# Quiz 5: Consumer Choice

Business

Q 1Q 1

What is meant by the term margin?
A) A measure of desire.
B) The extra or additional unit.
C) A measure of the ability to purchase.
D) The difference between the total and the average.

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Multiple Choice

B

Q 2Q 2

What is meant by the term utility?
A) A measure of a product's usefulness.
B) A measure of necessity.
C) The satisfaction or pleasure derived from the consumption of a product.
D) The benefit derived from the production of a product.

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Multiple Choice

C

Q 3Q 3

What is the amount of additional utility derived from the consumption of an extra unit of a product called?
A) Marginal utility.
B) Optimal utility.
C) Marginal demand.
D) Optimal demand.

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Multiple Choice

A

Q 4Q 4

What is marginal utility?
A) The utility derived from marginal products.
B) The utility derived from the consumption of all products.
C) The utility derived from the consumption of the average product.
D) The utility derived from the consumption of an extra unit of a product.

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Multiple Choice

Q 5Q 5

What is the correct expression for marginal utility?
A) TU/price.
B) ΔTU/price.
C) ΔTU/Δquantity.
D) TU/quantity.

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Multiple Choice

Q 6Q 6

What does the law of diminishing marginal utility state?
A) That the amount of additional utility increases as successive units of a product are consumed.
B) That the amount of total utility decreases at an increasing rate.
C) That the amount of total utility decreases at a decreasing rate.
D) That the amount of additional utility decreases as successive units of a product are consumed.

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Multiple Choice

Q 7Q 7

What is the correct expression for marginal utility?
A) It is equal to total utility divided by quantity consumed.
B) It is the change in total utility resulting from a change in the quantity consumed.
C) It is equal to total utility divided by the quantity demanded.
D) It is equal to the additional utility divided by the quantity consumed.

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Multiple Choice

Q 8Q 8

If total utility is falling, what is also true?
A) Marginal utility must be negative.
B) Marginal utility must also be falling.
C) Marginal utility must be greater than total utility.
D) Marginal utility must be rising.

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Multiple Choice

Q 9Q 9

When is total utility at a maximum?
A) When marginal utility is at a maximum.
B) When marginal utility is zero.
C) When marginal utility is equal to total utility.
D) When marginal utility is greater than total utility.

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Multiple Choice

Q 10Q 10

Which of the following is correct in reference to the law of diminishing marginal utility?
A) The amount of additional utility decreases as successive units of a product are consumed.
B) Marginal utility increases at first, but after some point starts to decline.
C) Total utility declines at first, but after some point starts to increase.
D) Marginal utility increases as more of a product is consumed.

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Multiple Choice

Q 11Q 11

When is marginal utility equal to zero?
A) When TU is zero.
B) When MU is at its maximum.
C) When TU is at its maximum.
D) When MU is at its minimum.

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Multiple Choice

Q 12Q 12

-Refer to the information above to answer this question. If the price of this product is $5, how many units should this consumer purchase?
A) 4.
B) 5.
C) 6.
D) Cannot be answered from this information.

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Multiple Choice

Q 13Q 13

-Refer to the above information to answer this question. What is the marginal utility of the 3

^{rd}unit? A) 30. B) 45. C) 48. D) 143. E) Cannot be determined.Free

Multiple Choice

Q 14Q 14

-Refer to the above information to answer this question. What is the total utility of 7 units?
A) 15.
B) 25.
C) 256.
D) 271.
E) Cannot be determined.

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Multiple Choice

Q 15Q 15

-Refer to the above information to answer this question. After the consumption of how many units will total utility be maximized?
A) 4.
B) 5.
C) 7.
D) 8.
E) Cannot be determined.

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Multiple Choice

Q 16Q 16

-Refer to the above information to answer this question. How many units should this consumer purchase?
A) 0.
B) 1.
C) 7.
D) 8.
E) Cannot be determined.

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Multiple Choice

Q 17Q 17

-What concept explains why a consumer should purchase the product which yields the greatest marginal utility per dollar spent?
A) Law of diminishing marginal utility.
B) Law of diminishing returns.
C) Optimal purchasing rule.
D) Consumer surplus rule.

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Multiple Choice

Q 18Q 18

Suppose that Reza buys two products and that the marginal utility of an additional carton of soy milk is 20 and its price is $1.25, whereas the marginal utility for an additional orange costing 50 cents is 7.
Sayre - Chapter 05
-Refer to the above information to answer this question. What can be deduced?
A) The MU per dollar spent on soya milk is equal to that of an orange.
B) The MU per dollar spent on soya milk is greater than that of an orange.
C) The MU per dollar spent on soya milk is less than that of an orange.
D) The MU per dollar spent on soya milk is 25.
E) The MU per dollar spent on an orange is $3.50.

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Multiple Choice

Q 19Q 19

Suppose that Reza buys two products and that the marginal utility of an additional carton of soy milk is 20 and its price is $1.25, whereas the marginal utility for an additional orange costing 50 cents is 7.
Sayre - Chapter 05
-Refer to the above information to answer this question. What can be deduced?
A) Reza should buy more oranges.
B) Reza should reduce his consumption of soya milk.
C) Reza should buy more soya milk.
D) Reza should divide his budget equally between soya milk and oranges.
E) Nothing can be deduced.

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Multiple Choice

Q 20Q 20

The following graph shows the marginal utility derived from milk and giant cookies purchased by Sandeep.
-Refer to the above graph to answer this question. What would be Sandeep's total utility if he consumed 5 milk and 5 cookies?
A) 10.
B) 14.
C) 80.
D) 124.
E) 130.

