Question 1

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.
A) lower than; marginal utility
B) greater than; average utility
C) the same as; marginal utility
D) greater than; marginal utility
E) none of the above

Accepted Answer

The answer of Suppose people are in consumer equilibrium buying...

Question 2

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer)equilibrium will buy more of good __________ until the marginal utility of good __________ falls to __________ utils.
A) Y; Y; 12
B) X; X; 24
C) Y; X; 12
D) Y; Y; there is not enough information to answer this part of the question.
E) X; X; there is not enough information to answer this part of the question.

Accepted Answer

The answer of The MU/P ratio for good X is...

Question 3

The marginal utility curve for units 6 through 8 of good Z lies below the horizontal axis. What does this imply must be true about the total utility curve for units 6 through 8 of good Z?
A) That portion of good Z's total utility curve must be upward sloping.
B) That portion of good Z's total utility curve must be downward sloping.
C) That portion of good Z's total utility curve must be horizontal.
D) That portion of good Z's total utility curve must also lie below the horizontal axis.

Accepted Answer

The marginal utility curve for any good is the slope of the total utility curve. If the marginal utility curve is below the horizontal axis, this implies that the slope of the total utility curve is negative, which in turn means that the total utility curve is decreasing. Therefore, the best choice is B, indicating that the total utility curve for units 6 through 8 of good Z must be downward sloping.

Question 4

Exhibit 21-4
 
-Refer to Exhibit 21-4. What value goes in blank (D)?
A) 132
B) 111
C) 118
D) 25
E) There is not enough information to answer this question.

Accepted Answer

The answer of Exhibit 21-4
 
-Refer to Exhibit 21-4. What...

Question 5

Consumer equilibrium exists when an individual
A) can be made better off by buying more of a normal good and less of an inferior good.
B) is receiving the same total utility from each of the goods he or she purchases.
C) is receiving the same marginal utility from each of the goods he or she purchases.
D) has the same MU/P ratio for each of the goods he or she purchases.
E) none of the above

Accepted Answer

Consumer equilibrium exists when the consumer allocates their budget in such a way that the marginal utility per dollar spent on each good is equal. This means that the consumer is getting the most satisfaction per dollar spent on each good and cannot increase their overall utility by reallocating their budget. This condition is known as the equalization of the marginal utility per dollar spent or the MU/P ratio. Choices A, B, and C do not accurately describe the condition for consumer equilibrium.

Question 6

Indifference curves are convex to the origin if
A) a person's marginal rate of substitution declines as he or she consumes more of a good.
B) a person's marginal rate of substitution increases as he or she consumes more of a good.
C) the law of diminishing marginal utility holds.
D) a and c
E) none of the above

Accepted Answer

Indifference curves are convex to the origin if a person's marginal rate of substitution declines as he or she consumes more of a good (due to diminishing marginal utility) and the law of diminishing marginal utility holds.

Question 7

If the marginal utility of X is negative,then the last unit of X is
A) a bad
B) a normal good
C) an inferior good
D) not subject to the law of diminishing marginal utility

Accepted Answer

If the marginal utility of X is negative, it means that consuming one more unit of X will result in a decrease in total utility. In other words, the consumer will be worse off than before. Therefore, the last unit of X is considered a bad.

Question 8

Exhibit 21-5
 
-Refer to Exhibit 21-5. What value goes in blank (A)?
A) 12.0
B) 13.5
C) 10.0
D) 14.0
E) There is not enough information to answer this question.

Accepted Answer

The answer of Exhibit 21-5
 
-Refer to Exhibit 21-5. What...

Question 9

There are two goods,X and Y,and the absolute price of good Y falls.It follows that
A) a person can buy more of good Y.
B) a person cannot buy more of good Y.
C) the slope of the budget constraint changes.
D) the indifference curve between X and Y changes.
E) a and c

Accepted Answer

When the price of good Y falls, a person can buy more of good Y with the same amount of money, and the slope of the budget constraint changes because the relative price of the goods has changed.

