# Quiz 5: Theory of Consumer Behavior

Business

Q 1Q 1

Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she
A) prefers oranges to peaches.
B) prefers plums to oranges.
C) is indifferent between oranges and plums.
D) is indifferent between oranges and peaches.

Free

Multiple Choice

A

Q 2Q 2

typical indifference curve
A) shows all combinations of goods that give a consumer the same level of utility.
B) shows that as a consumer has more of a good he is less willing to exchange it for one unit of another good.
C) shifts out if income increases.
D) both a and b
E) all of the above

Free

Multiple Choice

A

Q 3Q 3

rate at which a consumer is ABLE to substitute one good for another is determined by
A) the indifference map.
B) the marginal rate of substitution.
C) the consumer's income.
D) the ratio of the prices of the goods.

Free

Multiple Choice

D

Q 4Q 4

utility function
A) shows the relation between prices and a consumer's utility.
B) shows the relation between income and a consumer's utility.
C) shows the relation between the amount of goods consumed and a consumer's utility.
D) all of the above
E) none of the above

Free

Multiple Choice

Q 5Q 5

Along an indifference curve
A) the MRS is constant.
B) the ratio of the marginal utilities is constant.
C) the price ratio is constant.
D) all of the above
E) none of the above

Free

Multiple Choice

Q 6Q 6

slope of an indifference curve shows
A) the change in utility from an additional unit of the good.
B) the rate at which the consumer is able to substitute one good in the market.
C) is equal to the price ratio at all points.
D) is the rate at which the consumer is willing to exchange one good for another, utility held constant.
E) all of the above

Free

Multiple Choice

Q 7Q 7

Which of the following assumptions is(are) NOT made in consumer behavior theory?
A) Consumers can rank all bundles of goods.
B) Consumers can measure the utility they get from all bundles of goods.
C) Consumers have complete information.
D) both a and b
E) None of the above are assumptions made in consumer behavior theory.

Free

Multiple Choice

Q 8Q 8

Suppose that 2 units of X and 8 units of Y give a consumer the same satisfaction as 4 units of X and 2 units of Y. Then
A) the consumer is willing to give up 3 units of Y to obtain 1 more unit of X.
B) the consumer is willing to give up 1 unit of Y to obtain 3 more units of X.
C) the marginal rate of substitution of X for Y is 3.
D) both a and c
E) both b and c

Free

Multiple Choice

Q 9Q 9

Alexandra consumes only caviar and champagne, but she does have a limited income of $400. Her current consumption choice is 5 ounces of caviar, at a price of $50 per ounce, and 6 bottles of champagne, at $25 each. The last ounce of caviar added 100 units to Alexandra's total utility, while the last bottle of champagne added 75 units. If Alexandra chooses 4 ounces of caviar and 8 bottles of champagne instead:
A) her total utility will increase by 150 units
B) her total utility will decrease by 150 units
C) her total utility will increase by 100 units
D) her total utility will decrease by 100 units
E) her total utility will increase by 50 units

Free

Multiple Choice

Q 10Q 10

Questions 10 and 11 refer to the following figure:
-could have caused a consumer's budget line to shift from ML to MN?
A) an increase in the price of X
B) a decrease in the price of X
C) an increase in the price of Y
D) a decrease in the price of Y
E) cannot determine without more information

Free

Multiple Choice

Q 11Q 11

Questions 10 and 11 refer to the following figure:
-point A,
A) the marginal rate of substitution of X for Y is greater than it is at point B.
B) the ratio of the price of X to the price of Y is greater than it is at point B.
C) the consumer's utility is less than it is at point B.
D) both a and c
E) all of the above

Free

Multiple Choice

Q 12Q 12

Marginal utility is
A) the utility obtained from the consumption of all but the last unit of a good.
B) the relative value of two goods when a utilitymaximizing decision has been made.
C) the change in utility that results from increasing the amount of a good consumed by one unit.
D) the change in the amount of a good consumed that increases total utility by one unit.
E) none of the above

Free

Multiple Choice

Q 13Q 13

the marginal rate of substitution of X for Y is 2, the price of X is $3, and the price of Y is $1, a utilitymaximizing consumer should
A) be indifferent between 1X and 2Y.
B) prefer 3Y to 1X.
C) choose less X and more Y.
D) choose more X and less Y.

