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| 1 | |
The utility of a particular good: |
| | A) | is the same for everyone, even if its usefulness differs from person to person. |
| | B) | is a measure of the product's usefulness. |
| | C) | typically increases at a constant rate. |
| | D) | typically increases at a decreasing rate. |
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| 2 | |
Answer the next question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer derives from successive quantities of products J and K.
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Refer to the table. If this consumer has an income of $26 and the prices of J and K are $2 and $4 respectively, the consumer will maximize her utility by purchasing: |
| | A) | 7 units of J and 3 units of K. |
| | B) | 5 units of J and 4 units of K. |
| | C) | 3 units of J and 5 units of K. |
| | D) | 1 units of J and 6 units of K. |
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| 3 | |
Jim enjoys having either a peanut butter sandwich or a bologna sandwich for his lunch. A drop in the price of peanut butter increases the marginal utility per dollar of peanut butter and causes Jim to buy more peanut butter and less bologna to restore maximum utility. This best illustrates the: |
| | A) | law of diminishing marginal utility. |
| | B) | income effect. |
| | C) | substitution effect. |
| | D) | law of increasing total utility. |
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| 4 | |
Suppose the prices of products X and Y are $5 and $10, respectively. For a specific consumer who is currently exhausting her total income, the total utility from X is 100, while the total utility from Y is 200. The marginal utility of X and Y are both equal to 8. From this information, we can conclude: |
| | A) | she is maximizing total utility. |
| | B) | she should purchase relatively more X. |
| | C) | she should purchase relatively more Y. |
| | D) | nothing about whether she is maximizing total utility. |
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| 5 | |
Suppose the price of an iced coffee is $4 and the price of a candy bar is $2. In order to maximize total utility, a consumer who buys some of each should allocate purchases such that: |
| | A) | the marginal utility of each good is the same. |
| | B) | the marginal utility of an iced coffee is half that of a candy bar. |
| | C) | the marginal utility of an iced coffee is twice that of a candy bar. |
| | D) | the total utility of an iced coffee is half that of a candy bar. |
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| 6 | |
Kevin received 80 total units of utility from the first four chips he consumed. If the marginal utilities of the first, second, and third chips are 20, 25, and 20, respectively, the marginal utility of the fourth chip is: |
| | A) | 65 units of utility. |
| | B) | 20 units of utility. |
| | C) | 15 units of utility. |
| | D) | unknown, since Kevin's utility does not conform to the usual rules. |
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| 7 | |
Jacquee and Shariff have identical preferences but Shariff has a lower opportunity cost of time. We should expect that, compared to Jacquee, Shariff: |
| | A) | will have a higher marginal utility of income. |
| | B) | will have a higher total utility of income. |
| | C) | will consume fewer time-intensive commodities. |
| | D) | will consume more time-intensive commodities. |
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| 8 | |
Joan occasionally enjoys wine with her meals. However, the more wine she consumes per month, the lower her marginal utility of wine. We can conclude that: |
| | A) | Joan's demand for wine is inelastic. |
| | B) | Joan's demand for wine is downsloping. |
| | C) | an decrease in the price of wine will decrease Joan's total utility. |
| | D) | a decrease in the price of wine will increase Joan's marginal utility. |
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| 9 | |
The price of apples decreases and Josh responds by buying more apples and fewer oranges. Accordingly, the: |
| | A) | marginal utility of both apples and oranges will decrease. |
| | B) | marginal utility of both apples and oranges will increase. |
| | C) | marginal utility of apples will increase and the marginal utility of oranges will decrease. |
| | D) | marginal utility of apples will decrease and the marginal utility of oranges will increase. |
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| 10 | |
Devanté is unwilling to sell his favorite rookie baseball card for anything less than $20 even though he noticed several identical cards are available from online retailers for around $15. This best illustrates: |
| | A) | the framing effect. |
| | B) | mental accounting. |
| | C) | anchoring. |
| | D) | the endowment effect. |
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