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Multiple Choice

Q 21Q 21

The following graph shows the marginal utility derived from milk and giant cookies purchased by Sandeep.
-Refer to the above graph to answer this question. Which of the following combinations will give Sandeep the greatest total utility?
A) 2 milk and 5 cookies.
B) 3 milk and 4 cookies.
C) 4 milk and 3 cookies.
D) 5 milk and 2 cookies.
E) 6 milk and 1 cookie.

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Multiple Choice

Q 22Q 22

The following graph shows the marginal utility derived from milk and giant cookies purchased by Sandeep.
-Refer to the above graph to answer this question. If the price of both milk and cookies are $1 and Sandeep has a budget of $7, how many will he purchase if he wishes to maximize his total utility?
A) 2 milk and 5 cookies.
B) 3 milk and 4 cookies.
C) 4 milk and 3 cookies.
D) 5 milk and 2 cookies.
E) 6 milk and 1 cookie.

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Multiple Choice

Q 23Q 23

The following graph shows the marginal utility derived from milk and giant cookies purchased by Sandeep.
-Refer to the above graph to answer this question. If the price of milk is $2, the price of a cookie is $1 and Sandeep has a budget of $7, how many will he purchase if he wishes to maximize his total utility?
A) 0 milk and 7 cookies.
B) 1 milk and 5 cookies.
C) 2 milk and 3 cookies.
D) 3 milk and 1 cookie.
E) 3 milk and 4 cookies.

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Multiple Choice

Q 24Q 24

The following graph shows the total utility obtained from rice crackers and beer by Carla.
-Refer to the above graph to answer this question. If the price of both rice crackers and beer are $2, and Carla has a budget of $14, how much of each will she purchase if she wishes to maximize her total utility?
A) 3 crackers and 4 beers.
B) 4 crackers and 3 beers.
C) 5 crackers and 2 beers.
D) 6 crackers and 1 beer.
E) 7 crackers.

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Multiple Choice

Q 25Q 25

The following graph shows the total utility obtained from rice crackers and beer by Carla.
-Refer to the above graph to answer this question. If the price of rice crackers are $2, beer is $3, and Carla has a budget of $14, how much of each will she purchase if she wishes to maximize her total utility?
A) 1 cracker and 4 beers.
B) 2 crackers and 3 beers.
C) 3 crackers and 3 beers.
D) 4 crackers and 2 beers.
E) 5 crackers and 1 beer.

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Multiple Choice

Q 26Q 26

The following graph shows the total utility obtained from rice crackers and beer by Carla.
-Refer to the above graph to answer this question. If the price of rice crackers are $3, beer is $2, and Carla has a budget of $15, how much of each will she purchase if she wishes to maximize her total utility?
A) 2 crackers and 4 beers.
B) 3 crackers and 3 beers.
C) 3 crackers and 4 beers.
D) 4 crackers and 3 beers.
E) 5 crackers.

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Multiple Choice

Q 27Q 27

The following table shows Ketta's utility for eggs and bacon.
-Refer to the above information to answer this question. If Ketta has a budget of $5 and the price of both eggs and bacon are $1, what will be her optimal purchase?
A) 5 bacon.
B) 1 egg and 4 bacon.
C) 2 eggs and 3 bacon.
D) 3 eggs and 2 bacon.
E) 4 eggs and 1 bacon.

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Multiple Choice

Q 28Q 28

The following table shows Ketta's utility for eggs and bacon.
-Refer to the above information to answer this question. If Ketta has a budget of $8 and the price of both eggs and bacon are $1, what will be her optimal purchase?
A) 1 egg and 7 bacon.
B) 2 eggs and 6 bacon.
C) 3 eggs and 5 bacon.
D) 4 eggs and 4 bacon.
E) 5 eggs and 3 bacon.

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Multiple Choice

Q 29Q 29

The following table shows Ketta's utility for eggs and bacon.
-Refer to the above information to answer this question. If Ketta has a budget of $8 and the price of eggs are $2 and bacon is $1, what will be her optimal purchase?
A) 0 egg and 8 bacon.
B) 1 egg and 6 bacon.
C) 2 eggs and 4 bacon.
D) 3 eggs and 2 bacon.
E) 4 eggs and 0 bacon.

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Multiple Choice

Q 30Q 30

The following table shows Erica's utility for muffins and grapefruit.
-Refer to the above information to answer this question. If Erica has a budget of $5 and the price of both muffins and grapefruit are $1, what will be her optimal purchase?
A) 1 muffin and 4 grapefruit.
B) 2 muffins and 3 grapefruit.
C) 3 muffins and 2 grapefruit.
D) 4 muffins and 1 grapefruit.
E) 5 muffins.

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Multiple Choice

Q 31Q 31

The following table shows Erica's utility for muffins and grapefruit.
-Refer to the above information to answer this question. If Erica has a budget of $5 and the price of both muffins and grapefruit are $1, what will be the total utility of her optimal purchase?
A) 66 utils.
B) 126 utils.
C) 136 utils.
D) 363 utils.
E) 423 utils.

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Multiple Choice

Q 32Q 32

The following table shows Erica's utility for muffins and grapefruit.
-Refer to the above information to answer this question. If Erica has a budget of $8 and the price of both muffins and grapefruit are $1, what will be her optimal purchase?
A) 1 muffin and 7 grapefruit.
B) 2 muffin and 6 grapefruit.
C) 3 muffins and 5 grapefruit.
D) 4 muffins and 4 grapefruit.
E) 5 muffins and 3 grapefruit.

