Microeconomics - Testbank 1 (Hubbard/O'Brien)
Chapter 9 Consumer Choice and Behavioral Economics
b1) Economists assume the goal of consumers is to:
A do as little work as possible to survive.
)
B make themselves as well off as possible.
)
C expend all their income.
)
D consume as much as possible.
)
c2) Marginal utility is:
A the total satisfaction received from consuming a good or
) service.
B the average satisfaction received from consuming a good
) or service.
C the extra satisfaction received from consuming one unit
) of a good or service.
D none of these describes marginal utility.
)
c3) As a consumer consumes more and more of a good or
service in a particular time period, eventually marginal
utility:
A rises.
)
B is constant.
)
C declines.
)
D
)
fluctuate s.
d4) If a consumer receives 20 units of utility from consuming
two units of a good and for consuming three units this
consumer receives 25 units of utility, the marginal utility of
consuming the third unit is:
A 45 utility units.
)
B 25 utility units.
)
C 20 utility units.
)
D 5 utility units.
)
d5) If a consumer receives 20 units of utility from consuming
two units of a good and from consuming three units this
consumer receives 25 units of utility, the marginal utility of
consuming the second unit is:
A 25 utility units.
)
B 20 utility units.
)
C 5 utility units.
)
D unknown as more information is needed to determine
) the answer.
a6) If a consumer receives 22 units of marginal utility for
consuming the first unit of a good, 20 units from consuming
the second, and 15 from the third, the total utility of
consuming the three units is:
A
)
57 utility units.
B 35 utility units.
)
C 15 utility units.
)
D unknown as more information is needed to determine
) the answer.
c7) Total utility:
A always increases as a person consumes more and more of
) a good.
B has a constant rate of increase as a person consumes
) more and more of a good.
C is equal to the sum of the marginal utilities of all units
) consumed.
D is negative when marginal utility is declining.
)
d8) If, as a person consumes more and more of a good, each
additional unit adds less satisfaction than the previous unit
consumed, we are seeing the working of the law of:
A demand.
)
B supply.
)
C increasing opportunity cost.
)
D diminishing marginal utility.
)
d9) Marginal utility can be:
A negative.
)
B zero.
)
C positive.
)
D all of these.
)
b1 If, when you consume another unit of a good, your marginal
0) utility is zero, then:
A you want more of the good.
)
B your total utility has peaked.
)
C you have not yet reached the point of diminishing
) marginal utility.
D you should consume less of this good.
)
c11 Consumers have to make tradeoffs in deciding what to
) consume because:
A they can only consume so much each day.
)
B there is not enough time to consume everything.
)
C they are limited by a budget constraint.
)
D there is not enough of all goods produced.
)
d1 If your total satisfaction increases when you consume
2) another unit, your marginal utility must be:
A increasing.
)
B decreasing.
)
C negative.
)
D positive.
)
c13 If you ate too many pieces of pie and got sick, then at least
) the last piece of pie:
A had constant marginal utility.
)
B had constant total utility.
)
C had negative marginal utility.
)
D had positive marginal utility.
)
c14 Total utility typically increases at a decreasing rate as a
) consumer consumes more of one good or service, so
marginal utility must:
A remains constant.
)
B increase also.
)
C decrease.
)
D be negative.
)
d1 Something has utility for a consumer if it:
5)
A
)
is scarce.
B has a high price.
)
C is something everyone else wants.
)
D generates enjoyment or satisfaction.
)
a16 When marginal utility is zero, total utility is:
)
A maximized.
)
B decreasing.
)
C negative.
)
D increasing.
)
c17 Consumers maximize total utility within their budget
) constraint by:
A buying the cheapest goods they can find.
)
B buying whatever they like the best.
)
C buying the good with the largest marginal utility per
) dollar spent.
D buying the same dollar amount of each good.
)
c18 If a consumer always buys goods rationally, then:
)
A
)
the total utilities of the different goods consumed will be equal.
