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Chapter 21

Consumer Choice

Copyright © Houghton Mifflin Company. All rights reserved. 21 | 2

Boyes/Melvin Economics

Chapter 21

Utility is most closely defined as

a) extra.

b) marginal.

c) usefulness.

d) satisfaction.

e) opportunity cost.



Chapter 21

Utility is most closely defined as

a) extra.

b) marginal.

c) usefulness.

d) satisfaction. (correct)

e) opportunity cost.



Chapter 21

When total utility is at a maximum, marginal utility is

a) increasing.

b) at a minimum.

c) equal to zero.

d) decreasing.

e) at a maximum.



Chapter 21

When total utility is at a maximum, marginal utility is

a) increasing.

b) at a minimum.

c) equal to zero. (correct)

d) decreasing.

e) at a maximum.



Chapter 21

In the theory of utility, it is assumed that marginal utility

a) increases as consumption of a product increases.

b) increases as additional consumption of a product remains unchanged.

c) is zero as consumption of a product increases.

d) diminishes as consumption of a product increases.

e) remains constant as consumption of a product increases.



Chapter 21

In the theory of utility, it is assumed that marginal utility

a) increases as consumption of a product increases.

b) increases as additional consumption of a product remains unchanged.

c) is zero as consumption of a product increases.

d) diminishes as consumption of a product increases. (correct)

e) remains constant as consumption of a product increases.



Chapter 21

Marginal utility declines more quickly

a) the longer the time period.

b) the greater the number of consumers.

c) the shorter the time period.

d) the greater the number of firms producing the good.

e) None of the above.



Chapter 21

Marginal utility declines more quickly

a) the longer the time period.

b) the greater the number of consumers.

c) the shorter the time period. (correct)

d) the greater the number of firms producing the good.

e) None of the above.



Chapter 21

A consumer is purchasing two goods, A and B, and he or she is in equilibrium. The prices of the last units of A and B the consumer purchases are $100 and $10, respectively. It can be concluded that this consumer

a) likes A 10 times as much as B.

b) likes the last unit of A 10 times as much as the last unit of B.

c) likes B 10 times as much as A.

d) is purchasing 10 units of B for each unit of A.

e) is purchasing 10 units of A for each unit of B.



Chapter 21

A consumer is purchasing two goods, A and B, and he or she is in equilibrium. The prices of the last units of A and B the consumer purchases are $100 and $10, respectively. It can be concluded that this consumer

a) likes A 10 times as much as B.

b) likes the last unit of A 10 times as much as the last unit of B. (correct)

c) likes B 10 times as much as A.

d) is purchasing 10 units of B for each unit of A.

e) is purchasing 10 units of A for each unit of B.



Chapter 21

Assume MUx=1,000 utils, MUy=200, Px=$50, and Py=$20. This consumer

a) should buy less of X and less of Y.

b) should buy more of X and less of Y.

c) is in equilibrium.

d) should buy more of X and more of Y.

e) should buy more of X because MUx > MUy.



Chapter 21

Assume MUx=1,000 utils, MUy=200, Px=$50, and Py=$20. This consumer

a) should buy less of X and less of Y.

b) should buy more of X and less of Y. (correct)

c) is in equilibrium.

d) should buy more of X and more of Y.

e) should buy more of X because MUx > MUy.



Chapter 21

Which of the following is the best explanation for the downward slope of the demand curve?

a) As the price of a good declines, the total utility of that good will increase.

b) As the price of a good declines, the marginal utility of that good will increase.

c) As the price of a good declines, less people are willing to purchase that good.

d) As the price of a good declines, consumers will maximize utility by purchasing more of that good and less of other goods.

e) Demand curves are easier to draw that way.



Chapter 21

Which of the following is the best explanation for the downward slope of the demand curve?

a) As the price of a good declines, the total utility of that good will increase.

b) As the price of a good declines, the marginal utility of that good will increase.

c) As the price of a good declines, less people are willing to purchase that good.

d) As the price of a good declines, consumers will maximize utility by purchasing more of that good and less of other goods. (correct)

e) Demand curves are easier to draw that way.



Chapter 21

Which of the following would not affect the market demand for a good?

a) The number of consumers

b) Consumer income

c) The number of producers

d) Consumer tastes and preferences

e) The prices of related goods



Chapter 21

Which of the following would not affect the market demand for a good?

a) The number of consumers

b) Consumer income

c) The number of producers (correct)

d) Consumer tastes and preferences

e) The prices of related goods



Chapter 21

Suppose Kim is willing to pay $5 for her first ice cream sundae, $4 for a second ice cream sundae, and $2 for a third ice cream sundae. If Kim is able to buy all three ice cream sundaes for $2 apiece, she has realized a consumer surplus of

a) $1.

b) $3.

c) $5.

d) $4.

e) $2.



Chapter 21

Suppose Kim is willing to pay $5 for her first ice cream sundae, $4 for a second ice cream sundae, and $2 for a third ice cream sundae. If Kim is able to buy all three ice cream sundaes for $2 apiece, she has realized a consumer surplus of

a) $1.

b) $3.

c) $5. (correct)

d) $4.

e) $2.



Chapter 21

Which of the following statements concerning income and substitution effects is not true?

a) Income and substitution effects cause the demand curve to slope downward.

b) When the price of a good falls, real purchasing power increases and consumers can purchase more of all goods.

c) The substitution effect describes the situation where more of a good whose price has fallen is purchased and less of all other goods is purchased.

d) A price decrease of one good cannot cause the income effect.

e) Income and substitution effects are related to diminishing marginal utility and consumer equilibrium.



Chapter 21

Which of the following statements concerning income and substitution effects is not true?

a) Income and substitution effects cause the demand curve to slope downward.

b) When the price of a good falls, real purchasing power increases and consumers can purchase more of all goods.

c) The substitution effect describes the situation where more of a good whose price has fallen is purchased and less of all other goods is purchased.

d) A price decrease of one good cannot cause the income effect. (correct)

e) Income and substitution effects are related to diminishing marginal utility and consumer equilibrium.

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