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Multiple Choice

Q 33Q 33

The following table shows Erica's utility for muffins and grapefruit.
-Refer to the above information to answer this question. If Erica has a budget of $8 and the price of both muffins and grapefruit are $1, what will be the total utility of her optimal purchase?
A) 96 utils.
B) 116 utils.
C) 210 utils.
D) 331 utils.
E) 541 utils.

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Multiple Choice

Q 34Q 34

The following table shows Erica's utility for muffins and grapefruit.
-Refer to the above information to answer this question. If Erica has a budget of $5 and the price of a muffin is $2 and a grapefruit is $1, what will be her optimal purchase?
A) 0 muffin and 5 grapefruit.
B) 1 muffin and 3 grapefruit.
C) 2 muffins and 1 grapefruit.
D) 3 muffins and 0 grapefruit.
E) 3 muffins and 1 grapefruit.

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Multiple Choice

Q 35Q 35

The following table shows Erica's utility for muffins and grapefruit.
-Refer to the above information to answer this question. If Erica has a budget of $5 and the price of a muffin is $2 and a grapefruit is $1, what will be the total utility of her optimal purchase?
A) 56 utils.
B) 96 utils.
C) 145 utils.
D) 146 utils.
E) 331 utils.

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Multiple Choice

Q 36Q 36

The following table shows Pierre's utility for bagels and cider.
-Refer to the above information to answer this question. If Pierre has a budget of $12 and the price of both bagels and cider are $2, what will be his optimal purchase?
A) 1 bagel and 5 ciders.
B) 2 bagels and 4 ciders.
C) 3 bagels and 3 ciders.
D) 4 bagels and 2 ciders.
E) 5 bagels and 1 ciders.

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Multiple Choice

Q 37Q 37

The following table shows Pierre's utility for bagels and cider.
-Refer to the above information to answer this question. If Pierre has a budget of $12 and the price of both bagels and cider are $2, what will be the total utility of his optimal purchase?
A) 9 utils.
B) 10 utils.
C) 21 utils.
D) 87 utils.
E) 97 utils.

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Multiple Choice

Q 38Q 38

The following table shows Pierre's utility for bagels and cider.
-Refer to the above information to answer this question. If Pierre has a budget of $12, the price of bagels is $1 and cider is $2, what will be his optimal purchase?
A) 2 bagel and 5 ciders.
B) 4 bagel and 4 ciders.
C) 6 bagels and 3 ciders.
D) 8 bagels and 2 ciders.
E) 10 bagels and 1 ciders.

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Multiple Choice

Q 39Q 39

The following table shows Pierre's utility for bagels and cider.
-Refer to the above information to answer this question. If Pierre has a budget of $12, the price of bagels is $1 and cider is $2, what will be the total utility of his optimal purchase?
A) 12 utils.
B) 41 utils.
C) 50 utils.
D) 57 utils.
E) 98 utils.

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Multiple Choice

Q 40Q 40

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-Refer to the above information to answer this question. Suppose that Maria only has $5 to spend on lunch. How should she allocate her spending so as to maximize her total utility?
A) 2 apples and 4 bagels.
B) 2 apples, 2 bagels and 1 cappuccino.
C) 2 apples and 2 cappuccinos.
D) 1 bagel and 2 cappuccinos.
E) 3 bagels and 1 cappuccino.

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Multiple Choice

Q 41Q 41

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-Refer to the above information to answer this question. Suppose that Maria only has $5 to spend on lunch. If she allocates her spending so as to maximize her total utility, what will be her total utility?
A) 393 utils.
B) 408 utils.
C) 500 utils.
D) 548 utils.
E) 636 utils.

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Multiple Choice

Q 42Q 42

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-Refer to the above information to answer this question. Suppose that Maria has $7 to spend on lunch. How should she allocate her spending so as to maximize her total utility?
A) 2 apples, 2 bagels and 2 cappuccinos.
B) 2 apples, 4 bagels and 1 cappuccino.
C) 4 apples, 1 bagel and 2 cappuccinos.
D) 4 apples, 3 bagels and 1 cappuccino.
E) 4 apples and 5 bagels.

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Multiple Choice

Q 43Q 43

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-Refer to the above information to answer this question. Suppose that Maria has $7 to spend on lunch. If she allocates her spending so as to maximize her total utility, what will be her total utility?
A) 436 utils.
B) 508 utils.
C) 500 utils.
D) 526 utils.
E) 548 utils.

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Multiple Choice

Q 44Q 44

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-Assume that Gina is allocating her budget optimally between two products. If the MU of product X is 40 and its price is $8, what must be the price of product Y if its MU is 60?
A) $7.50.
B) $12.
C) $16.
D) $40.
E) $300.

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Multiple Choice

Q 45Q 45

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-According to consumer research, what happens to the proportion of disposable income which is spent by Canadians on the various product groups as the level of income increases?
A) The fraction spent on both food and travel increases whereas the amount spent on shelter decreases.
B) The fraction spent on both food and shelter decreases whereas the amount spent on travel increases.
C) The fraction spent on both food and travel decreases whereas the amount spent on shelter increases.
D) The fraction spent on food decreases whereas the amount spent on both travel and shelter increases.

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Multiple Choice

Q 46Q 46

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-In many countries, income earned from financial investments is taxed at a higher rate than income earned from employment. What might explain this?
A) The marginal utility from employment dollars is greater than that from investment dollars.
B) The marginal utility from employment dollars is less than that from investment dollars.
C) The consumer surplus derived from employment income is greater than that from investment income.
D) The consumer surplus derived from employment income is smaller than that from investment income.

