ECON 201
QUIZ 3
WEEK 13
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) If a consumer's budget increases, then the budget line
A) rotates outward and its slope changes.
B) does not change.
C) shifts inward and its slope does not change.
D) rotates inward and its slope changes.
E) shifts outward and its slope does not change.
1)
2) If you get 40 units of utility from eating the first bag of pretzels, 30 from the second bag, and 20
from the third bag, the total utility of three bags of pretzels is ________ units of utility.
A) 50
B) 70
C) 20
D) 90
E) 40
2)
3) As more of a good is consumed, marginal utility
A) decreases.
B) is negative and stays negative.
C) remains the same.
D) becomes negative and then turns positive.
E) increases.
3)
Bottles of Soda
Quantity Total utility
0
0
1
8
2
14
3
18
4
21
5
23
6
24
Slices of Pizza
Quantity Total utility
0
0
1
10
2
19
3
27
4
34
5
40
6
45
4) The table above gives Ali's total utility from consuming bottles of soda and slices of pizza. The
price of pizza is $2 per slice and the price of soda is $1 per bottle. Ali has $14 in his budget. When
Ali maximizes his utility he buys ________ bottles of soda and ________ slices of pizza.
A) 6; 6
MU per dollar for the 4th bottle of soda = 3 / $1 = $3
B) 6; 4
MU per dollar for the 5th slice of pizza = 6 / $2 = $3
C) 4; 5
D) 2; 6
E) None of the above answers is correct.
4)
5) The goal of a consumer is to
A) acquire the largest possible quantity of goods.
B) save money.
C) acquire the largest possible variety of goods.
D) maximize utility.
E) insure that marginal utility is positive.
5)
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6) The paradox of value refers to the
A) fact that water is vital but cheap while diamonds are relatively useless but expensive.
B) law of demand.
C) utility maximizing rule.
D) issue of why the consumer surplus from water equals the consumer surplus from diamonds.
E) fact that consumers have different preferences and utility schedules.
6)
7) Consumers' preferences are described by
A) relative prices.
B) household income.
C) indifference curves.
D) budget lines.
E) demand curves.
7)
8) When Bo is at his best affordable consumption point, his marginal rate of substitution is
A) equal to the relative price.
B) less than the relative price.
C) greater than the relative price.
D) is equal to one.
E) maximized.
8)
9) At her best affordable point, Kris
i. is on her budget line.
ii. is on the highest attainable indifference curve.
iii. has a marginal rate of substitution equal to the relative price of the goods.
A) i and ii
B) i only
C) ii only
D) iii only
9)
10) The budget line is the boundary between
A) income and consumption.
B) affordable and unaffordable consumption combinations.
C) goods and bads.
D) income and expenditure.
E) preferred and nonpreferred consumption combinations.
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E) i, ii, and iii
10)