Quiz
The Logic of Consumer Choice
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Table 17.1
Units of Good X Total Utility
(utils)
Marginal Utility
(utils)
00-
10100 
20180 
30240 
40280 
50300 

1. Consider Table 17.1. Which of the following statements is correct?

a. The marginal utility associated with the consumption of 0-10 units of good X equals 100 utils.
b. The marginal utility associated with the consumption of 0-10 units of good X equals 10 utils.
c. The marginal utility associated with the consumption of 20-30 units of good X equals 180 utils.
d. The marginal utility associated with the consumption of 20-30 units of good X equals 8 utils.
e. The marginal utility associated with the consumption of 40-50 units of good X equals 300 utils.

Table 17.2
Units of Good XTotal Utility
(utils)
Marginal Utility
(utils)
300900-
301 8
302 6
303 3
304 0
305912 

2. Consider Table 17.2. Which of the following statements is correct?

a. The total utility of consuming 301 units of good X equals 908 utils.
b. The total utility of consuming 303 units of good X equals 914 utils.
c. The total utility of consuming 304 units of good X equals 912 utils.
d. The marginal utility of consuming the 305th unit of good X equals 0 utils.
e. All of the above.

3. According to the law of diminishing marginal utility, as a person successively consumes additional equal-sized units of a good,

a. total utility increases.
b. total utility decreases.
c. marginal utility is negative.
d. total utility may well increase, remain constant, or decrease.
e. none of the above is true.

4. According to the law of diminishing marginal utility, as a person successively consumes fewer equal-sized units of a good,

a. total utility increases.
b. total utility decreases.
c. marginal utility is negative.
d. total utility may well increase, remain constant, or decrease.
e. none of the above is true.

5. In light of the law of diminishing marginal utility, we can say that

a. a poor person gets more utility from an extra dollar then a millionaire.
b. a 1,000th dollar received by a pauper is worth more than a 1,000th dollar received by a millionaire.
c. the 1 millionth dollar received by a millionaire might be worth more than the 1,000th dollar received by a pauper.
d. a 1,000th dollar received by a pauper brings less extra utility than the previous 999 dollars.
e. both (a) and (b) are true.

6. Consumers who have allotted all of their incomes are said to be in equilibrium with respect to their consumption decisions when

a. they have maximized their total utility.
b. the total utility received from each type of consumption good is the same.
c. the marginal utility received from each type of consumption good is the same.
d. the marginal utility received from each type of consumption good has fallen to zero.
e. conditions (a), (c), and (d) are fulfilled.

7. If bread is priced at $1/lb. and meat at $4/lb., a consumer of both (whose marginal utility per pound of meat equals 80 utils) is maximizing utility only if the marginal utility per pound of bread equals

a. 80 utils as well.
b. 60 utils.
c. 40 utils.
d. 20 utils.
e.   8 utils.

8. Ignoring all other goods, if a consumer's marginal utility per pound of potatoes equaled 10 utils, while the marginal utility per pound of meat equaled 30 utils, the consumer's total utility

a. could be increased by buying more meat and fewer potatoes.
b. could be increased by buying less meat and more potatoes.
c. would already be maximized, provided the price per pound of potatoes was triple the price per pound of meat.
d. would already be maximized, provided the price per pound of potatoes was one third the price per pound of meat.
e. would clearly be less than it could be.

9. If PA = $5, PB = $100, and the MUA/MUB ratio equals 1/50, the consumer in question should, in order to maximize utility,

a. lower the price of A to $1, while lowering the price of B to $50.
b. buy more A and less B.
c. buy less A and more B.
d. continue to buy the same quantities of A and B.
e. buy more of both goods and less of C.

10. Which of the following statements about utility is correct?

a. The diamond-water paradox can be solved by carefully distinguishing between total and marginal utility.
b. The diamond-water paradox teaches us that some goods contain an inherently higher total utility than others.
c. The diamond-water paradox teaches us that some goods contain an inherently higher marginal utility than others.
d. When people can receive a good at a zero price, utility maximization calls for consuming so much of the good that its total utility is zero as well.
e. All of the above statements are correct.