Question 10

No matter what the price of a given item of food,a person will eat the same amount of that food.This is __________ with the idea of __________.
A) consistent; consumer equilibrium
B) not consistent; consumer equilibrium
C) consistent; maximizing total utility
D) consistent; consumers' surplus
E) none of the above

Accepted Answer

This statement is not consistent with the idea of consumer equilibrium, which suggests that the quantity demanded of a good is determined by the price and the consumer's marginal utility for that good. According to consumer equilibrium, if the price of a good increases, the quantity demanded will decrease, because the marginal utility of the good will decrease relative to its price. Moreover, if the price of a good decreases, the quantity demanded will increase, because the marginal utility of the good will increase relative to its price.

Question 11

Exhibit 21-5
 
-Refer to Exhibit 21-5. What value goes in blank (B)?
A) 27
B) 38
C) 40
D) 35
E) There is not enough information to answer this question.

Accepted Answer

The value in blank (B) is the sum of the values in blanks (A) and (C). The value in blank (A) is 11, and the value in blank (C) is 27. Therefore, the value in blank (B) is 11 + 27 = 38.

Question 12

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _________________ percentage of money given to them if it is ________________ rather than
A) smaller; cash; a rebate check.
B) greater; termed a rebate; a bonus.
C) greater; termed a bonus; a rebate.
D) smaller; a rebate check; cash.

Accepted Answer

Research by Nicholas Epley and his colleagues found that people tend to spend a greater percentage of money when it is termed a bonus compared to when it is termed a rebate, indicating how the framing of money as a reward (bonus) versus returned money (rebate) influences spending behavior.

Question 13

Exhibit 21-5
 
-Refer to Exhibit 21-5. What value goes in blank (D)?
A) 47
B) 15
C) 35
D) 60
E) There is not enough information to answer this question.

Accepted Answer

The answer of Exhibit 21-5
 
-Refer to Exhibit 21-5. What...

Question 14

Exhibit 21-5
 
-Refer to Exhibit 21-5. What value goes in blank (C)?
A) 28
B) 16
C) 44
D) 50
E) There is not enough information to answer this question.

Accepted Answer

The value in blank (C) is the sum of the values in blanks (A) and (B). The value in blank (A) is 20, and the value in blank (B) is 24. Therefore, the value in blank (C) is 20 + 24 = 44.

Question 15

Exhibit 21-4
 
-Refer to Exhibit 21-4. What value goes in blank (A)?
A) 47.5
B) 100
C) 80
D) 95
E) There is not enough information to answer this question.

Accepted Answer

The answer of Exhibit 21-4
 
-Refer to Exhibit 21-4. What...

Question 16

Suppose that there are two cities that are alike in every way except that one city has significantly better weather than the other city. Call the city with good weather Good-Weather City (GWC)and the other Bad-Weather City (BWC). Assume that the median price of a home in the two cities is originally the same. If the marginal utility of living in GWC is 500 and the marginal utility of living in BWC is 300,to make themselves better off economic theory tells us that
A) at least some people will move from BWC to GWC, which will make housing prices rise in GWC and BWC.
B) at least some people will move from GWC to BWC, which make housing prices rise in BWC and GWC.
C) at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC.
D) at least some people will move from GWC to BWC, which will make housing prices rise in BWC and fall in GWC.

Accepted Answer

According to the law of demand, people will demand more of a good when its marginal utility is higher relative to its price. Since the marginal utility of living in GWC is higher than that of BWC, people will demand more housing in GWC. This increase in demand will cause housing prices to rise in GWC. On the other hand, the decrease in demand for housing in BWC will cause housing prices to fall. Therefore, the correct answer is that at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC.

Question 17

Exhibit 21-4
 
-Refer to Exhibit 21-4. What value goes in blank (B)?
A) 115
B) 150
C) 45
D) 100
E) There is not enough information to answer this question.

