Deck 5: National Income Accounting

Question 1

Refer to Table 19.1. For Josh, diminishing marginal utility begins

A) After the first slice of pizza.
B) After the third slice of pizza.
C) After the second slice of pizza.
D) To increase after the first slice of pizza.

Answer 1

A

Question 2

The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of the

A) Law of demand.
B) Law of diminishing marginal utility.
C) Law of diminishing total utility.
D) Total revenue rule.

Answer 2

B

Question 3

If an individual demands a good, it means that he or she

A) Has a strong desire for the good.
B) Is willing and able to purchase the good at some price.
C) Must need the good.
D) Prefers the good to all other choices.

Answer 3

B

Question 4

Refer to Table 19.1. What is Josh's total utility from consuming the third slice of pizza?

A) 20 utils.
B) 54 utils.
C) 5 utils.
D) 0 utils.

Question 5

Economists accept consumer tastes as given and focus on

A) How price will affect actual consumer purchases.
B) How culture affects consumer preferences.
C) How advertising molds consumer desires.
D) What consumers desire.

Question 6

Graphically, as a consumer buys more of a good, the marginal utility line will

A) Increase as more goods are consumed.
B) Increase steadily and then decline.
C) Continuously decline if diminishing returns are present.
D) Follow the same shape as the total utility line.

Question 7

Refer to Table 19.1. The marginal utility Josh enjoys from the fourth slice of pizza is

A) 20 utils.
B) 54 utils.
C) 5 utils.
D) 0 utils.

Question 8

As more satisfaction is achieved from consuming a good with diminishing marginal utility, then total utility

A) Increases at a decreasing rate.
B) Decreases as long as marginal utility is negative.
C) Decreases as long as marginal utility is positive.
D) Is negative as long as marginal utility is decreasing.

Question 9

Which of the following is not a determinant of demand?

A) Desire for the good.
B) Income of the consumer.
C) The cost of the factor inputs.
D) The price of other goods.

Question 10

Marginal utility is

A) The sum of the total utility of consuming a certain amount of a good.
B) The additional utility a consumer enjoys from the consumption of one more unit of a good.
C) The diminishing nature of total utility.
D) Always negative or zero.

Question 11

If a product has a high marginal utility, then

A) Consumers will not purchase any more of the good.
B) The demand curve will be downward-sloping.
C) A consumer is willing to pay a high price for it.
D) Consumers will also have a low total utility.

Question 12

The marginal utility for a good is computed as

A) Total utility divided by quantity.
B) Quantity divided by total utility.
C) The change in quantity divided by total utility.
D) The change in total utility divided by the change in quantity.

Question 13

When economists refer to the determinants of demand, they are referring to factors that

A) Cause a movement down a demand curve.
B) Cause the demand curve to shift left or right.
C) Influence producer behavior.
D) Cause a movement up one demand curve.

Question 14

The law of diminishing marginal utility states that

A) The total utility of consuming the next unit of a good falls.
B) As a consumer enjoys successive units of a good, eventually marginal utility will fall.
C) Marginal utility always falls to zero after two or three units of a good consumed.
D) The total utility of a good rises at a fast rate as more units of a good are consumed.

Question 15

Total utility is

A) The additional utility from consuming one more unit of a good.
B) The sum of the marginal utilities from the consumption of good.
C) A function that always falls as a buyer enjoys more units of a good.
D) How much utility a seller gets from producing a good.

Question 16

Utility refers to the

A) Satisfaction obtained from a good or service.
B) Additional satisfaction obtained from one more unit of a good or service.
C) Willingness to buy specific quantities of a good or service at a particular price.
D) Decrease in satisfaction as more of a good or service is consumed.

Question 17

Sociopsychiatric explanations of consumer behavior include the

A) Desire for ego and status.
B) Level of income.
C) Level of wealth.
D) Prices of other goods.

Question 18

The law of diminishing marginal utility suggests that

A) People are willing to buy additional quantities of a good only if its price falls.
B) People will substitute lower-priced goods for more expensive goods, ceteris paribus.
C) Price and quantity demanded are directly related.
D) As marginal utility decreases, the willingness to pay increases.

Question 19

Economic explanations of consumer behavior take into consideration

A) Ego gratification.
B) Lack of self-confidence.
C) Social status.
D) Prices and income.

Question 20

Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because

A) The price of the fourth plate is too high.
B) He has reached the point of increasing marginal utility.
C) The marginal utility of the fourth plate would be zero or even negative.
D) His total utility would increase with the fourth plate of food.

Question 21

If a good had a zero price (i.e., the good was free), a rational person would consume

A) An infinite amount of the good.
B) The good until total utility was zero.
C) The good until the marginal utility was maximized.
D) The good until the marginal utility of the last unit was zero.

Question 22

The total consumer surplus is shown on a graph as

A) The area under the demand curve and below the actual price.
B) The area under the demand curve and above the actual price.
C) The area above the demand curve and above the actual price.
D) The area above the demand curve and below the actual price.