11. Ceteris paribus, as the price of a normal good falls,

a. the quantity demanded rises due to the income effect (given their money income, consumers facing even a single lower price have higher real income).
b. the quantity demanded rises due to the substitution effect (even at unchanged real income, people buy more of a good if its price falls relative to other prices).
c. both (a) and (b) occur.
d. the quantity demanded rises because the income effect outweighs the substitution effect.
e. the quantity demanded rises because the substitution effect outweighs the income effect.

12. Ceteris paribus, as the price of an inferior good falls,

a. the quantity demanded rises due to the income effect (given their money income, consumers facing even a single lower price have higher real income).
b. the quantity demanded rises due to the substitution effect (even at unchanged real income, people buy more of a good if its price falls relative to other prices).
c. both (a) and (b) occur.
d. the quantity demanded rises because the income effect outweighs the substitution effect.
e. the quantity demanded rises because the substitution effect outweighs the income effect.

13. The absolute price of a normal good falls and the good's quantity demanded rises from 400 to 425 pounds. The change in the quantity demanded attributable to the income effect must be

a. some negative number.
b. zero.
c. some number greater than zero and less than 25 pounds.
d. 25 pounds.
e. more than 25 pounds.

14. The absolute price of an inferior good falls and the good's quantity demanded rises from 400 to 425 pounds. The change in the quantity demanded attributable to the income effect must be

a. zero.
b. some negative number.
c. some number greater than zero and less than 25 pounds.
d. 25 pounds.
e. more than 25 pounds.

15. The absolute price of an inferior good falls and the good's quantity demanded rises from 400 to 425 pounds. The change in the quantity demanded attributable to the substitution effect must be

a. exactly 25 pounds.
b. greater than 25 pounds.
c. less than 25 pounds.
d. some number between zero and 25 pounds.
e. negative.

16. The concept of consumer surplus refers to which of the following?

a. For a single unit of a good, the difference between the maximum price a buyer would pay for that unit and the (lower) actual price paid.
b. For all consumers in a market, the difference between the maximum sum of money they would have paid for the quantity traded and the (lower) actual sum they did pay for it.
c. The entire area under a demand curve.
d. All of the above.
e. Either (a) or (b).

17. Consider Figure 17.1. Let Demand #2 and Supply #2 describe the current situation. Then we can say the following:

a. The equilibrium is at m, with price 0e and quantity traded 0n.
b. The consumers' surplus equals area abi.
c. The consumers' surplus equals area 0ap.
d. The substitution effect equals 0l, the income effect is ln.
e. The substitution effect equals 0f, the income effect is fe.

18. Consider Figure 17.1. Let Demand #2 and Supply #2 describe the current situation. Then we can say the following:

a. If supply falls to Supply #1, the market price rises to 0b.
b. If supply falls to Supply #1, the market quantity traded falls to 0j.
c. If supply falls to Supply #1, the consumers' surplus falls to abi.
d. If supply falls to Supply #1, the revenue of producers changes from 0emn to 0bij.
e. All of the above.

19. Consider Figure 17.1. Let Demand #2 and Supply #2 describe the current situation. Then we can say the following:

a. If demand falls to Demand #1, the market price falls to 0f = kl.
b. If demand falls to Demand #1, the market quantity traded falls to 0l = fk.
c. If demand falls to Demand #1, the consumers' surplus falls to cfk.
d. If demand falls to Demand #1, the revenue of producers changes from 0emn to 0fkl.
e. All of the above.

20. Consider Figure 17.1. Let Demand #2 and Supply #2 describe the current situation. Then we can say the following:

a. If demand falls to Demand #1 at the same time as supply falls to Supply #1, the market price rises to 0d.
b. If demand falls to Demand #1 at the same time as supply falls to Supply #1, the market quantity traded changes to 0h.
c. If demand falls to Demand #1 at the same time as supply falls to Supply #1, the consumers' surplus falls to cdg.
d. If demand falls to Demand #1 at the same time as supply falls to Supply #1, the expenditures of consumers fall from 0emn to 0dgh.
e. All of the above.





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