Question 1

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _________________ percentage of money given to them if it is ________________ rather than

Accepted Answer

A)  smaller; cash; a rebate check.
B)  greater; termed a rebate; a bonus.
C)  greater; termed a bonus; a rebate.
D)  smaller; a rebate check; cash.

Question 2

If the marginal utility of a good is negative, then

Accepted Answer

A)  consumers should buy less of it.
B)  consumers will consume it only if it is free.
C)  consumers should buy more of it to make its marginal utility positive.
D)  the law of diminishing marginal utility is being violated.

Question 3

Exhibit 20-7
​
 
-Refer to Exhibit 20-7. For graph (1) , if the price of X is $20, the price of Y is

Accepted Answer

A)  $10.
B)  $40.
C)  $80.
D)  $100.
E)  $160.

Question 4

Exhibit 20-3
​
 
-Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, how many apples and oranges, respectively, does she purchase per week if she wants to maximize her utility?

Accepted Answer

A)  0 and 5
B)  1 and 4
C)  2 and 3
D)  3 and 2
E)  none of the above

Question 5

As presented in the textbookbook, research by some economists has shown that even when there is no difference between options provided to people

Accepted Answer

A)  the way in which the options are framed has no impact on the outcome (i.e.there will be no preference for one option over another) .
B)  the preferred option will always be the one that is stated most simplistically.
C)  the preferred option will always be the one that sounds more complicated.
D)  the way in which the options are framed impacts the outcome (i.e.which option is preferred) .

Question 6

It is possible for total utility to rise as marginal utility falls.

Accepted Answer

A) True 
 B)False

Question 7

Given that MUX/PX Y/PY, consumers who spend all their income on these two goods

Accepted Answer

A)  can never maximize total utility.
B)  have maximized total utility.
C)  can increase total utility by buying more of X and less of Y.
D)  can increase total utility by buying more of Y and less of X.
E)  a and b

Question 8

If Smith will give up three units of Y to get one additional unit of X, then

Accepted Answer

A)  he has transitive preferences.
B)  his budget constraint is upward sloping.
C)  his indifference curve is downward sloping.
D)  the price of X must be three times as high as the price of Y.
E)  none of the above

Question 9

The MU/P ratio for good X is greater than the MU/P ratio for good Y as a result of a fall in the price of good X. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. In the process, she

Accepted Answer

A)  puts downward pressure on prices.
B)  maximizes total utility.
C)  acts according to the law of demand.
D)  b and c
E)  none of the above

Question 10

Jones buys two goods, A and B. Currently, Jones receives marginal utility of 24 utils from good A and pays a price of $1.50 per unit. Jones receives a marginal utility of 43 utils from good B and pays a price of $1.99 per unit. Jones receives __________ per dollar from good B as he does from good A.

Accepted Answer

A)  the same marginal utility
B)  more marginal utility
C)  less marginal utility
D)  more consumers' surplus
E)  less consumers' surplus

Question 11

Exhibit 20-8
​
 
-Refer to Exhibit 20-8. A move of the budget constraint from 1 to 2 is caused by a

Accepted Answer

A)  rise in the price of good X.
B)  fall in the price of good X.
C)  rise in the price of good Y.
D)  fall in income.

Question 12

Which of the following is true?

Accepted Answer

A)  It is possible for total utility to rise as marginal utility falls.
B)  Marginal utility is the same as total utility.
C)  As marginal utility falls, total utility always falls.
D)  a and c

Question 13

Suppose the marginal utility (MU)  of a paperback books is 60 utils and each book costs $10, while the MU of a hamburger is 50 utils and each costs $7.50. If you consume one movie and buy one hamburger per week, are you attaining consumer equilibrium?

Accepted Answer

A)  Yes, so there is no need to change.
B)  No.You need to buy more books and fewer hamburgers to move toward consumer equilibrium.
C)  No.You need to buy more hamburgers and fewer books to move toward consumer equilibrium.
D)  There is not enough information to answer the question.

Question 14

Suppose for a consumer the marginal utility (MU)  of bread is 20 utils and the MU of milk is 10 utils; the price of bread is $3 and the price of milk is $1. Given this,

Accepted Answer

A)  more utility per dollar is gained from consuming bread than milk.
B)  more utility per dollar is gained from consuming milk than bread.
C)  the same amount of utility per dollar is gained from consuming milk as bread.
D)  the consumer is in consumer equilibrium.

Question 15

Because there are so few diamonds in the world, the consumption of diamonds

Accepted Answer

A)  takes priority over the consumption of water.
B)  takes place at relatively high marginal utility.
C)  takes place at relatively low marginal utility.
D)  is more important than the consumption of water.

Question 16

Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero units of additional satisfaction. Should you go back for more?