Question 23

Consumer surplus measures

A) The difference between the maximum price a consumer is willing to pay and the price actually paid.
B) The difference between the minimum price a consumer is willing to pay and the price actually paid.
C) The difference between the amounts of a good a consumer is willing to pay, and how much of the good is available for sale.
D) The sum of all of the marginal utilities for that good

Question 24

The ___________ surplus will rise if the price of the good ________.

A) consumer; rises
B) consumer; falls
C) producer; falls
D) total; rises

Question 25

If the equilibrium price rises,

A) The consumer surplus will be reduced.
B) The producer surplus will fall.
C) The consumer surplus will increase.
D) The total surplus will increase.

Question 26

Which of the following statements best captures the concept of consumer surplus?

A) "I saw a sale for flowers, so I bought four bundles."
B) "I was willing to pay $30 for a dozen roses, but I bought them for $20."
C) "I was willing to pay $30 for roses, but they are selling for $35, so I did not buy."
D) "I paid $35 for roses last week and just saw them for sale now at $25."

Question 27

Total utility is maximized when

A) Price is less than marginal utility.
B) Price is equal to marginal utility.
C) Marginal utility is zero.
D) Marginal utility is maximized.

Question 28

The market demand for a product is

A) The sum of all of the markets in the area.
B) The sum of all of the marginal utilities among consumers.
C) The total utility received for a good by all consumers in the market.
D) The sum of all of the individual demands for that product.

Question 29

Which of the following is not held constant when considering a shift in the demand for pizza?

A) Consumer incomes.
B) The price of pizza.
C) The price of spaghetti (a substitute).
D) Expectations of higher prices for pizzas.

Question 30

The benefit that consumers get when they buy goods at the equilibrium price is called

A) Marginal utility.
B) The law of demand.
C) Consumer surplus.
D) Maximum price.

Question 31

Refer to Figure 19.1. Ben's consumer surplus is equal to

A) $50.
B) $100.
C) $200.
D) $0.

Question 32

According to the law of demand, ceteris paribus,

A) The quantity demanded increases at lower prices.
B) A consumer will purchase more of a good at higher prices than at lower prices.
C) Price and quantity supplied are directly related.
D) The responsiveness of consumer demand to a change in the price of a good is measured by the price elasticity of demand.

Question 33

The four determinants of demand that are held constant when we consider a movement along a demand curve include all of the following except

A) Price.
B) Income.
C) Tastes.
D) Availability and price of substitute goods.

Question 34

The _________ of the demand curve corresponds to the idea that the marginal utility for the first few goods is _____________________.

A) top; lower
B) bottom; lower
C) top; higher
D) bottom; higher

Question 35

Most goods can yield

A) Only positive marginal utility.
B) Both positive and negative marginal utility.
C) Only negative marginal utility.
D) Only zero marginal utility.

Question 36

Refer to Figure 19.1. The total consumer surplus in this market is equal to

A) $950.
B) $900.
C) $850.
D) $800.

Question 37

If marginal utility is negative, then

A) Total utility will increase with additional consumption.
B) Total utility will decrease with additional consumption.
C) The good or service being consumed is an inferior good.
D) Total utility is at a minimum.

Question 38

Rosa is willing to pay $200 for the iPhone, but the actual price is $400. This means

A) Rosa will enjoy a consumer surplus of $200 if she buys the iPhone.
B) Rosa will not enjoy any consumer surplus from purchasing the iPhone.
C) Rosa will buy this product.
D) The iPhone is overpriced.

Question 39

The law of diminishing marginal utility gives us a deeper understanding of the downward-sloping demand curve because

A) Consumers are willing to pay a higher price for a greater quantity.
B) Consumer tastes change due to advertising.
C) When marginal utility is high, we are willing to pay a higher price.
D) Consumers do not respond to a change in price.

Question 40

See Figure 19.1. Lu's consumer surplus is equal to

A) $100.
B) $200.
C) $300.
D) $500.

Question 41

Price discrimination occurs when

A) Minorities pay a higher price for a product than everyone else.
B) Sellers charge a higher price than is reasonable.
C) Sellers charge two separate prices for the same product to two different groups.
D) Sellers charge one price to all consumers but not wholesalers.

Question 42

Price discrimination is ________ in the United States and ________ practiced.

A) legal; rarely
B) illegal; widely
C) legal; often
D) illegal; rarely

Question 43

Price discrimination

A) Is illegal.
B) Rarely occurs in the airline industry.
C) Is a way for sellers to exact the maximum willingness to pay from buyers.
D) Is a method used by sellers to pit one buyer against the other.

Question 44

Price discrimination works best when

A) Sellers cannot meet collectively.
B) Buyers do not have perfect information about the price.
C) Buyers have information about prices charged to different customers.
D) A product is purchased frequently by consumers.