Free

Multiple Choice

Q 14Q 14

a consumer is choosing the bundle of goods that maximizes utility subject to a budget constraint, then
A) the rate at which income affects the utilitymaximizing choice is equal for all goods.
B) the rate at which the consumer is willing to substitute between goods is equal to the market rate of exchange.
C) the ratio of marginal utility to price is equal for all goods.
D) both b and c
E) all of the above

Free

Multiple Choice

Q 15Q 15

Ronald, who consumes only hamburgers and hot dogs, has a weekly income of $50. He is currently consuming 20 hamburgers, at a price of $2 each, and 10 hot dogs, at a price of $1 each. If the last hamburger and the last hot dog both added 50 units to Ronald's total utility, he
A) is making the utilitymaximizing choice.
B) should buy more hamburgers and fewer hot dogs.
C) should buy more hot dogs and fewer hamburgers.
D) obtains more additional utility per dollar from hot dogs than from hamburgers.
E) both c and d

Free

Multiple Choice

Q 16Q 16

Questions 16 through 18 refer to the following:
The price of Y is $10.
-the price of X is $5, what combination of X and Y will a utility-maximizing consumer choose?
A) 80X, 20Y
B) 120X, 620Y
C) 120X, 250Y
D) 200X, 620Y
E) none of the above

Free

Multiple Choice

Q 17Q 17

Questions 16 through 18 refer to the following:
The price of Y is $10.
-marginal rate of substitution of X for Y at point C is:
A) 5
B) 2
C) 0.5
D) 0.3
E) none of the above

Free

Multiple Choice

Q 18Q 18

Questions 16 through 18 refer to the following:
The price of Y is $10.
-Which of the following are points on the consumer's demand curve for X?
A) $2, 300 units
B) $3, 120 units
C) $5, 120 units
D) both a and b
E) both c and d

Free

Multiple Choice

Q 19Q 19

Questions 19-22 refer to the following figure:
The consumer's income is $800.
-are the prices of goods X and Y?
A) = $10,
= $8
B) = $8,
= $10
C) = $100,
= $80
D) = $20,
= $60
E) = $60,
= $20

Free

Multiple Choice

Q 20Q 20

Questions 19-22 refer to the following figure:
The consumer's income is $800.
-is the consumer's marginal rate of substitution in equilibrium?
A) 1.5
B) 2
C) 2.5
D) 0.8
E) unable to tell from information given

Free

Multiple Choice

Q 21Q 21

Questions 19-22 refer to the following figure:
The consumer's income is $800.
-doesn't the consumer choose the combination of 30X and 56Y at point A?
A) MRS is less than .
B) MRS is greater than .
C) is greater than
.
D) is less than
.

Free

Multiple Choice

Q 22Q 22

Questions 19-22 refer to the following figure:
The consumer's income is $800.
-doesn't the consumer choose the combination at point B?
A) The consumer is willing to give up more X for additional units of Y than the rate in the market.
B) The marginal utility of Y exceeds the marginal utility of X.
C) The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X.
D) both a and c
E) both b and c

Free

Multiple Choice

Q 23Q 23

individual's demand curve for X
A) shows how the utilitymaximizing choice of X changes as the price of X changes.
B) shows how the individual's preferences change as the price of X changes.
C) shows how the individual's preferences change as the consumer income changes.
D) both a and b
E) both a and c

Free

Multiple Choice

Q 24Q 24

Suppose a consumer who purchases only two goods is making a utilitymaximizing choice and then the price of one of the goods decreases. What will happen?
A) The consumer's purchasing power will increase.
B) The consumer's utility will increase.
C) The consumer's income will increase.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 25Q 25

Ferdinand prefers a Big Mac to a Whopper and a Whopper to a hotdog, but is indifferent between a Big Mac and a Quarter Pounder he must
A) prefer a Quarter Pounder to a hotdog.
B) prefer a Whopper to a Quarter Pounder.
C) be indifferent between a Quarter Pounder and a Whopper.
D) be indifferent between a Whopper and a hotdog.