Accepted Answer

The value in blank (B) is 115. This is because the value in blank (A) is 100, and the value in blank (C) is 150. The value in blank (B) must be greater than the value in blank (A) and less than the value in blank (C). The only value that meets this criteria is 115.

Question 18

The marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis. What does this imply must be true about the total utility curve for units 1 through 5 of good Z?
A) That portion of good Z's total utility curve must be upward sloping.
B) That portion of good Z's total utility curve must be downward sloping.
C) That portion of good Z's total utility curve must be horizontal.
D) That portion of good Z's total utility curve must also lie above the horizontal axis.

Accepted Answer

The fact that the marginal utility curve is above the horizontal axis implies that each additional unit of good Z is adding positive utility. Therefore, the total utility curve must also be upward sloping for units 1 through 5.

Question 19

Consumer equilibrium exists when the
A) slope of the indifference curve is greater than the slope of the budget constraint.
B) consumer is on his highest indifference curve.
C) marginal rate of substitution equals the slope of the budget constraint.
D) slope of the indifference curve equals the slope of the budget constraint.
E) c and d

Accepted Answer

Consumer equilibrium occurs when the marginal rate of substitution (MRS), which is the slope of the indifference curve, equals the slope of the budget constraint. This ensures that the consumer is maximizing utility given their budget.

Question 20

Exhibit 21-4
 
-Refer to Exhibit 21-4. What value goes in blank (C)?
A) 25
B) 5
C) 14.5
D) 10
E) There is not enough information to answer this question.

Accepted Answer

The answer of Exhibit 21-4
 
-Refer to Exhibit 21-4. What...

Quiz 21: Consumer Choice: Maximizing Utility and Behavioral Economics

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be the of the 10,000th unit.

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer) equilibrium will buy more of good until the marginal utility of good falls to __ utils.

The marginal utility curve for units 6 through 8 of good Z lies below the horizontal axis. What does this imply must be true about the total utility curve for units 6 through 8 of good Z?

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (D) ?

Consumer equilibrium exists when an individual

Indifference curves are convex to the origin if

If the marginal utility of X is negative,then the last unit of X is

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (A) ?

There are two goods,X and Y,and the absolute price of good Y falls.It follows that

No matter what the price of a given item of food,a person will eat the same amount of that food.This is with the idea of .

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (B) ?

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _ percentage of money given to them if it is rather than

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (D) ?

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (C) ?

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (A) ?

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (B) ?

The marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis. What does this imply must be true about the total utility curve for units 1 through 5 of good Z?

Consumer equilibrium exists when the

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (C) ?

Quiz 21: Consumer Choice: Maximizing Utility and Behavioral Economics

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer) equilibrium will buy more of good __________ until the marginal utility of good __________ falls to __________ utils.

The marginal utility curve for units 6 through 8 of good Z lies below the horizontal axis. What does this imply must be true about the total utility curve for units 6 through 8 of good Z?

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (D) ?

Consumer equilibrium exists when an individual

Indifference curves are convex to the origin if

If the marginal utility of X is negative,then the last unit of X is

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (A) ?

There are two goods,X and Y,and the absolute price of good Y falls.It follows that

No matter what the price of a given item of food,a person will eat the same amount of that food.This is __________ with the idea of __________.

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (B) ?

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _________________ percentage of money given to them if it is ________________ rather than

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (D) ?

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (C) ?

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (A) ?

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (B) ?

The marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis. What does this imply must be true about the total utility curve for units 1 through 5 of good Z?

Consumer equilibrium exists when the

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (C) ?

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be the of the 10,000th unit.

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer) equilibrium will buy more of good until the marginal utility of good falls to __ utils.

No matter what the price of a given item of food,a person will eat the same amount of that food.This is with the idea of .

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _ percentage of money given to them if it is rather than