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| 1 | |
Even millionaires face a budget constraint. |
| | A) | True |
| | B) | False |
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| 2 | |
If you are purchasing two products whose prices are Px = $3 and Py = $9, in order to maximize your utility you should purchase: |
| | A) | three times as much X as Y |
| | B) | X and Y such that their marginal utilities are one third of their total utilities |
| | C) | X and Y such that the marginal utility of X is one third the marginal utility of Y |
| | D) | X and Y such that the total utility of X is three times the total utility of Y |
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| 3 | |
Suppose your supervisor at work gives you a basket for "employee recognition day" containing food items with a combined market value of $25. Then (ignoring any satisfaction you derive from your supervisor's thoughtfulness): |
| | A) | you would likely have preferred $25 cash instead |
| | B) | you would likely be indifferent between this gift and $25 cash instead |
| | C) | your supervisor likely was a good judge of your food preferences |
| | D) | you likely preferred this to an alternative gift of $25 cash |
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| 4 | |
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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| 5 | |
High medical expenditures in the U.S. may be partially explained by noting that: |
| | A) | insurance reduces the consumer's price below its actual market price |
| | B) | insurance raises the employer's price above its actual market price |
| | C) | time costs are a relatively high proportion of the price of medical goods |
| | D) | medical care is not subject to the law of demand |
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| 6 | |
Both an increase in money income and an increase in prices will shift the budget constraint to the right. |
| | A) | True |
| | B) | False |
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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 her 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, her marginal utility of wine diminishes the more wine she consumes per month. We can conclude that: |
| | A) | Joan's demand for wine is inelastic |
| | B) | Joan's demand for wine is downward sloping |
| | 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 | |
Suppose Josh is currently consuming 7 apples and 14 oranges per week. Further suppose he would receive the same utility from consuming 8 apples and 10 oranges per week. If apples cost $2.00 each and oranges cost $1.00 each: |
| | A) | Josh could increase his utility by consuming relatively more apples |
| | B) | Josh could increase his utility by consuming relatively more oranges |
| | C) | Josh is maximizing his utility at his current consumption levels |
| | D) | More information is required to determine if Josh should change his consumption of apples and oranges |
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| 10 | |
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 oranges will decrease |
| | D) | marginal utility of apples will decrease and oranges will increase |
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