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Multiple Choice

Q 47Q 47

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-Why does the demand curve slope downward?
A) Since the marginal utility increases with increased consumption, people will be eager to buy more at lower prices.
B) Since the marginal utility decreases with increased consumption, the price must fall in order to induce people to buy more.
C) Since total utility increases with increased consumption, a lower price is necessary to encourage increased production.
D) Lower prices mean a lower consumer surplus which will encourage increased consumption.

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Multiple Choice

Q 48Q 48

Maria is considering her lunch purchase. Unfortunately, the deli doesn't have a very extensive menu: apples at $0.50 each, bagels at $1 each, and cappuccino at $2 each. Her utility from each is shown in the table below.
-If a consumer buys more than one unit of a product, which of the following statements is true?
A) The value of the last unit purchased must be greater than the value of the previous units, otherwise it would not be bought.
B) The consumer rates the value of each unit equally, otherwise she would not buy more of the item.
C) The value of the last unit purchased is always less than the value of the previous units.
D) It is the value of the first unit purchased which determines the total number of units which will be purchased.

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Multiple Choice

Q 49Q 49

-Refer to the graph above to answer this question. What is the maximum price that would be paid by this consumer, assuming that partial units cannot be purchased?
A) $9.
B) $10.
C) $16.
D) $18.
E) Cannot be determined.

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Multiple Choice

Q 50Q 50

-Refer to the graph above to answer this question. At what quantity would this consumer maximize her total utility?
A) 5.
B) 9.
C) 10.
D) 18.
E) Cannot be determined.

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Multiple Choice

Q 51Q 51

The following table shows Mia's $ marginal utility for litres of soya milk:
-If the price of soya milk is $8 per litre, what is the maximum number of litres that Mia will buy?
A) 0.
B) 1.
C) 2.
D) 3.
E) 7.

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Multiple Choice

Q 52Q 52

The following table shows Mia's $ marginal utility for litres of soya milk:
-If the price of soya milk is $2 per litre, what is the maximum number of litres that Mia will buy?
A) 1.
B) 3.
C) 4.
D) 6.
E) 7.

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Multiple Choice

Q 53Q 53

The following table shows Mia's $ marginal utility for litres of soya milk:
-Refer to the above table to answer this question. Suppose that Mia has a budget of $7 and the price of a litre of soya milk is $1, what is the maximum quantity that Mia might purchase?
A) 0.
B) 4 litres.
C) 5 litres.
D) 6 litres.
E) Cannot be determined.

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Multiple Choice

Q 54Q 54

The following table shows Mia's $ marginal utility for litres of soya milk:
-Refer to the above table to answer this question. Suppose that Mia has a budget of $7 and the price of a litre of soya milk is $1, how much consumer surplus will Mia receive as a result of her purchases?
A) 0.
B) $1.
C) $15.
D) $35.
E) Cannot be determined.

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Multiple Choice

Q 55Q 55

The following table shows Mia's $ marginal utility for litres of soya milk:
-Refer to the above table to answer this question. Suppose that soya milk is free, how much will Mia consume?
A) 0.
B) 4 litres.
C) 5 litres.
D) 7 litres.
E) Cannot be determined.

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Multiple Choice

Q 56Q 56

Suppose that Irina is prepared to pay a maximum of $2.40 for her first glass of cranberry juice, but for each subsequent glass she is only prepared to pay 20 cents less than the previous one.
Sayre - Chapter 05
-Refer to the above information to answer this question. If the price of cranberry juice is 80 cents per glass, how many glasses will she purchase?
A) 3 glasses.
B) 8 glasses.
C) 9 glasses.
D) 10 glasses.
E) Cannot be determined.

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Multiple Choice

Q 57Q 57

Suppose that Irina is prepared to pay a maximum of $2.40 for her first glass of cranberry juice, but for each subsequent glass she is only prepared to pay 20 cents less than the previous one.
Sayre - Chapter 05
-Refer to the above information to answer this question. If the price of cranberry juice is 80 cents a glass, how much consumer surplus will she receive as a result of her purchases?
A) 0.
B) $0.80.
C) $13.60.
D) $14.40.
E) Cannot be determined.

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Multiple Choice

Q 58Q 58

Suppose that Irina is prepared to pay a maximum of $2.40 for her first glass of cranberry juice, but for each subsequent glass she is only prepared to pay 20 cents less than the previous one.
Sayre - Chapter 05
-Refer to the above information to answer this question. If cranberry juice is free, how many glasses will she consume?
A) 0 glasses.
B) 10 glasses.
C) 11 glasses.
D) 13 glasses.
E) Cannot be determined.

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Multiple Choice

Q 59Q 59

In which book is the diamond-water paradox first mentioned?
A) Marx's Das Kapital.
B) Keynes's General Theory.
C) Ricardo's Principles of Political Economy and Taxation.
D) Adam Smith's Wealth of Nations.
E) Marshall's Principles of Economics.

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Multiple Choice

Q 60Q 60

What is meant by the term consumer surplus?
A) It is the difference between the actual price of a product and its real value.
B) It is the surplus which consumers receive from a product as a result of a drop in its price.
C) It is the difference between what the consumer is willing to pay and the actual price of the product.
D) It is the difference between the price which consumers pay for a product and the actual costs of production.

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Multiple Choice

Q 61Q 61

What is the correct formula for MCS (marginal consumer surplus)?
A) $MU-price.
B) Price-$MU.
C) $TU-price.
D) ΔTU/price.
E) ΔTU/Δquantity.

