Assignment Print View
1.
Page 1 of 20
award:
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Which of the following is not a determinant of demand?
Desire for the good.
Income of the consumer.
→
The cost of the factor inputs.
The price of other goods.
An individual's demand for a specific product is determined by tastes, income, expectations (for income, prices,
tastes), and the availability and price of other goods. The cost of the factor inputs is a determinant of supply.
Multiple Choice
2.
Difficulty: 2 Medium
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
Graphically, as a consumer buys more of a good, the marginal utility line will
Increase as more goods are consumed.
Increase steadily and then decline.
→
Continuously decline if diminishing returns are present.
Follow the same shape as the total utility line.
Total utility increases as a consumer enjoys more units of a product. Due to the law of diminishing marginal utility,
marginal utility declines.
Multiple Choice
3.
Difficulty: 2 Medium
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
Total utility is
The additional utility from consuming one more unit of a good.
→
The sum of the marginal utilities from the consumption of good.
A function that always falls as a buyer enjoys more units of a good.
How much utility a seller gets from producing a good.
Total utility can be calculated by summing up all of the marginal utilities that the buyer has enjoyed from each
subsequent unit of a good.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-01 Why
demand curves are downward
sloping.
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4.
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The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the
definition of the
Law of demand.
→
Law of diminishing marginal utility.
Law of diminishing total utility.
Total revenue rule.
As a rule, the amount of additional utility we obtain from a product declines as we continue to consume it. For
example, the third slice of pizza isn't as desirable as the first.
Multiple Choice
5.
Difficulty: 1 Easy
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
The law of diminishing marginal utility suggests that
→
People are willing to buy additional quantities of a good only if its price falls.
People will substitute lower-priced goods for more expensive goods, ceteris paribus.
Price and quantity demanded are directly related.
As marginal utility decreases, the willingness to pay increases.
The more marginal utility a product delivers, the more a consumer will be willing to pay for it. Marginal utility
diminishes as increasing quantities of a product are consumed; therefore consumers are willing to pay progressively
less for additional quantities of a product.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-01 Why
demand curves are downward
sloping.
9/24/2013
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6.
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Refer to Table 19.1. What is Josh's total utility from consuming the third slice of pizza?
rev: 02_12_2013_QC_26590
20 utils.
→
54 utils.
5 utils.
0 utils.
Total utility is the sum of all of the marginal utilities. If you add the 15 marginal utility units that Josh received from
consuming the third slice of pizza to the total utility units of 39 he enjoyed from the second slice, 39 + 15 = 54.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-01 Why
demand curves are downward
sloping.
9/24/2013
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7.
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Refer to Table 19.1. For Josh, diminishing marginal utility begins
→
After the first slice of pizza.
After the third slice of pizza.
After the second slice of pizza.
To increase after the first slice of pizza.
Once marginal utility falls, diminishing marginal utility is occurring. That happens for Josh after the first slice of pizza
because marginal utility falls from 20 to 19.
Multiple Choice
8.
Difficulty: 1 Easy
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
As more satisfaction is achieved from consuming a good with diminishing marginal utility, then total utility
→
Increases at a decreasing rate.
Decreases as long as marginal utility is negative.
Decreases as long as marginal utility is positive.
Is negative as long as marginal utility is decreasing.
As long as marginal utility is positive, total utility must be increasing from consuming a good; but total utility increases
by smaller and smaller increments when diminishing marginal utility exists.
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 19-01 Why
demand curves are downward
sloping.
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9.
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Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back
for a fourth plate of food because
The price of the fourth plate is too high.
He has reached the point of increasing marginal utility.
→
The marginal utility of the fourth plate would be zero or even negative.
His total utility would increase with the fourth plate of food.
As long as marginal utility is positive, total utility must be increasing; but when marginal utility is negative or zero,
consumption of one more good will decrease total utility or not add to utility at all.
Multiple Choice
10.
Difficulty: 2 Medium
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
Total utility is maximized when
Price is less than marginal utility.