Accepted Answer

A)  Why not? Since the third plateful gave you zero units, the fourth can't give you any less than zero.
B)  No way.You could get negative utility from the fourth plateful.
C)  Yes or no.It won't make any difference because your total utility is at its peak.
D)  Yes.If you received zero units of satisfaction from the third, then obviously the law of diminishing marginal utility is not working in this case.

Question 17

Diamonds are more expensive than water because

Accepted Answer

A)  markets do not always reflect value.
B)  they have fewer uses.
C)  they are relatively scarce and they yield higher marginal utility.
D)  they yield higher total utility.
E)  all of the above

Question 18

Suppose that the MU/P ratio for good X is the same as for good Y: 12 utils per dollar. If the price of good X then rises to $2 from $1, a consumer who seeks to maintain consumer equilibrium will buy more of good __________ until the marginal utility of that good falls to __________ utils.

Accepted Answer

A)  Y; 12
B)  Y; 24
C)  X; 12
D)  Y; there is not enough information to answer this part of the question
E)  X; there is not enough information to answer this part of the question

Question 19

If the marginal utility of X is negative, then the last unit of X is

Accepted Answer

A)  a bad
B)  a normal good
C)  an inferior good
D)  not subject to the law of diminishing marginal utility

Question 20

In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition

Accepted Answer

A)  TUA = TUB.
B)  TUA/PA = TUB/PB.
C)  MUA = MUB.
D)  MUA/PA = MUB/PB.
E)  MUB/PA = MUA/PB.

Exam 20: Consumer Choice and Behavioral Economics

Which of the following is true?

Correct AnswerverifiedShow Answer

Suppose the marginal utility (MU) of a paperback books is 60 utils and each book costs $10, while the MU of a hamburger is 50 utils and each costs $7.50. If you consume one movie and buy one hamburger per week, are you attaining consumer equilibrium?

Correct AnswerverifiedShow Answer

Exhibit 20-3 ​ -Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, how many apples and oranges, respectively, does she purchase per week if she wants to maximize her utility?

Correct AnswerverifiedShow Answer

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _________________ percentage of money given to them if it is ________________ rather than

Correct AnswerverifiedShow Answer

Diamonds are more expensive than water because

Correct AnswerverifiedShow Answer

Exhibit 20-8 ​ -Refer to Exhibit 20-8. A move of the budget constraint from 1 to 2 is caused by a

Correct AnswerverifiedShow Answer

As presented in the textbookbook, research by some economists has shown that even when there is no difference between options provided to people

Correct AnswerverifiedShow Answer

Suppose that the MU/P ratio for good X is the same as for good Y: 12 utils per dollar. If the price of good X then rises to $2 from $1, a consumer who seeks to maintain consumer equilibrium will buy more of good __________ until the marginal utility of that good falls to __________ utils.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 20-7 ​ -Refer to Exhibit 20-7. For graph (1) , if the price of X is $20, the price of Y is

Correct AnswerverifiedShow Answer

If the marginal utility of a good is negative, then

Correct AnswerverifiedShow Answer

Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero units of additional satisfaction. Should you go back for more?

Correct AnswerverifiedShow Answer

It is possible for total utility to rise as marginal utility falls.

Correct AnswerverifiedShow Answer

The MU/P ratio for good X is greater than the MU/P ratio for good Y as a result of a fall in the price of good X. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. In the process, she

Correct AnswerverifiedShow Answer

Given that MUX/PX < MUY/PY, consumers who spend all their income on these two goods

Correct AnswerverifiedShow Answer

If the marginal utility of X is negative, then the last unit of X is

Correct AnswerverifiedShow Answer

In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition

Correct AnswerverifiedShow Answer

If Smith will give up three units of Y to get one additional unit of X, then

Correct AnswerverifiedShow Answer

Because there are so few diamonds in the world, the consumption of diamonds

Correct AnswerverifiedShow Answer

Suppose for a consumer the marginal utility (MU) of bread is 20 utils and the MU of milk is 10 utils; the price of bread is $3 and the price of milk is $1. Given this,

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Exhibit 20-3 -Refer to Exhibit 20-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, how many apples and oranges, respectively, does she purchase per week if she wants to maximize her utility?

Correct Answer
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Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _ percentage of money given to them if it is rather than

Correct Answer
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Correct Answer
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Exhibit 20-8 -Refer to Exhibit 20-8. A move of the budget constraint from 1 to 2 is caused by a

Correct Answer
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Correct Answer
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Suppose that the MU/P ratio for good X is the same as for good Y: 12 utils per dollar. If the price of good X then rises to $2 from $1, a consumer who seeks to maintain consumer equilibrium will buy more of good until the marginal utility of that good falls to utils.

Correct Answer
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Correct Answer
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Exhibit 20-7 -Refer to Exhibit 20-7. For graph (1) , if the price of X is $20, the price of Y is

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Given that MU_X/P_X < MU_Y/P_Y, consumers who spend all their income on these two goods

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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