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Multiple Choice

Q 62Q 62

What is the term for the difference between the consumer's evaluation of a product and the price which is paid for it?
A) Price discrimination.
B) Price elasticity of demand.
C) Consumer indifference.
D) Consumer surplus.

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Multiple Choice

Q 63Q 63

Which of the following statements is correct regarding demand and consumer surplus?
A) The greater the elasticity of demand, the greater will be the consumer surplus.
B) The greater the elasticity of demand, the smaller will be the consumer surplus.
C) The greater the number of substitutes for a product, the greater will be the consumer surplus.
D) The smaller the elasticity of demand, the smaller will be the consumer surplus.

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Multiple Choice

Q 64Q 64

The following table shows the utility (measured in dollars) which Lisa derives from water (in 50 litre drums) and diamonds (uncut 1 carat stones).
-Refer to the above information to answer this question. If the price of both water and diamonds is $100 per unit, and Lisa has $500 to spend, how many units of each would she purchase?
A) 5 water.
B) 4 water and 1 diamond.
C) 3 water and 2 diamonds.
D) 2 water and 3 diamonds.
E) 1 water and 4 diamonds.

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Multiple Choice

Q 65Q 65

The following table shows the utility (measured in dollars) which Lisa derives from water (in 50 litre drums) and diamonds (uncut 1 carat stones).
-Refer to the above information to answer this question. If the price of both water and diamonds is $100 per unit, and Lisa has $500 to spend, what is the value of her total consumer surplus if she purchases the optimal quantity?
A) 0.
B) $375.
C) $620.
D) $875.
E) $1,120.

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Multiple Choice

Q 66Q 66

The following table shows the utility (measured in dollars) which Lisa derives from water (in 50 litre drums) and diamonds (uncut 1 carat stones).
-Refer to the above information to answer this question. If the price of both water and diamonds is $100 per unit, and Lisa has $700 to spend, how many units of each would she purchase?
A) 7 water
B) 4 water and 3 diamonds.
C) 3 water and 4 diamonds.
D) 2 water and 5 diamonds.
E) 1 water and 6 diamonds.

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Multiple Choice

Q 67Q 67

The following table shows the utility (measured in dollars) which Lisa derives from water (in 50 litre drums) and diamonds (uncut 1 carat stones).
-Refer to the above information to answer this question. If the price of both water and diamonds is $120 per unit, and Lisa has $720 to spend, how many units of each would she purchase?
A) 6 water.
B) 4 water and 2 diamonds.
C) 3 water and 3 diamonds.
D) 2 water and 3 diamonds.
E) 2 water and 4 diamonds.

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Multiple Choice

Q 68Q 68

-Refer to the graph above to answer this question. The graph shows Becky's demand for blueberries which can be purchased in any quantities and sold at any price. What is Becky's total consumer surplus if the price of each kilogram of blueberries is $2?
A) $2.
B) $4.
C) $6.
D) $12.
E) Cannot be determined.

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Multiple Choice

Q 69Q 69

-Refer to the graph above to answer this question. The graph shows Becky's demand for blueberries which can be purchased in any quantities and sold at any price. What is Becky's total expenditure if the price of each kilogram of blueberries is $2?
A) $2.
B) $4.
C) $6.
D) $12.
E) Cannot be determined.

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Multiple Choice

Q 70Q 70

-Refer to the graph above to answer this question. The graph shows Becky's demand for blueberries which can be purchased in any quantities and sold at any price. What is Becky's total willingness to pay for 6 kilograms of blueberries if the price of each kilogram of blueberries is $2?
A) $2.
B) $18.
C) $6.
D) $12.
E) Cannot be determined.

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Multiple Choice

Q 71Q 71

-What is price discrimination?
A) The selling of different products to the same customer at different prices.
B) The selling of an identical product to different customers at the same price.
C) The selling of an identical product to different customers at different prices.
D) The selling of different products to different customers at different prices.

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Multiple Choice

Q 72Q 72

-What is the term for the selling of an identical product at a different price to different customers for reasons other than cost?
A) Price discrimination.
B) Product substitution.
C) Marginal utility.
D) Consumer surplus.

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Multiple Choice

Q 73Q 73

In Longolia, beer drinking is associated with blood types. The demand for beer of the three major blood groups is shown below:
-Refer to the above information to answer this question. If the beer producers charged the same price to all consumers, in order to maximize total revenue what would that price be?
A) $5.00.
B) $4.50.
C) $4.00.
D) $3.50.
E) $3.00.

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Multiple Choice

Q 74Q 74

In Longolia, beer drinking is associated with blood types. The demand for beer of the three major blood groups is shown below:
-Refer to the above information to answer this question. If the beer producers charged the same price to all consumers, what would be the total revenue received?
A) $550.
B) $595.
C) $625.50
D) $636.
E) $670.

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Multiple Choice

Q 75Q 75

In Longolia, beer drinking is associated with blood types. The demand for beer of the three major blood groups is shown below:
-Refer to the above information to answer this question. If the beer producers could price discriminate on the basis of blood types, in order to maximize total revenue what price should be charged to type A, type B and type O respectively?
A) $3, $3 and $4.
B) $3, $4 and $4.
C) $3, $4 and $5.
D) $3.50, $4 and $4.50.
E) $4, $4.50 and $5.

