True or false: If your marginal utility from watching a second hour of television is less than your marginal utility from the first hour, then watching a second hour of television will decrease your total utility.

false

The marginal rate of substitution at a point is equal to Multiple choice question. the absolute value of the slope of the indifference curve at that point. the price of the good depicted on the horizontal axis divided by the price of the good depicted on the vertical axis. a consumer's total satisfaction at that point. the absolute value of the slope of the budget constraint at that point.

he absolute value of the slope of the indifference curve at that point.

Suppose that when you eat chocolate cake, you enjoy every bite, but each bite is never quite as good as the one before it. Thus, with each bite of chocolate cake, your total utility _____ while your marginal utility _____. Multiple choice question. decreases; increases decreases; decreases increases; decreases increases; increases

increases; decreases

A(n) _____ tells us how various bundles are ranked in order of preference, while a(n) _____ tells us which bundles are affordable. Multiple choice question. budget constraint; indifference curve map indifference curve map; budget constraint demand curve; supply curve

indifference curve map; budget constraint

According to the _ spending rule, spending should be allocated across goods so that the marginal utility per dollar is the same for each good.

rational

According to _____ spending should be allocated across goods so that the marginal utility per dollar is the same for each good. Multiple choice question. the rational spending rule the law of demand the law of diminishing marginal utility

rational spending rule

When the price of a good goes up, part of the reason consumers purchase less of the good is that they Multiple choice question. switch to less expensive substitutes. switch to more expensive substitutes. switch to more expensive complements.

switch to less expensive substitutes

A consumer's optimal combination of goods is Multiple choice question. the combination that yields the highest total utility regardless of whether it is affordable. any affordable combination. the affordable combination that yields the highest total utility. the combination at which marginal utility is equal to price.

the affordable combination that yields the highest total utility.

True or false: economists believe that our preferences for different goods and services can be influenced by our peers. True false question. True False

true

The tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point is known as Multiple choice question. the law of diminishing marginal utility. the law of demand. the law of diminishing utility.

the law of diminishing marginal utility

A bundle of goods refers to Multiple choice question. all the combinations of goods that a consumer can afford. the total cost of the goods. a particular combination of goods. goods that must be consumed as a unit.

a particular combination of goods.

The additional utility gained from consuming an additional unit of a good is _____. Multiple choice question. average utility total utility marginal utility

marginal utility

Suppose that in response to a decrease in the price of Hondas, people switch from buying Toyotas to Hondas. This is an example of _____ of a price change. Multiple choice question. the income effect the allocative effect the substitution effect

substitution

Once people have achieved bare subsistence levels of consumption, economists emphasize that we can talk mainly in terms of people's ______. Multiple choice question. needs wants must-haves

wants