Question 1

Which of the graphs shows a decrease in the price of X and an increase in the price of Y, but no change in the buyer's budget?

Accepted Answer

A)  graph A
B)  graph B
C)  graph C
D)  graph DE) A) and B)
F) A) and C)

Question 2

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Accepted Answer

A) True 
 B)False

Question 3

In moving along a given budget line,

Accepted Answer

A)  the prices of both products and money income are assumed to be constant.
B)  each point on the line will be equally satisfactory to consumers.
C)  money income varies, but the prices of the two goods are constant.
D)  the prices of both products are assumed to vary, but money income is constant.E) B) and C)
F) C) and D)

Question 4

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 25 and MU z/ Pz = 20. To maximize utility, without spending more money, the consumer should

Accepted Answer

A)  purchase less of Y and more of Z.
B)  purchase more of Y and less of Z.
C)  purchase more of both Y and Z.
D)  make no change in the quantities Y and Z.E) None of the above
F) A) and B)

Question 5

Assume a diagram in which a budget line is imposed on an indifference map. A consumer will maximize her utility

Accepted Answer

A)  at any point where the budget line and an indifference curve intersect.
B)  at either point where the budget line intersects the horizontal and vertical axes.
C)  where the budget line is tangent to an indifference curve.
D)  where the ratio of the two product prices equals the reciprocal of the consumer's income.E) B) and D)
F) All of the above

Question 6

Edith is buying products X and Y with her money income. Suppose her budget line shifts rightward (outward) . This might be the result of

Accepted Answer

A)  the prices of X and Y increasing while her money income remains constant.
B)  her money income decreasing while the prices of X and Y remain constant.
C)  her money income increasing more than increases in the prices of X and Y.
D)  none of these.E) B) and C)
F) None of the above

Question 7

Where total utility is at a maximum, marginal utility is

Accepted Answer

A)  negative.
B)  positive and increasing.
C)  zero.
D)  positive but decreasing.E) B) and D)
F) A) and B)

Question 8

5/₄. That is, MUA/MU0>5/₄. To maximize utility, the consumer should move from point A) a to e. B) b to e. C) c to e. D) d to e. " class="answers-bank-image d-inline" rel="preload" > In the diagram, suppose the consumer is currently exhausting his or her income at a point where the marginal rate of substitution of apples for oranges is greater than 5/₄. That is, MUA/MU0>5/₄. To maximize utility, the consumer should move from point

Accepted Answer

A)  a to e.
B)  b to e.
C)  c to e.
D)  d to e.E) A) and D)
F) None of the above

Question 9

The marginal rate of substitution

Accepted Answer

A)  may increase or decrease on a given indifference curve, depending on whether the substitution or the income effect is dominant.
B)  increases as one moves southeast along an indifference curve.
C)  is constant at all points on the budget line.
D)  declines as one moves southeast along an indifference curve.E) A) and C)
F) C) and D)

Question 10

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth

Accepted Answer

A)  is relatively unappreciative of the arts.
B)  obtains more marginal utility from the play than from the hockey game.
C)  has a higher "marginal utility-to-price ratio" for the hockey game than for the play.
D)  has recently attended several other Broadway plays.E) A) and D)
F) None of the above

Question 11

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 12 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $4. The utility-maximizing rule suggests that this consumer should

Accepted Answer

A)  decrease consumption of product X and increase consumption of product Y.
B)  decrease consumption of product X and decrease consumption of product Y.
C)  decrease consumption of product Y and increase consumption of product X.
D)  stick with the current consumption mix because it yields maximum utility.E) A) and C)
F) B) and C)

Question 12

A child is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from each product are as shown in the following table.  If the child buys either chocolates or hard candies one piece at a time, what will be his first two purchases?

Accepted Answer

A)  a hard candy, followed by another hard candy
B)  a hard candy, followed by a chocolate
C)  a chocolate, followed by a hard candy
D)  a chocolate, followed by another chocolateE) A) and B)
F) None of the above

Question 13

Any combination of goods lying outside of the budget line

Accepted Answer

A)  implies that the consumer is not spending all his income.
B)  yields less utility than any point on the budget line.
C)  yields less utility than any point inside the budget line.
D)  is unattainable, given the consumer's income.E) B) and C)
F) None of the above

Question 14

MU b/P B C) MU A/P A = MU b/P B D) P A/P B = MU b/MU A" class="answers-bank-image d-inline" rel="preload" > Given the indifference curve and budget line above, which of the following must be true at point A?