B the average utilities of the different goods consumed
) will be equal.
C the marginal utility per dollar spent on all goods will be
) equal.
D the marginal utility of the different goods consumed
) will be equal.
d1 Suppose Joe is maximizing total utility within his budget
9) constraint and the price of jeans is $25 and yielded 100 units
of extra satisfaction. If the price of a shirt is $20, then the
extra satisfaction received for the last shirt must be:
A 2000 units of utility.
)
B 500 units of utility.
)
C 100 units of utility.
)
D 80 units of utility.
)
b2 If a consumer is maximizing total utility by buying goods X
0) and Y, for a consumer to buy more of good X:
A the consumer is maximizing so nothing can change the
) consumption of X.
B the price of X has to fall.
)
C the price of X has to rise.
)
D the price of Y has to fall.
)
c21
)
Most prefer to drive a luxury car that has all the options, but more
woul people buy less expensive cars even though they could
d
afford the luxury car because:
A car buyers are irrational.
)
B the total utility of less expensive cars is greater than
) luxury cars.
C the marginal utility per dollar spent on the less
) expensive car is higher than on luxury cars.
D none of these can explain this.
)
b2 If a consumer is purchasing good X at $5 and gets 25 units of
2) marginal utility from the last unit and good Y at $3 and gets
12 units of marginal utility from the last unit, the consumer:
A is maximizing total utility and does not want to change
) their consumption of good X or good Y.
B wants to consume more of good X and less of good Y.
)
C wants to consume more of good Y and less of good X.
)
D wants to consume less of both good X and good Y.
)
b2 If a consumer is obtaining nine units of utility per dollar
3) spent on apples and six units of utility per dollar spent on
oranges, then the consumer:
A is maximizing total utility.
)
B wants to buy more apples and less oranges.
)
C wants to buy more oranges and less apples.
)
D wants to buy less oranges and less apples.
)
a24 If a consumer is utility maximizing and the price of one
) good falls, what has happened to the marginal utility
divided by the price of the good and what should the
consumer do?
A MU/P has increased and the consumer should buy more
) of this good.
B MU/P has increased and the consumer should buy less
) of this good.
C MU/P has decreased and the consumer should buy more
) of this good.
D MU/P has decreased and the consumer should buy less
) of this good.
b2 When the price of a normal good falls causing your
5) purchasing power to rise, you buy more of it due to:
A the substitution effect.
)
B the income effect.
)
C the deadweight loss effect.
)
D the elasticity effect.
)
a26 When the price of a good falls and you buy more of it
) because it is relatively less expensive, this is called:
A the substitution effect.
)
B the income effect.
)
C the deadweight loss effect.
)
D the elasticity effect.
)
c27 If a normal good you are consuming has its price increase,
) you will buy less of it because:
A the negative income effect is greater than the positive
) substitution effect.
B the positive income and substitution effects work
) together.
C the negative income and substitution effects work
) together.
D the positive income effect is smaller than and the
) negative substitution effect.
a28 If an inferior good you are consuming has its price increase,
) you will buy less of it because:
A the negative income effect is smaller than the positive
) substitution effect.
B the positive income and substitution effects work
) together.
C the negative income and substitution effects work
) together.
D the positive income effect is larger than and the negative
) substitution effect.
a29 When price decreases for a normal good, the income and
) substitution effects:
A work in the same direction to increase quantity
) demanded.
B work in the same direction to decrease quantity
) demanded.
C work in opposite directions and quantity demanded
) increases.
D work in opposite directions and quantity demanded
) decreases.
d3 A Giffen good:
0)
A must be an inferior good.
)
B is one where the positive income effect of a price
) increase is larger than the negative substitution effect.
C is one where buyers increase quantity demanded when
) price increases.
D all of the above.
)
b3 To be a Giffen good a good must be:
1)
A a normal good.
)
B inferior with an income effect that is larger than the
) opposing substitution effect.
C inferior with an income effect that is smaller than the
) opposing substitution effect.