Free

Multiple Choice

Q 26Q 26

Which of the following is NOT a characteristic of a typical indifference curve?
A) The curve shows all combinations of goods that give the consumer the same level of utility.
B) As a consumer has less of a good, he is less willing to exchange less of it for one more unit of another good.
C) The marginal rate of substitution is measured by the slope of the tangent to the curve.
D) The curve will shift out if income increases.

Free

Multiple Choice

Q 27Q 27

According to the Rolling Stones, "You can't always get what you want." What does this mean in the context of utility maximization?
A) A bundle of goods between the budget line and the origin.
B) Vertical indifference curves.
C) A bundle of goods above the budget line.
D) Downward-sloping indifference curves.

Free

Multiple Choice

Q 28Q 28

spending all his income, the consumer chooses the bundle of goods that maximizes his utility. Which of the following statements will be correct?
A) The marginal utilities of all goods are equal.
B) Expenditures on all goods are equal.
C) The addition to utility of the last unit of the good is equal across all goods.
D) The addition to utility of the last unit of the good per dollar is equal across all goods.

Free

Multiple Choice

Q 29Q 29

indifference curve is drawn on a graph with good X on the horizontal axis and good Y on the vertical axis. One point on the curve is X = 5, Y = 5. Which of the following points CANNOT also be on the curve?
A) X = 6, Y = 6
B) X = 6, Y = 4
C) X = 9, Y = 4
D) X = 2, Y = 11

Free

Multiple Choice

Q 30Q 30

Birnbaum is buying bottles of beer and bags of pretzels. The marginal utility of the last bottle of beer is 60 and the marginal utility of the last bag of pretzels is 30. The price of beer is $0.30 per bottle and the price of pretzels is $0.20 per bag. Ms. Birnbaum
A) is buying beer and pretzels in the utility-maximizing amounts.
B) should buy more beer and fewer pretzels.
C) should buy more pretzels and less beer.
D) is not spending all her income.

Free

Multiple Choice

Q 31Q 31

rate at which a consumer is WILLING to substitute one good for another is measured by
A) the indifference map.
B) the slope of the budget line.
C) the consumer's real income.
D) the slope of the tangent to the indifference curve.

Free

Multiple Choice

Q 32Q 32

Questions 32 through 35 refer to the following graph:
The consumer's income is $600.
-is the price of Y?
A) $0.25
B) $4
C) $8
D) $6
E) none of the above

Free

Multiple Choice

Q 33Q 33

Questions 32 through 35 refer to the following graph:
The consumer's income is $600.
-the price of X is $7.50 per unit, how many units of X will a utility-maximizing consumer choose?
A) 25
B) 30
C) 35
D) 50
E) none of the above

Free

Multiple Choice

Q 34Q 34

Questions 32 through 35 refer to the following graph:
The consumer's income is $600.
-point C,
A) MRS is greater than 1.25.
B) MRS is less than 0.4.
C) MRS is greater than 2.
D) MRS is less than 2.5.

Free

Multiple Choice

Q 35Q 35

Questions 32 through 35 refer to the following graph:
The consumer's income is $600.
-point on the consumer's demand curve for X is
A) 60 units at a price of $10.
B) 35 units at a price of $10.
C) 35 units at a price of $6.
D) 25 units at a price of $10.
E) 25 units at a price of $7.50.