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Multiple Choice

Q 76Q 76

In Longolia, beer drinking is associated with blood types. The demand for beer of the three major blood groups is shown below:
-Refer to the above information to answer this question. If the beer producers could price discriminate on the basis of blood types, what would be their maximum total revenue?
A) $550.
B) $595.
C) $625.50.
D) $636.
E) $670.

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Multiple Choice

Q 77Q 77

In Longolia, beer drinking is associated with blood types. The demand for beer of the three major blood groups is shown below:
-Refer to the above information to answer this question. If the beer producers could price discriminate on the basis of blood types, in order to maximize revenue, which of the following statements is correct?
A) The consumer group with the highest price elasticity of demand should be charged the highest price.
B) The consumer group with the highest price elasticity of demand should be charged the lowest price.
C) The consumer group with the lowest price elasticity of demand should be charged the lowest price.
D) The consumer group which should be charged the highest price depends upon which has the smallest marginal utility.

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Multiple Choice

Q 78Q 78

-Refer to the graph above to answer this question. The graph shows a tennis coach charges $20 per hour for tennis lessons for adults and $10 per hour for tennis lessons for children. The tennis coach is practicing:
A) Peak load pricing
B) Three part pricing
C) Price discrimination
D) Bundling
E) All of the choices are correct.

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Multiple Choice

Q 79Q 79

-Refer to the graph above to answer this question. The graph shows a tennis coach charges $20 per hour for tennis lessons for adults and $10 per hour for tennis lessons for children. What is the total revenue of the tennis coach?
A) $20.
B) $30.
C) $80.
D) $110.
E) Cannot be determined.

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Multiple Choice

Q 80Q 80

-Refer to the graph above to answer this question. The graph shows a tennis coach charges $20 per hour for tennis lessons for adults and $10 per hour for tennis lessons for children. Suppose the coach provides lessons to the children only. What is the amount of the consumer surplus of the children taking the tennis lessons?
A) $20.
B) $50.
C) $120.
D) $160.
E) Cannot be determined.

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Multiple Choice

Q 81Q 81

What is marginal utility?
A) It is the total satisfaction resulting from consuming a product.
B) It is the total satisfaction resulting from consuming all products.
C) It is the additional satisfaction resulting from consuming one more unit of all products.
D) It is the additional satisfaction resulting from consuming one more unit of a product.

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Multiple Choice

Q 82Q 82

When is total utility at a maximum?
A) When marginal utility is maximum.
B) When marginal utility is zero.
C) When marginal utility is increasing
D) When marginal utility is decreasing.

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Multiple Choice

Q 83Q 83

What is the law of diminishing marginal utility?
A) The amount of additional utility decreases as successive units of a product is consumed.
B) Marginal utility increases quickly at first, but more slowly later.
C) Total utility declines at first, but after some point starts to increase.
D) While total utility rises with the consumption of additional units, marginal utility is always constant.

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Multiple Choice

Q 84Q 84

Which of the following is a correct statement of the optimal purchasing rule?
A) MUA/MUB = PB/PA.
B) MUA/PA = MUB/PB.
C) PA/MUB = PB/MUA.
D) PA/PB = MUB/MUA.

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Multiple Choice

Q 85Q 85

-Refer to Table 5.13 to answer this question. What is the marginal utility of the 5

^{th}unit? A) 10. B) 20. C) 100. D) Cannot be answered from this information.Free

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Q 86Q 86

-Refer to Table 5.13 to answer this question. With the consumption of what quantity is marginal utility equal to zero.
A) 1.
B) 5.
C) 7.
D) 8.

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Multiple Choice

Q 87Q 87

-In order for price discrimination to work, three conditions must be fulfilled. Which of the following is not one of those conditions?
A) The seller must be able to identify and separate different groups of buyers.
B) The different groups of buyers must have different elasticities of demand.
C) The product must be a necessity.
D) It must be impossible to resell the product.

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Multiple Choice

Q 88Q 88

-Refer to Table 5.14 to answer this question. What are the missing numbers in the total utility column?
A) 135, 305, and 435.
B) 90, 340, and 450.
C) 190, 340, and 450.
D) Cannot be determined with the information given.

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Multiple Choice

Q 89Q 89

-Refer to Table 5.14 to answer this question. What are the missing numbers in the marginal utility column?
A) 0, 80, and 60.
B) 100, 80, and 60.
C) 100, 90, and 82.
D) Cannot be determined with the information given.

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Multiple Choice

Q 90Q 90

-Under which of the following circumstances will consumers' surplus be greatest?
A) When price is high and demand is elastic.
B) When price is low and demand is inelastic.
C) When price is low and demand is elastic.
D) When price is high and demand is inelastic.

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Multiple Choice

Q 91Q 91

-Which of the following statements is true about price discrimination?
A) It is practiced on the basis of age, time, and the volume of purchases.
B) It is illegal in Canada.
C) It works with luxury goods but not with necessities.
D) It works with necessities but not with luxury goods.

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Multiple Choice

Q 92Q 92

-Refer to Table 5.15 to answer this question. Suppose that the price of both apples and bananas is $1 each and this consumer has $8 to spend. In order to maximize her total utility, how many of each should she purchase?
A) 3 apples and 5 bananas.
B) 4 apples and 4 bananas.
C) 5 apples and 3 bananas.
D) 8 apples.
E) 8 bananas.

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Multiple Choice

Q 93Q 93

-Refer to Table 5.15 to answer this question. Suppose that the price of an apple is $2 and the price of a banana is $1 and this consumer has $8 to spend. In order to maximize her total utility, how many of each should she purchase?
A) 1 apple and 6 bananas.
B) 2 apples and 4 bananas.
C) 3 apples and 2 bananas.
D) 4 apples.
E) 8 bananas.

