Economics CH 7 Quiz

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Marginal Utility can be

positive, negative or zero

Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is:

negative

The law of diminishing marginal utility states that:

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:

8 units of utility

Marginal utility is the:

change in total utility obtained by consuming one more unit of a good.

Total utility may be determined by:

summing the marginal utilities of each unit consumed.

Refer to the diagram. The total utility yielded by 4 units of X is:

17

Refer to the diagram. Total utility is at a maximum at _____ units of X.

6

Refer to the diagram. Marginal utility:

becomes negative after consuming 4 units of output

Where total utility is at a maximum, marginal utility is:

zero

The theory of consumer behavior assumes that:

consumers behave rationally, attempting to maximize their satisfaction

To maximize utility, a consumer should allocate money income so that the:

marginal utility obtained from the last dollar spent on each product is the same.

Suppose that MUx/Px exceeds MUy/Py. To maximize utility, the consumer who is spending all her money income should buy:

more of X and less of Y.

Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D, the respective prices of which are Pc and Pd. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:

MUc/Pc > MUd/Pd

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium:

are $105 and $140 respectively.

Frank is purchasing products C and D in utility-maximizing amounts. If the price of C is $4 and the price of D is $2, then:

the marginal utility of C is twice that of D.

The theory of consumer behavior assumes that consumers attempt to maximize:

total utility

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

they all help explain the downsloping demand curve

Which of the following statements is correct?

Noncash gift-giving creates a value loss, but cash gifts do not.

The budget line shows:

all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

Refer to the budget line shown in the diagram. If the consumer’s money income is $20, the:

price of C is $4 and the price of D is $2

If the price of A is $12 and the price of B is $3, the budget line tells us that a consumer in effect can trade:

1 unit of A for 4 of B

An indifference curve shows all:

combinations of two products yielding the same total utility to a consumer.

An indifference map implies that

curves farther from the origin yield higher levels of total utility

The marginal rate of substitution:

declines as one moves southeast along an indifference curve

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