Price is equal to marginal utility.
→
Marginal utility is zero.
Marginal utility is maximized.
As long as marginal utility is positive, total utility must be increasing; but when marginal utility is negative,
consumption of one more good will decrease total utility. Therefore total utility is maximized at the consumption level
where marginal utility is neither positive or negative.
Multiple Choice
11.
Difficulty: 2 Medium
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
The law of diminishing marginal utility gives us a deeper understanding of the downward-sloping demand curve because
Consumers are willing to pay a higher price for a greater quantity.
Consumer tastes change due to advertising.
→
When marginal utility is high, we are willing to pay a higher price.
Consumers do not respond to a change in price.
Marginal utility is higher when the first few units of a good are consumed. This corresponds to a point high up on the
demand curve, where consumers are more willing to pay a higher price.
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 19-01 Why
demand curves are downward
sloping.
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12.
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The _________ of the demand curve corresponds to the idea that the marginal utility for the first few goods is
_____________________.
top; lower
bottom; lower
→
top; higher
bottom; higher
The first few goods consumed have a higher marginal utility. This corresponds to the top of the demand curve, where
consumers are willing to pay a higher price if a good has a higher marginal utility.
Multiple Choice
13.
Difficulty: 2 Medium
Learning Objective: 19-01 Why
demand curves are downward
sloping.
award:
0.00 points
Consumer surplus measures
→
The difference between the maximum price a consumer is willing to pay and the price actually paid.
The difference between the minimum price a consumer is willing to pay and the price actually paid.
The difference between the amounts of a good a consumer is willing to pay, and how much of the good
is available for sale.
The sum of all of the marginal utilities for that good
Consumer surplus is the difference between what you are willing to pay and the actual equilibrium price.
Multiple Choice
14.
Difficulty: 1 Easy
Learning Objective: 19-02 The
nature and source of consumer
surplus.
award:
0.00 points
Rosa is willing to pay $200 for the iPhone, but the actual price is $400. This means
Rosa will enjoy a consumer surplus of $200 if she buys the iPhone.
→
Rosa will not enjoy any consumer surplus from purchasing the iPhone.
Rosa will buy this product.
The iPhone is overpriced.
Rosa will not purchase the iPhone because she is not willing to pay the $400 price. If she were willing to pay $500 for
the iPhone, she would buy it and enjoy $100 of consumer surplus.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-02 The
nature and source of consumer
surplus.
9/24/2013
Assignment Print View
15.
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Which of the following statements best captures the concept of consumer surplus?
"I saw a sale for flowers, so I bought four bundles."
→
"I was willing to pay $30 for a dozen roses, but I bought them for $20."
"I was willing to pay $30 for roses, but they are selling for $35, so I did not buy."
"I paid $35 for roses last week and just saw them for sale now at $25."
Consumer surplus is the difference between the maximum a consumer was willing to pay for a good and the actual
price paid.
Multiple Choice
Difficulty: 1 Easy
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Learning Objective: 19-02 The
nature and source of consumer
surplus.
9/24/2013
Assignment Print View
16.
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See Figure 19.1. Lu's consumer surplus is equal to
$100.
$200.
$300.
→
$500.
An individual's consumer surplus is the difference between the maximum she or he is willing to pay and the actual
price. Here Lu's maximum willingness to pay is $600 and the actual price is $100. Her consumer surplus is equal to
$600 - $100 = $500.
Multiple Choice
Difficulty: 1 Easy
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Learning Objective: 19-03 The
meaning and use of price
discrimination.
9/24/2013
Assignment Print View
17.
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Refer to Figure 19.1. The total consumer surplus in this market is equal to
$950.
→
$900.
$850.
$800.
The total consumer surplus is the total of the differences between each individual's maximum willingness to pay and
the actual price. The total for the three consumers is ($600 - $100) + ($400 - $100) + ($200 - $100) = $900.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-02 The
nature and source of consumer
surplus.
