Question 1
A consumer was at an optimum. She then discovers that the marginal utility per dollar spent on food is more than the marginal utility per dollar spent on gasoline. She knows then that
A) the price of gasoline must have decreased or the price of food must have increased.
B) the price of gasoline must have decreased.
C) the price of gasoline must have increased or the price of food must have decreased.
D) the price of food must have increased.
Question 2
Refer to the above table. The marginal utility of the 7th movie for Michelle is
A) 15 units of utility.
B) 20 units of utility.
C) 35 units of utility.
D) 435 units of utility.
Question 3
If the price of a good is zero, a rational consumer will
A) stop consuming the good when total utility is maximized.
B) consume the good up to the point where total utility is just below zero.
C) buy all of the units available.
D) not consume the good at all since it must not be valuable if it has a zero price.
Question 4
If marginal utility is zero, total utility is
A) falling.
B) at its maximum.
C) increasing.
D) negative.
Question 5
A well-known athlete loves cupcakes. He receives 200 utils for the first cupcake, an additional 160 for the second, an additional 120 for the third, another 80 for the fourth, and another 40 for the fifth. The marginal utility of the fourth cupcake is ________ and the total utility of consuming four cupcakes is ________.
A) 40;40
B) 40;80
C) 80;560
D) 80;600
Question 6
According to utility theory, consumer purchase decisions are made such that
A) the value of the ratio of marginal utility to price for the last units purchased and consumed is equal.
B) the total utility of the last unit purchased is equal to the price of that unit.
C) the difference between the value of the marginal utility of the last unit purchased and the price paid is maximized.
D) the total utility from consuming the good is less than the marginal utility of the last unit consumed.
Question 7
Refer to the above table. If the price of Good X is $1, the price of Good Y is $2, and the consumer has $13, the rational consumer will purchase
A) 5 units of Good X and 4 units of Good Y.
B) 3 units of Good X and 4 units of Good Y.
C) 1 units of Good X and 1 units of Good Y.
D) 6 units of Good X and 0 units of Good Y.
Question 8
A representative unit that measures the want-satisfying power of a good is
A) a util.
B) a margin.
C) income.
D) purchasing power.
Question 9
Based on the material presented in the chapter, can we conclude that people will consume goods until the marginal utility of each good is zero?
A) Yes, because at that point marginal utility is minimum.
B) Yes, because at that point total utility is maximum.
C) No, because consumption is determined by the marginal utility/price ratio.
D) No, because consumption is determined by total utility.
Question 10
When the price of a good that a person is consuming falls, other things being constant, there is
A) a decline in real income.
B) a decline in purchasing power.
C) no change in purchasing power.
D) a real income effect.
Question 11
Refer to the above table. At what quantity does diminishing marginal utility set in?
A) after 10
B) after 2
C) after 1
D) after 0
Question 12
The price of a hamburger is $1, the price of a movie is $5, and the consumer has $13. A consumer has purchased 3 hamburgers and two movies, receiving 10 units of utility for the last hamburger and 10 units of utility for the last movie. The set of goods
A) is not an optimum because the marginal utility for the second hamburger was less than the marginal utility for the first hamburger.
B) is an optimum because the consumer has maximized her utility given the limited income she had.
C) is not an optimum because the marginal utility per dollar spent is greater for the hamburger than for the movie.
D) is an optimum since the entire income is spent and the marginal utility is the same for the last unit of each good.
Question 13
Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
In the above table, Bob experiences diminishing marginal utility after consuming how many beers?
A) 2
B) 1
C) 4
D) 3
Question 14
On a hot summer day, a construction worker enters a McDonald's fast-food restaurant. He orders the first Big Mac. He consumes it within 3 minutes. He then orders a second Big Mac and consumes it in 10 minutes. He eats only half of the third one in 18 minutes and throws away the rest. The store manager offers him the fourth for free. The construction worker says: "No thanks." Why?
A) The law of diminishing marginal utility does not apply to consumption of Big Macs.
B) Marginal utility declined as he consumed additional Big Macs.
C) Marginal utility increased at an increasing rate.
D) For the construction worker, total utility increased at an increasing rate.
Question 15
Marginal utility is
A) the utility received by the last consumer of a good.
B) the utility received from consuming one unit of a good.
C) the total utility received from consuming a certain quantity of a good divided by the quantity.
D) the change in total utility due to a one-unit change in the quantity of a good consumed.
Question 16
Bill ate four hot dogs at the baseball game. The first one tasted best, but he found that as he ate more hot dogs the amount of extra satisfaction he was receiving was beginning to fall. This would demonstrate
A) the law of zero utility.
B) the law of diminishing costs.
C) the law of diminishing marginal utility.
D) the law of total utility maximization.
Question 17
When marginal utility is positive, total utility is
A) decreasing.
B) at its minimum.
C) zero.
D) increasing.
Question 18
The price of hamburgers is $2 and the price of movies is $4. The consumer has $16 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods
A) is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.
B) is an optimum since the entire income is spent and total utility is maximized.
C) is not an optimum because the consumer has not spent all of his money.
D) is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.
Question 19
The want-satisfying power of a good or service is known as
A) principle of substitution.
B) purchasing power.
C) consumer optimum.
D) utility.
Question 20
Assume that Jack has the preferences shown in the above table. Also assume that the price of a can of Pepsi is $3.00 and that the price of a slice of pizza is $1.00. If he has $16 available to spend, what combination of Pepsi and pizza will be his consumer optimum?
A) 2 cans of Pepsi, 4 slices of pizza
B) 4 cans of Pepsi, 4 slices of pizza
C) 4 cans of Pepsi, 1 slice of pizza
D) 3 cans of Pepsi, 2 slices of pizza