Free

Multiple Choice

Q 36Q 36

market demand curve
A) is the horizontal summation of the demand curves of all consumers in the market.
B) is the sum of the prices consumers are willing to pay at each quantity.
C) shows that consumers demand more at higher prices.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 37Q 37

ratio of the prices of two goods measures
A) the rate at which a consumer is willing to substitute one good for another.
B) the rate at which a consumer is able to substitute one good for another.
C) the marginal rate of substitution of X for Y.
D) both a and c
E) both b and c

Free

Multiple Choice

Q 38Q 38

Questions 38 through 41refer to the following graph:
The price of X is $20 and the price of Y is $40.
-U

_{1}is the highest level of utility the consumer can achieve, what is the consumer's income? A) $ 480 B) $ 600 C) $ 800 D) $1,200 E) none of the aboveFree

Multiple Choice

Q 39Q 39

Questions 38 through 41refer to the following graph:
The price of X is $20 and the price of Y is $40.
-many units of X will the consumer choose if point B is the utility-maximizing choice?
A) 28
B) 30
C) 32
D) 60
E) none of the above

Free

Multiple Choice

Q 40Q 40

Questions 38 through 41refer to the following graph:
The price of X is $20 and the price of Y is $40.
-point B,
A) if the consumer obtains one more unit of Y, ½ unit of X must be foregone in order to keep utility unchanged.
B) if the consumer obtains one more unit of X, two units of Y must be foregone in order to keep utility unchanged.
C) the marginal rate of substitution is ½.
D) both a and c
E) all of the above

Free

Multiple Choice

Q 41Q 41

Questions 38 through 41refer to the following graph:
The price of X is $20 and the price of Y is $40.
-income is $800, how many units of Y will the consumer choose?
A) 6
B) 7
C) 8
D) 9
E) 10

Free

Multiple Choice

Q 42Q 42

Questions 42 through 44 refer to the following graph:
The consumer's income is $1,200.
-is Y

_{1}? A) 30 B) 80 C) 110 D) 120 E) none of the aboveFree

Multiple Choice

Q 43Q 43

Questions 42 through 44 refer to the following graph:
The consumer's income is $1,200.
-what price of Y are Y

_{2}units demanded? A) $ 8 B) $10 C) $15 D) $16 E) $12Free

Multiple Choice

Q 44Q 44

Questions 42 through 44 refer to the following graph:
The consumer's income is $1,200.
-point B,
A) the rate at which the consumer is willing to substitute X for Y is greater than it is at point A.
B) the consumer is willing to give up more Y in order to gain an extra unit of X than at point A.
C) the consumer will receive more Y for each unit of X exchanged in the market than at point A.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 45Q 45

Greystroke uses his limited income to purchase fruits and nuts; he is currently buying 10 pounds of fruits at a price of $2 per pound and 5 pounds of nuts at a price of $6 per pound. The last pound of fruits added 10 units to Lord Greystroke's total utility, while the last pound of nuts added 30 units. Lord Greystroke
A) is making the utility-maximizing choice.
B) should buy more fruits and less nuts because the last pound of fruits cost less than the last pound of nuts.
C) should buy more fruits and less nuts because the last dollar spent on fruits added more to total utility than the last dollar spent on nuts.
D) should buy more nuts and less fruits because the last pound of nuts added more to total utility than the last pound of fruits.
E) should buy more nuts and less fruits because the last dollar spent on nuts added more to total utility than the last dollar spent on fruits.

Free

Multiple Choice

Q 46Q 46

Questions 46 through 49 refer to the following graphs of a consumer's indifference map and budget lines and possible demand curves:
The price of Y is $50.
-the price of X is $10, what combination of X and Y will a utility-maximizing consumer choose?
A) 400X, 100Y
B) 800X, 130Y
C) 850X, 130Y
D) 1,000X, 100Y
E) none of the above

Free

Multiple Choice

Q 47Q 47

Questions 46 through 49 refer to the following graphs of a consumer's indifference map and budget lines and possible demand curves:
The price of Y is $50.
-U

_{2}is the maximum attainable utility, the price of X is A) $10. B) $15. C) $20. D) $25. E) none of the aboveFree

Multiple Choice

Q 48Q 48

Questions 46 through 49 refer to the following graphs of a consumer's indifference map and budget lines and possible demand curves:
The price of Y is $50.
-point A,
A) the consumer can exchange two units of X for one unit of Y and keep utility unchanged.
B) the consumer can exchange two units of X for one unit of Y and keep income unchanged.
C) the consumer receives twice as much marginal utility from X as from Y.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 49Q 49