9/24/2013
Assignment Print View
18.
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award:
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Price discrimination is ________ in the United States and ________ practiced.
legal; rarely
illegal; widely
→
legal; often
illegal; rarely
Price discrimination is not illegal in the United States and is often exercised by sellers in the auto, airline, and college
markets.
Multiple Choice
19.
Difficulty: 1 Easy
Learning Objective: 19-02 The
nature and source of consumer
surplus.
award:
0.00 points
When sellers price discriminate,
→
They are attempting to charge a price that is the maximum price each individual is willing to pay.
They are trying to pit one group of buyers against another.
They are trying to find a minimum price the individual is willing to pay.
They are taking an illegal action.
Sellers test the waters by trying to find a price that is the maximum price each individual will pay for the product.
Multiple Choice
20.
Difficulty: 2 Medium
Learning Objective: 19-02 The
nature and source of consumer
surplus.
award:
0.00 points
Sellers can gain profits from price discrimination because
→
Charging different prices based on willingness to pay can increase revenues.
Total expenses are less with price discrimination.
Total revenues are maximized when all buyers pay the same price.
Different prices charged to different customers can lower total revenue.
If a seller can charge the maximum price each individual is willing to pay, it can raise its total revenues. Revenue is
price times quantity.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-03 The
meaning and use of price
discrimination.
9/24/2013
Assignment Print View
21.
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Car dealers can easily price discriminate because
Buyers do not know the car's price.
→
Sellers negotiate a separate price agreement with each individual buyer.
Each seller knows the price but the buyer does not.
Buyers get together to collectively negotiate a price.
Individual buyers are at a disadvantage at car dealers because they negotiate a price between themselves and a
seller.
Multiple Choice
22.
Difficulty: 2 Medium
Learning Objective: 19-03 The
meaning and use of price
discrimination.
award:
0.00 points
Price discrimination works best when
Sellers cannot meet collectively.
→
Buyers do not have perfect information about the price.
Buyers have information about prices charged to different customers.
A product is purchased frequently by consumers.
A seller is most successful in practicing price discrimination when buyers do not have full information about the prices
of the good or the different prices charged to different individuals.
Multiple Choice
23.
Difficulty: 2 Medium
Learning Objective: 19-03 The
meaning and use of price
discrimination.
award:
0.00 points
Which industry here is unlikely to exhibit price discrimination?
Airlines.
New cars.
→
Supermarkets.
Colleges.
Products that are purchased regularly, and that consumers have more information about, tend not to exhibit price
discrimination. Airlines, new car sales, and colleges engage in price discrimination.
Multiple Choice
Difficulty: 1 Easy
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Learning Objective: 19-03 The
meaning and use of price
discrimination.
9/24/2013
Assignment Print View
24.
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Assume Amanda always maximizes her total utility given her budget constraint. Every morning for breakfast she has two
eggs and three sausages. If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each, what can we
say about the marginal utility of the last sausage if the price of each sausage is $2?
→
It must be equal to 20 utils.
It must be equal to 10 utils.
It must be equal to 5 utils.
It must be equal to 1 utils.
Optimal consumption implies that the utility-maximizing combination of goods has been found if you can't increase
your total utility by trading one good for another. Therefore, all goods included in the optimal consumption mix yield
the same marginal utility per dollar. Amanda's marginal utility per dollar from eggs is therefore 10, and the sausage
utils should be 10 as well.
Multiple Choice
25.
Difficulty: 3 Hard
Learning Objective: 19-04 How
consumers maximize utility.
award:
0.00 points
Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips. The marginal utility of the last bottle
of soft drink purchased is 12 utils, and each bottle costs $1.20. The marginal utility of the last bag of chips purchased is 8
utils, and each bag costs $1. In order to maximize his utility, Caesar should
→
Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks.
Buy more chips and fewer soft drinks because of the lower price for chips.
Buy more soft drinks and fewer chips because the soft drink has fewer calories.