D inferior with an income effect and a substitution effect
) working in the same direction.
c32 A network externality is when:
)
A there is production cost savings from being networked
) with suppliers.
B there is production cost savings from being networked
) with buyers.
C the utility of a good is affected by how many others use
) the good.
D the utility of a good is affected by celebrities who use
) the good.
b3 A good is path dependent, when:
3)
A consumers get utility from consuming goods that others
) are consuming such as restaurants.
B the first technology that was adopted has an advantage
) over a better technology that came later.
C people who move location follow the path of people
) who moved before them.
D it can only be used in one way.
)
c34 Business firms might raise prices only if costs have
) increased but not when demand has increased because:
A demand changes are hard to determine while cost
) changes are provided by suppliers.
B fear that the public may demand the government put a
) price ceiling on the product.
C fear that buyers will consider demand-caused price
) increases as unfair and buy elsewhere.
D cost changes are usually permanent while demand
) changes are often temporary fluctuations.
a35 Sunk costs:
)
A are costs that have already been paid and cannot be
) recaptured.
B are important for optimal decision making.
)
C are costs associated with repairing something you
) already own.
D are costs that firms sink into marketing.
)
d3 What is held constant along one indifference curve?
6)
A Prices of goods
)
B Marginal rate of substitution
)
C Marginal utility
)
D Total utility
)
d3 Indifference curves intersect:
7)
A at equilibrium.
)
B the consumer optimum.
)
C where the marginal rate of substitution for each
) indifference curve is equal.
D never.
)
a38 The indifference curve shows what a consumer:
)
A wants.
)
B can buy.
)
C
)
will buy.
D can't buy.
)
b3 The budget constraint on an indifference curve graph shows
9) what a consumer:
A wants.
)
B can buy.
)
C will buy.
)
D has bought.
)
c40 The rational consumer will buy that combination of the two
) goods on an indifference curve graph that is where:
A the indifference curve intersects the horizontal axis.
)
B the indifference curve intersects the vertical axis.
)
C an indifference curve is tangent to the budget constraint.
)
D the budget constraint intersects one of the axes.
)
d4 When the price of one of the goods on an indifference curve
1) graph increases while the other remains constant, the
consumer's:
A indifference curve becomes more concave away from the
) origin.
B indifference curve becomes straighter.
)
C budget constraint moves away from the origin on the
) axis of the good whose price has increased.
D budget constraint moves in towards the origin on the
) axis of the good whose price has increased.
a42 On an indifference curve/budget constraint graph, the
) substitution effect of a price change for one good is shown
as a movement:
A along one indifference curve.
)
B from one indifference curve to another one.
)
C from one equilibrium point to another one.
)
D along one budget constraint.
)
b4 On an indifference curve/budget constraint graph, the
3) income effect of a price change of one good is shown as a
movement:
A along one indifference curve.
)
B from one indifference curve to another.
)
C from one equilibrium point to another.
)
D along one budget constraint.
)
d4 An increase in a consumer's income is shown on an
4) indifference curve/budget constraint graph by:
A indifference curves all shifting inward.
)
B indifference curves all shifting outward.
)
C budget constraint shifting inward.
)
D budget constraint shifting outward.
)
Refer to Figure 9.1 for the questions below.
Figure 9.1
a45 In figure 9.1, a change in income is shown in:
)
A panel a.
)
B panel b.
)
C panel c.
)
D none of the above.
)
c46 In figure 9.1, a change in the price of candy is shown in:
)
A panel a.
)
B panel b.
)
C panel c.
)
D none of the above.
)
d4 In figure 9.1, beginning with the lower level of utility, an
7) increase in the price of popcorn is shown in:
A panel a.
)
B panel b.
)
C panel c.
)
D none of the above.
)
c48 In figure 9.1 beginning with the lower level of utility, panel
) c shows:
A an increase in income.
)
B an increase in the price of candy.
)
C a decrease in the price of candy.
)
D none of the above.
)