Question 1

If the price of a good increases, it will tend to make the MU to P ratio for the good rise and the good becomes more attractive to the buyer.

Accepted Answer

A) True 
 B)False

Question 2

As a consumer moves down a given indifference curve, his or her total utility will diminish.

Accepted Answer

A) True 
 B)False

Question 3

When total utility reaches a maximum, then marginal utility is

Accepted Answer

A)  increasing.
B)  decreasing.
C)  at a minimum.
D)  equal to zero.E) A) and C)
F) None of the above

Question 4

A consumer maximizes total utility when she or he purchases the combination of the two products at which her or his budget line is tangent to an indifference curve.

Accepted Answer

A) True 
 B)False

Question 5

The table shows an indifference schedule for several combinations of X and Y.  In moving from combination a to b, then to c, d, and e, the marginal rate of substitution of X for Y

Accepted Answer

A)  increases.
B)  decreases.
C)  stays the same.
D)  decreases and then increases.E) A) and D)
F) All of the above

Question 6

A consumer allocates all income between two products, A and B. If, on an indifference map, the equilibrium position shifts onto a higher indifference curve, then

Accepted Answer

A)  the consumer must be purchasing more of both products.
B)  the relative prices of A and B must have changed.
C)  the prices of A and B must have increased.
D)  total utility must have increased.E) None of the above
F) C) and D)

Question 7

State the utility-maximizing rule for two products in words and using algebra.

Accepted Answer

To maximize satisfaction, consumers shou...

Question 8

Assume that a consumer purchases a combination of product A and product B such that the MUₐ /Pₐ = 3 and MUᵦ /Pᵦ = 5. To maximize utility without spending more money, the consumer should

Accepted Answer

A)  purchase more of product A and less of product B.
B)  purchase less of product A and more of product B.
C)  purchase more of both product A and product B.
D)  make no change in purchases of products A and B.E) A) and D)
F) C) and D)

Question 9

Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

Accepted Answer

A)  iPads are often superior to laptop and desktop computers in their ability to create content.
B)  A scarcity of production capacity has curtailed the manufacture of laptop and desktop computers.
C)  Many consumers perceive that iPads are superior to laptops and desktop computers for the consumption of digital media.
D)  The prices of laptops and desktop computers have increased dramatically.E) None of the above
F) All of the above

Question 10

An indifference curve

Accepted Answer

A)  may be either upsloping or downsloping, depending on whether the two products are complements or substitutes.
B)  is downsloping and convex to the origin.
C)  is upsloping and has a constant slope.
D)  is downsloping and concave to the origin.E) All of the above
F) B) and C)

Question 11

If total utility is increasing, marginal utility

Accepted Answer

A)  is positive but may be either increasing or decreasing.
B)  must also be increasing.
C)  may be either positive or negative.
D)  will be increasing at an increasing rate.E) A) and D)
F) None of the above

Question 12

In introducing the opportunity cost of time into the theory of consumer behavior, we find that, all else equal,

Accepted Answer

A)  one should consume less of time-intensive goods.
B)  one should consume more of time-intensive goods.
C)  the consumer's equilibrium position is not altered.
D)  the marginal utility derived from each product must be multiplied by consumption time in determining equilibrium.E) A) and B)
F) A) and C)

Question 13

When total utility is at a maximum, marginal utility is zero.

Accepted Answer

A) True 
 B)False

Question 14

The utility of a good or service

Accepted Answer

A)  is synonymous with usefulness.
B)  is the satisfaction or pleasure one gets from consuming it.
C)  is easy to quantify.
D)  rarely varies from person to person.E) B) and C)
F) B) and D)

Question 15

Refer to the graph. The shift of the budget line from AB to CD is consistent with

Accepted Answer

A)  a decrease in the consumer's money income.
B)  a decrease in the prices of both Goods 1 and 2.
C)  an increase in the prices of both Goods 1 and 2.
D)  a decrease in the price of Good 1, and an increase in the price of Good 2.E) B) and D)
F) None of the above

Question 16

Which of the following is not an assumption of the theory of consumer behavior described in this chapter?

Accepted Answer

A)  The consumer has to make purchasing decisions within a given budget constraint.
B)  The consumer experiences diminishing marginal utility from consuming goods.
C)  The consumer's tastes and preferences continually change within the period studied.
D)  The consumer aims to get maximum total utility out of a given budget.E) A) and C)
F) C) and D)

Question 17

Increases in product prices shift the consumer's

Accepted Answer

A)  budget line to the right.
B)  budget line to the left.
C)  indifference curves to the left.
D)  indifference curves to the right.E) B) and C)
F) C) and D)

Question 18

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the

Accepted Answer

A)  total utility is the same for each good.
B)  marginal utility of each good is maximized.
C)  marginal utility per dollar spent is the same for all goods.
D)  marginal utility per dollar spent is maximized for each good.E) C) and D)
F) All of the above

Question 19

The graph shows part of a consumer's indifference map for units of coffee and tea, where I₁ and I₂ represent indifference curves. Which of the following statements is correct?

Accepted Answer

A)  The consumer prefers E to F.
B)  The consumer prefers C to A.
C)  The consumer likes B and D equally well.
D)  The consumer likes D better than E.E) A) and B)
F) A) and C)

Question 20

Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Accepted Answer

A) True 
 B)False

Exam 7: Utility Maximization

Assume that a consumer purchases a combination of product A and product B such that the MUₐ /Pₐ = 3 and MUᵦ /Pᵦ = 5. To maximize utility without spending more money, the consumer should

Correct AnswerverifiedShow Answer

When total utility is at a maximum, marginal utility is zero.

Correct AnswerverifiedShow Answer

As a consumer moves down a given indifference curve, his or her total utility will diminish.

Correct AnswerverifiedShow Answer

State the utility-maximizing rule for two products in words and using algebra.

Correct AnswerverifiedTo maximize satisfaction, consumers shou...View AnswerShow Answer

Refer to the graph. The shift of the budget line from AB to CD is consistent with

Correct AnswerverifiedShow Answer

A consumer maximizes total utility when she or he purchases the combination of the two products at which her or his budget line is tangent to an indifference curve.

Correct AnswerverifiedShow Answer

If the price of a good increases, it will tend to make the MU to P ratio for the good rise and the good becomes more attractive to the buyer.

Correct AnswerverifiedShow Answer

Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Correct AnswerverifiedShow Answer

An indifference curve

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In introducing the opportunity cost of time into the theory of consumer behavior, we find that, all else equal,

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If total utility is increasing, marginal utility

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Increases in product prices shift the consumer's

Correct AnswerverifiedShow Answer

When total utility reaches a maximum, then marginal utility is

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The table shows an indifference schedule for several combinations of X and Y. In moving from combination a to b, then to c, d, and e, the marginal rate of substitution of X for Y

Correct AnswerverifiedShow Answer

A consumer allocates all income between two products, A and B. If, on an indifference map, the equilibrium position shifts onto a higher indifference curve, then

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Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

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The utility of a good or service

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The graph shows part of a consumer's indifference map for units of coffee and tea, where I₁ and I₂ represent indifference curves. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the

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Which of the following is not an assumption of the theory of consumer behavior described in this chapter?

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To maximize satisfaction, consumers shou...
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