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Multiple Choice

Q 94Q 94

-What does the diamond-water paradox refer to?
A) The fact that water is far more plentiful than diamonds, even though people need more diamonds.
B) The fact that water is far more valuable than diamonds, yet its price tends to be far lower.
C) The fact that although people don't necessarily want diamonds, they are prepared to pay a high price for them.
D) The fact that diamonds are more plentiful than water in some countries.

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Multiple Choice

Q 95Q 95

-Which of the following products are likely to yield the greatest amount of consumer surplus?
A) Water.
B) Diamonds.
C) Ice cream.
D) A Persian carpet.

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Multiple Choice

Q 96Q 96

-Refer to Figure 5.5 to answer this question. If partial units cannot be purchased, what is the value of total consumer surplus at a price of $5?
A) $10.
B) $12.
C) $20.
D) $35.

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Multiple Choice

Q 97Q 97

-Refer to Figure 5.5 to answer this question. If partial units cannot be purchased, at what price is the total consumer surplus equal to $21?
A) $3.
B) $4.
C) $5.
D) $6.
E) $9.

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Multiple Choice

Q 98Q 98

-Suppose that Jon is purchasing the optimal amounts of apples and oranges. The marginal utility of the last apple is 8 and of the last orange is 6. If the price of an apple is $1, what must be the price of an orange?
A) 50 cents.
B) 75 cents.
C) $1.33.
D) $1.40.
E) Cannot be determined from this information.

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Multiple Choice

Q 99Q 99

The following table shows Ketta's total utility for coffee and croissants.
-Refer to Table 5.16 to answer this question. If Ketta has a budget of $15 and the price of both coffees and croissants are $3, what will be her optimal purchase?
A) 5 croissants.
B) 1 coffee and 4 croissants.
C) 2 coffees and 3 croissants.
D) 3 coffees and 2 croissants.
E) 4 coffees and 1 croissant.

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Multiple Choice

Q 100Q 100

The following table shows Ketta's total utility for coffee and croissants.
-Refer to Table 5.16 to answer this question. If Ketta has a budget of $15 and the price of croissants is $3, but the price of coffees is $2, what will be her optimal purchase?
A) 5 croissants.
B) 3 coffees and 2 croissants
C) 3 coffees and 3 croissants
D) 4 coffees and 3 croissants.
E) 6 coffees and 1 croissant.

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Multiple Choice

Q 101Q 101

The following table shows Ketta's total utility for coffee and croissants.
-Suppose that the price of a plate of sushi is $10 and that Jan's marginal utility is 8 while Jin's marginal utility is 12. What can be deduced from this information?
A) That Jin should buy the sushi, but Jan should not.
B) That Jin likes sushi better than does Jan.
C) That Jan's MU per $ spent on sushi is greater than Jin's.
D) No deductions can be made from this information.

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Multiple Choice

Q 102Q 102

-Refer to Table 5.17 to answer this question. Assume that the price of a pastry is $4 each. What are the missing numbers in the MU column for pastries?
A) 15, 6.25, 2.92, 1.31, 0.80, 0.42, 0.
B) 15, 25, 26.25, 21, 20, 15, 0.
C) 120, 90, 65, 45, 25, 23, 10.
D) 60, 50, 35, 21, 16, 10, 0.

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Multiple Choice

Q 103Q 103

-Refer to Table 5.17 to answer this question. Assume that the price of a latté is $5 and pastries are priced at $4 each. If Kyle has $36 to spend how many units of each will he buy in order to maximize his TU?
A) 2 lattés and 6 pastries.
B) 3 lattés and 5 pastries.
C) 4 lattés and 4 pastries.
D) 5 lattés and 3 pastries.

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Multiple Choice

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True False

Q 105Q 105

Utility is defined as the satisfaction or pleasure derived from the consumption of a product.
TRUE

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True False

Q 106Q 106

Marginal utility is the additional utility derived from the consumption of one more unit of a product.
TRUE

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True False

Q 107Q 107

The law of diminishing marginal utility suggests that as successive units of a product are consumed, total utility declines.
FALSE

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True False

Q 108Q 108

If the MU per dollar spent on product A is greater than on product B, then a rational consumer should consume more of product B to compensate.
FALSE

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True False

Q 109Q 109

It is the marginal utility of the last unit consumed that determines how much a consumer is prepared to pay for a product.
TRUE

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True False

Q 110Q 110

Consumer surplus is the additional amount that consumers have to pay if they really need a particular product.
FALSE

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True False

Q 111Q 111

The consumer surplus derived from products that have an inelastic demand is greater than that from products with an elastic demand.
TRUE

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True False

Q 112Q 112

Price discrimination is the practice of charging different prices for different products.
FALSE

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True False

Q 113Q 113

Price discrimination cannot be practised if consumers are able to resell the product.
TRUE

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True False

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Essay

Q 115Q 115

Explain why a rational consumer does not spend all of her income buying only her favorite product.

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Q 116Q 116

"If marginal utility is decreasing, then total utility must also be decreasing". Is this correct?

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Q 118Q 118

Define the following: a) utility b) marginal utility c) the law of diminishing marginal utility.

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Q 121Q 121

Assume the utility Janet obtains from consuming apples is given in the table below. (a) At what point does diminishing marginal utility set in?
(b) If apples were freely given away at zero cost, how many apples would she choose to consume?
(c) If Janet is at her level of maximum utility from apple consumption, what will happen to her level of utility if she consumes an additional apple?