Questions 46 through 49 refer to the following graphs of a consumer's indifference map and budget lines and possible demand curves:
The price of Y is $50.
-consumer's demand curve for X is
A) D

_{1}. B) D_{2}. C) D_{3}. D) D_{4}.Free

Multiple Choice

Q 50Q 50

Suppose that 25 units of X and 16 units of Y give a consumer the same satisfaction as 15 units of X and 18 units of Y. Then
A) the consumer can exchange five units of X for one unit of Y and keep utility unchanged.
B) the consumer can exchange one unit of X for 1/5 unit of Y and keep utility unchanged.
C) the market rate of exchange of X for Y is 1/5.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 51Q 51

consumes only candy and cookies; she is currently buying more cookies than candy with her limited income. The last bag of candy gave Lulu the same additional utility as the last bag of cookies, and the prices of candy and cookies are the same. Lulu
A) is maximizing utility given a limited income because the prices of candy and cookies are the same.
B) is maximizing satisfaction given a limited income because the marginal utility per dollar is the same for candy and cookies.
C) could get more satisfaction from the same income by buying more candy and less cookies.
D) could get more satisfaction from the same income by buying more cookies and less candy.

Free

Multiple Choice

Q 52Q 52

Questions 52 through 55 refer to the following graphs:
The price of Y is $15 per unit.
-is ?
A) 12
B) 15
C) 20
D) 25
E) none of the above

Free

Multiple Choice

Q 53Q 53

Questions 52 through 55 refer to the following graphs:
The price of Y is $15 per unit.
-is ?
A) 10
B) 12
C) 18
D) 20
E) none of the above

Free

Multiple Choice

Q 54Q 54

Questions 52 through 55 refer to the following graphs:
The price of Y is $15 per unit.
-point B,
A) the consumer can exchange one unit of X for one unit of Y and keep income unchanged.
B) the marginal rate of substitution of X for Y is greater than it is at point A.
C) the consumer's utility is greater than it is at point A.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 55Q 55

Questions 52 through 55 refer to the following graphs:
The price of Y is $15 per unit.
-does the curve in the lower graph show?
A) how a consumer's utility-maximizing choices of X and Y change when the budget constraint changes
B) how a consumer's preferences change when income changes
C) how a consumer's utility-maximizing choices of X changes when the price of X changes
D) how a consumer's utility-maximizing choices of Y changes when the price of Y changes
E) both c and d

Free

Multiple Choice

Q 56Q 56

Suppose that utility-maximizing consumers in San Francisco pay three times as much for apples as for peaches. What is the ratio of the marginal utility of apples to the marginal utility of peaches?
A) 1/3
B) 2/3
C) 3
D) none of the above
E) cannot determine without further information

Free

Multiple Choice

Q 57Q 57

For questions 57 through 59, assume that an individual consumes two goods X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $5 and $10.
-the consumer buys the third unit of Y,
A) the marginal utility of the third unit is 950 units of satisfaction.
B)
B) the marginal utility per dollar spent on Y is 200.
C) the marginal utility per dollar spent on Y is 20.
D) both a and

Free

Multiple Choice

Q 58Q 58

For questions 57 through 59, assume that an individual consumes two goods X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $5 and $10.
-the consumer has $65 to spend on X and Y, the utility-maximizing bundle is
A) 3X and 5Y.
B) 4X and 4Y.
C) 5X and 2Y.
D) 1X and 6Y.
E) 2X and 7Y.