Not change anything because he has made the choice that gives him the most total utility.
To maximize utility, the consumer should choose the good that delivers the most marginal utility per dollar. The
marginal utility per dollar from the soft drink is 10 while the marginal utility per dollar from the bag of chips is 8;
therefore Caesar should buy more soft drinks and fewer chips.
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 19-04 How
consumers maximize utility.
9/24/2013
Assignment Print View
26.
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Complete Table 19.2 below:
In Table 19.2, the marginal utility of the third unit is
3.
5.
→
6.
30.
Marginal utility is the change in total utility obtained by consuming one additional good or service. Total utility
increases from 24 to 30 when the third unit is consumed, an increase of 6 utils.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-04 How
consumers maximize utility.
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27.
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Complete Table 19.2 below:
In Table 19.2, the total utility when two units are consumed is
6.
9.
15.
→
24.
The total utility when one unit is consumed is 15 and the second unit adds 9 additional utils, which causes total utility
to increase to 24.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-04 How
consumers maximize utility.
9/24/2013
Assignment Print View
28.
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Complete Table 19.2 below:
In Table 19.2, diminishing marginal utility occurs
With the second and fourth units only.
With the first and third units only.
Only with the second unit.
→
With all units after the first.
Because the marginal utility decreases with each additional unit consumed, diminishing marginal utility occurs when
the second and subsequent units are consumed.
Picture
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 19-04 How
consumers maximize utility.
9/24/2013
Assignment Print View
29.
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Complete Table 19.3 below. Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
In Table 19.3 the marginal utility per dollar of the second cola is
10.
6.
→
4.
12.
The marginal utility per dollar is equal to the marginal utility divided by the price of the product. The marginal utility of
the second cola is 32, so the marginal utility per dollar is 32/8=4.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-04 How
consumers maximize utility.
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30.
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Complete Table 19.3 below. Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
Refer to Table 19.3. Suppose Michael has $28 to spend on cola and pretzels. What combination should he purchase in
order to maximize his utility?
Three colas and four pretzels.
One cola and five pretzels.
Three colas and one pretzel.
→
Two colas and three pretzels.
To maximize utility, the consumer should choose the goods that deliver the most marginal utility per dollar. The first
pretzel has a MU per dollar of 7.5, the second pretzel and first cola have a MU per dollar of 5, and the third pretzel
and the second coke have a MU per dollar of 4. Once Michael buys three pretzels and two colas, he will have spent
his $28 and maximized his utility.
Picture
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 19-04 How
consumers maximize utility.
9/24/2013
Assignment Print View
31.
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Complete Table 19.3 below. Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
Refer to Table 19.3. If Michael has $28 dollars to spend, why will three colas and four pretzels not be optimal?
This combination has less total utility.
This combination is affordable but does not maximize utility.
→
This combination is not affordable.
This combination has less marginal utility per dollar.
Three units of colas will cost 3 × $8=$24, and four pretzels will cost 4 × 4 = $16. The sum of these is $24 + $16 = $40,
which is not affordable given the budget constraint.
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 19-04 How
consumers maximize utility.
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Refer to Figure 19.2. The total utility of five apples is
1 utils.
17 utils.
→
18 utils.
20 utils.
The total utility derived from consuming a product comes from the marginal utilities of each successive unit. The total
utility of five apples is 6 + 5 + 4 + 2 + 1 or 17 utils.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 19-04 How
consumers maximize utility.
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Refer to Figure 19.2. Total utility is maximized at
→
6 apples.
7 apples.
1 apple.
3 apples.
As long as marginal utility is positive, total utility must be increasing; but when marginal utility is negative,
consumption of one more good will decrease total utility. Therefore total utility is maximized at the consumption level
where marginal utility is neither positive nor negative.
Multiple Choice
Difficulty: 2 Medium
http://ezto.mhecloud.mcgraw-hill.com/hm.tpx
Learning Objective: 19-04 How
consumers maximize utility.
9/24/2013