Accepted Answer

A)  MU A/P A
B)  MU A/P A> MU b/P B
C)  MU A/P A = MU b/P B
D)  P A/P B = MU b/MU AE) None of the above
F) A) and B)

Question 15

d/ Pc . D) Pc / Pd. " class="answers-bank-image d-inline" rel="preload" > Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is

Accepted Answer

A)  MU C/MU D.
B)  one-half.
C)  Pd/ Pc .
D)  Pc / Pd.E) C) and D)
F) B) and D)

Question 16

AA is Al's indifference curve, and BB is Betty's. Al and Betty have the same budget line, LL. This information implies that

Accepted Answer

A)  Al's demand for X is greater than Betty's.
B)  Al's demand for Y is greater than Betty's.
C)  Al and Betty have the same demand for both products.
D)  Al will buy some of X, but Betty will not.E) All of the above
F) A) and C)

Question 17

Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will

Accepted Answer

A)  decrease and the consumer will respond by buying more Y and less X.
B)  decrease and the consumer will respond by buying more X and less Y.
C)  increase and the consumer will respond by buying more Y and less X.
D)  increase and the consumer will respond by buying more X and less Y.E) All of the above
F) None of the above

Question 18

List the four assumptions about consumers that are used with the theory of consumer behavior.

Accepted Answer

The four assumptions about con...

Exam 7: Utility Maximization

AA is Al's indifference curve, and BB is Betty's. Al and Betty have the same budget line, LL. This information implies that

Correct Answer
verified

Any combination of goods lying outside of the budget line

Correct Answer
verified

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 25 and MU z/ P_z = 20. To maximize utility, without spending more money, the consumer should

Correct Answer
verified

Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will

Correct Answer
verified

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Correct Answer
verified

Where total utility is at a maximum, marginal utility is

Correct Answer
verified

The marginal rate of substitution

Correct Answer
verified

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth

Correct Answer
verified

Which of the graphs shows a decrease in the price of X and an increase in the price of Y, but no change in the buyer's budget?

Correct Answer
verified

Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is

Correct Answer
verified

Given the indifference curve and budget line above, which of the following must be true at point A?

Correct Answer
verified

Assume a diagram in which a budget line is imposed on an indifference map. A consumer will maximize her utility

Correct Answer
verified

Correct Answer
verified

List the four assumptions about consumers that are used with the theory of consumer behavior.

Correct Answer
verified
The four assumptions about con...
View Answer

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 12 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $4. The utility-maximizing rule suggests that this consumer should

Correct Answer
verified

In moving along a given budget line,

Correct Answer
verified

Edith is buying products X and Y with her money income. Suppose her budget line shifts rightward (outward) . This might be the result of

Correct Answer
verified

In the diagram, suppose the consumer is currently exhausting his or her income at a point where the marginal rate of substitution of apples for oranges is greater than ⁵/₄. That is, MUA/MU0>⁵/₄. To maximize utility, the consumer should move from point

Correct Answer
verified

Exam 7: Utility Maximization

AA is Al's indifference curve, and BB is Betty's. Al and Betty have the same budget line, LL. This information implies that

Correct AnswerverifiedShow Answer

Any combination of goods lying outside of the budget line

Correct AnswerverifiedShow Answer

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 25 and MU z/ Pz = 20. To maximize utility, without spending more money, the consumer should

Correct AnswerverifiedShow Answer

Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will

Correct AnswerverifiedShow Answer

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Correct AnswerverifiedShow Answer

Where total utility is at a maximum, marginal utility is

Correct AnswerverifiedShow Answer

The marginal rate of substitution

Correct AnswerverifiedShow Answer

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth

Correct AnswerverifiedShow Answer

Which of the graphs shows a decrease in the price of X and an increase in the price of Y, but no change in the buyer's budget?

Correct AnswerverifiedShow Answer

Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is

Correct AnswerverifiedShow Answer

Given the indifference curve and budget line above, which of the following must be true at point A?

Correct AnswerverifiedShow Answer

Assume a diagram in which a budget line is imposed on an indifference map. A consumer will maximize her utility

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

List the four assumptions about consumers that are used with the theory of consumer behavior.

Correct AnswerverifiedThe four assumptions about con...View AnswerShow Answer

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 12 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $4. The utility-maximizing rule suggests that this consumer should

Correct AnswerverifiedShow Answer

In moving along a given budget line,

Correct AnswerverifiedShow Answer

Edith is buying products X and Y with her money income. Suppose her budget line shifts rightward (outward) . This might be the result of

Correct AnswerverifiedShow Answer

In the diagram, suppose the consumer is currently exhausting his or her income at a point where the marginal rate of substitution of apples for oranges is greater than 5/₄. That is, MUA/MU0>5/₄. To maximize utility, the consumer should move from point

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 25 and MU z/ P_z = 20. To maximize utility, without spending more money, the consumer should

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The four assumptions about con...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the diagram, suppose the consumer is currently exhausting his or her income at a point where the marginal rate of substitution of apples for oranges is greater than ⁵/₄. That is, MUA/MU0>⁵/₄. To maximize utility, the consumer should move from point

Correct Answer
verified