Free

Multiple Choice

Q 59Q 59

For questions 57 through 59, assume that an individual consumes two goods X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $5 and $10.
-the consumer has $110 to spend on X and Y, which combination will the consumer choose?
A) 5X and 4Y
B) 6X and 8Y
C) 7X and 6Y
D) 8X and 7Y
E) 7X and 7Y

Free

Multiple Choice

Q 60Q 60

Questions 60 and 61 refer to the following graph:
-is the equation for budget line LM?
A) Y = 10 + 1.5X
B) Y = 10 (2/3)X
C) Y = 1.5 + 1.5X
D) Y = 1.5 10X
E) Y = 0.667 + 1.5X

Free

Multiple Choice

Q 61Q 61

Questions 60 and 61 refer to the following graph:
-is the equation for budget line RS?
A) Y = 10 + 18X
B) Y = 10 1.8X
C) Y = 15 + (9/5)X
D) Y = 1.8 + (9/5)X
E) Y = 18 (18/10)X

Free

Multiple Choice

Q 62Q 62

market demand curve
A) shows how much all consumers demand at various prices.
B) is the vertical summation of the demand curves of all the consumers in the market.
C) is quite complex to construct, given the demand curves of the individual consumers.
D) all of the above

Free

Multiple Choice

Q 63Q 63

Market demand
A) is the horizontal summation of the individual demand curves.
B) slopes downward.
C) shows how market purchases vary with price.
D) both a and b
E) all of the above

Free

Multiple Choice

Q 64Q 64

For the questions 64 and 65, assume James purchases only two goods, steak and chicken, with his weekly income of $60. The price of steak is $10 and the price of chicken is $5. The following table shows the marginal utility James obtains from each additional pound of steak and chicken:
-quantities of steak and chicken should James purchase to maximize his utility?
A) 3 steak, 2 chicken
B) 5 steak, 2 chicken
C) 4 steak, 4 chicken
D) 2 steak, 5 chicken
E) none of the above

Free

Multiple Choice

Q 65Q 65

For the questions 64 and 65, assume James purchases only two goods, steak and chicken, with his weekly income of $60. The price of steak is $10 and the price of chicken is $5. The following table shows the marginal utility James obtains from each additional pound of steak and chicken:
-the price of steak falls to $8, what quantities of steak and chicken should James purchase to maximize his utility?
A) 6 steak, 2 chicken
B) 5 steak, 3 chicken
C) 4 steak, 4 chicken
D) 5 steak, 4 chicken
E) 3 steak, 6 chicken

Free

Multiple Choice

Q 66Q 66

Questions 66 through 68 refer to the following indifference map for a consumer who has an income of $48 to spend on goods X and Y and the market prices of X and Y are both equal to $4:
-order to maximize utility subject to her budget constraint, this consumer should buy how many units of good X?
A) 0
B) 4
C) 6
D) 8
E) 12

Free

Multiple Choice

Q 67Q 67

Questions 66 through 68 refer to the following indifference map for a consumer who has an income of $48 to spend on goods X and Y and the market prices of X and Y are both equal to $4:
-suppose the price of good X increases to $12 while the price of good Y remains $4. Utility will be maximized on which indifference curve?
A) I
B) II
C) III
D) On an indifference curve below I

Free

Multiple Choice

Q 68Q 68

Questions 66 through 68 refer to the following indifference map for a consumer who has an income of $48 to spend on goods X and Y and the market prices of X and Y are both equal to $4:
-After the price of good X increases to $12 while the price of good Y remains $4, how many units of good X would be purchased?
A) 0
B) 2
C) 4
D) 8
E) 12

Free

Multiple Choice

Q 69Q 69

Questions 69 and 70 refer to the following:
The consumer faces a budget constraint because the market price of X is $3, the market price of Y is $3, and the consumer's budget is $90.
-Given this budget constraint, how many units of X and Y would be purchased?
A) 0 units of X, 0 units of Y.
B) 10 units of X, 20 units of Y.
C) 20 units of X, 20 units of Y.
D) 30 units of X, 30 units of Y.

Free

Multiple Choice

Q 70Q 70

Questions 69 and 70 refer to the following:
The consumer faces a budget constraint because the market price of X is $3, the market price of Y is $3, and the consumer's budget is $90.
-order for this consumer to choose the corner solution at point E, which of the following must occur?
A) price of X must rise to $6.
B) price of Y must rise to $6.
C) price of X must rise to $9.
D) price of Y must rise to $9.

Free

Multiple Choice