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Q 122Q 122

You have determined that the following utility values can be obtained by reading your Economics book. (a) Compute marginal utility.
(b) Does the example illustrate the principle of diminishing marginal utility? Explain.

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Q 123Q 123

You have $5 to spend on any combination of goods A and
B. Are you maximizing your utility? If so, explain why. If not, what combination of goods should you buy?
B. The price of good A is $2 and the price of good B is $1. You have calculated the following utility values for yourself:
(a) Fill in the empty columns of the table.
(b) You have purchased 2 units of good A and 1 unit of good

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Essay

Q 124Q 124

You have just spent two hours studying microeconomics and this has made you very hungry. You have $10 to spend on a snack and decide to go to Taco Bell. Putting your newly acquired economics knowledge to use, you have developed the following table to assist with your purchase decision: (a) Fill in the missing values in the table above.
(b) If you bought 6 tacos and 2 burritos are you maximizing your utility? Explain.

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Essay

Q 125Q 125

Given Jon's marginal utility form consuming packets of potato chips below, calculate his total utility for each quantity.

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Q 126Q 126

June's evaluation of packets of nacho chips in terms of $MU is as follows: 1

^{st}packet: $4; 2^{nd}packet: $3.50; 3^{rd}packet: $2.90; 4^{th}packet: $2.30; 5^{th}packet: $1.60. If the price of nacho chips is $1.50, and June buys 5 packets, calculate her marginal consumer surplus for each packet and the total consumer surplus form all 5.Free

Essay

Q 127Q 127

Suppose that Melissa spends recreation time and money on two leisure activities: Tennis and fishing. The cost per hour of tennis (court fees) and per hour of fishing (boat rentals) is $4. The table below shows the total utility that Melissa derives from the two activities. a) Complete the columns of marginal utilities.
b) Assume that Melissa has a budget of $20. To maximize her total utility, how much would she allocate her spending between the two activities? What is the resulting total utility?
c) At the end of the day, Melissa digs deep in her pocket and discovers an extra $4. If she allocates this additional spending between the two activities so as to maximize her total utility, what will be the final totals?
d) Suppose that Melissa's utility from the two activities remains unchanged the next day, when she arrives with $20 in her pocket. To her pleasure, she discovers that the hourly charge on court fees has decrease to $3. How will she allocate her expenditures in order to maximize her total utility?

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Essay

Q 128Q 128

Yoko has $10 to spend on lunch. The deli doesn't have a very extensive menu: pears at $0.75 each; bagels at $1.50 each and cappuccino at $2 each. Given her utility figures in the table below, how should she allocate her $10?

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Short Answer

Q 129Q 129

The figure below indicates Richard's demand for bus tickets. a) What is Richard's total consumer surplus if the price of tickets is $3 each?
b) What is Richard's total consumer surplus if the price of tickets is $2 each?

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Short Answer

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Essay

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Q 132Q 132

"When a consumer chooses between two products, it will purchase the good that yields a higher marginal utility." Evaluate this statement.

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Q 133Q 133

A new bakery has just opened, and in an attempt to attract awareness, it is offering free unlimited samples of its chocolate chip cookies. Assuming you can only consume the cookies in-store (you cannot take them home), how many pieces of cookie would you have?

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Q 135Q 135

Table 5.2 shows Rachel's total utility from consuming ice cream sandwiches. Is it possible that the marginal utility of the 4

^{th}unit is 14?Free

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Q 136Q 136

Table 5.3 shows Sam's marginal utility for Goods A, B, C, and
D.
Suppose the prices for Good A, B, C, and D are $5, $8, $20, and $3 respectively. If Sam's budget of $62, what is the Sam's consumption bundle?
What is his total utility?

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Q 137Q 137

Table 5.4 shows Matt's total utility for Goods A, B, C, and
D.
Suppose the prices for Good A, B, and C are $1, $2, and $3 respectively. If Matt's budget is $20, what is the Matt's consumption bundle?
What is his total utility?

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Essay

Q 138Q 138

What is price discrimination? What conditions must exist in order for price discrimination to be practised?

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Q 139Q 139

Table 5.5 shows the Brian's total utility from consuming peanut butter chocolate chip cookies. Which of the following are feasible amounts of the total utility of 4 units?

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Q 140Q 140

Table 5.6 shows Nelson's total utility for Goods A and
B.
Suppose the prices for both Good A and B are $1 each.
a) If Nelson's budget is $3, what will his consumption bundle?
b) If Nelson's budget is $4, what will his consumption bundle?
c) If Nelson's budget is $6, what will his consumption bundle?
d) If Nelson's budget is $10, what will his consumption bundle?

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Essay

Q 143Q 143

For the following diagram, suppose the quantity traded is Q

_{0}and the market price is P_{0}, shade in the area of a) total consumer surplus. b) total expenditure. c) maximum value that consumers are willing to pay for Q_{0}.Free

Essay

Q 144Q 144

Suppose that MU

_{C}/P_{C}< MU_{A}/P_{A}, MU_{C}/P_{C}= MU_{B}/P_{B}, and MU_{C}/P_{C}> MU_{D}/P_{D}, which good should be your next purchase?Free

Short Answer

Q 145Q 145

Table 5.8 shows Jacintha's marginal utility for Goods A and
B.
a) Suppose Jacintha's budget is $12 and P

_{A}= P_{B}= $2, should she spend her entire budget? Explain why or why not. b) Suppose Jacintha's budget is $20 and P_{A}= P_{B}= $2, should she spend her entire budget? Explain why or why not.Free

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