Question 45

Refer to Figure 19.2. Total utility is maximized at

A) 6 apples.
B) 7 apples.
C) 1 apple.
D) 3 apples.

Question 46

Assume Amanda always maximizes her total utility given her budget constraint. Every morning for breakfast she has two eggs and three sausages. If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each, what can we say about the marginal utility of the last sausage if the price of each sausage is $2?

A) It must be equal to 20 utils.
B) It must be equal to 10 utils.
C) It must be equal to 5 utils.
D) It must be equal to 1 utils.

Question 47

Complete Table 19.3 below. Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit. Refer to Table 19.3. If Michael has $48 to spend on cola and pretzels, what combination should he purchase in order to maximize his utility?

A) Four colas and four pretzels.
B) Five colas and two pretzels.
C) Three colas and five pretzels.
D) Five colas and five pretzels.

Question 48

Which of these examples is an example of price discrimination?

A) Goods are marked down on sale.
B) Wholesale prices differ from retail prices.
C) Seniors pay one price at the movie theater and adults pay more.
D) Cereal manufacturers put discount coupons inside their cereal boxes.

Question 49

Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips. The marginal utility of the last bottle of soft drink purchased is 12 utils, and each bottle costs $1.20. The marginal utility of the last bag of chips purchased is 8 utils, and each bag costs $1. In order to maximize his utility, Caesar should

A) Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks.
B) Buy more chips and fewer soft drinks because of the lower price for chips.
C) Buy more soft drinks and fewer chips because the soft drink has fewer calories.
D) Not change anything because he has made the choice that gives him the most total utility.

Question 50

Refer to Figure 19.2. With no budget constraint, a rational consumer will consume _________ apple(s).

A) zero
B) one
C) six
D) an infinite number of

Question 51

When sellers price discriminate,

A) They are attempting to charge a price that is the maximum price each individual is willing to pay.
B) They are trying to pit one group of buyers against another.
C) They are trying to find a minimum price the individual is willing to pay.
D) They are taking an illegal action.

Question 52

Refer to Figure 19.2. The total utility of two apples is

A) 2 utils.
B) 5 utils.
C) 6 utils.
D) 11 utils.

Question 53

To maximize utility, the consumer should choose the goods that deliver the most marginal utility per dollar at each step. With $40 Michael would consume three colas and four pretzels, which would bring him a total of 174 utils.

Question 54

Maximum utility is achieved when

A) Total revenue is the greatest.
B) The price elasticity of demand is 1.0.
C) Marginal utility is zero.
D) Total utility equals marginal utility.

Question 55

Which industry here is unlikely to exhibit price discrimination?

A) Airlines.
B) New cars.
C) Supermarkets.
D) Colleges.

Question 56

Car dealers can easily price discriminate because

A) Buyers do not know the car's price.
B) Sellers negotiate a separate price agreement with each individual buyer.
C) Each seller knows the price but the buyer does not.
D) Buyers get together to collectively negotiate a price.

Question 57

A consumer maximizes total utility from a given amount of income when the

A) Marginal utility obtained from the last dollar spent on each good is the same.
B) Marginal utility of the last unit of each good is the same.
C) Total utility obtained from each product is the same.
D) Amount spent for each product is the same.

Question 58

Airline companies engage in price discrimination by

A) Charging unrestricted fares.
B) Giving a temporary price cut.
C) Charging business customers higher prices than vacation travelers.
D) Engaging in price-fixing.

Question 59

Refer to Figure 19.2. The total utility of five apples is

A) 1 utils.
B) 17 utils.
C) 18 utils.
D) 20 utils.

Question 60

Sellers can gain profits from price discrimination because

A) Charging different prices based on willingness to pay can increase revenues.
B) Total expenses are less with price discrimination.
C) Total revenues are maximized when all buyers pay the same price.
D) Different prices charged to different customers can lower total revenue.

Question 61

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $3, the consumer would maximize utility by consuming

A) 30 units of Y.
B) 21 units of Y.
C) 10 units of Y.
D) 25 units of Y.

Question 62

In the article "Men vs. Women: How They Spend,"

A) Both sexes spend more than they earn.
B) Both sexes make the same annual income.
C) Both sexes spend the same amount of money on clothing purchases.
D) Women earn more than men.

Question 63

Which of the following is used to depict all combinations of goods that are affordable with a given income and given prices?

A) An indifference curve.
B) An indifference map.
C) A demand curve.
D) A budget constraint.

Question 64

If a successful advertising campaign increases brand loyalty, the

A) Supply of the advertised good will become less elastic.
B) Demand for the advertised good will become less elastic.
C) Supply of substitutes for the advertised good will increase.
D) Total level of consumption will decrease.

Question 65

The mix of consumer purchases that maximizes the utility attainable from available income is called the

A) Total utility combination.
B) Marginal utility combination.
C) Optimal consumption.
D) Maximum consumption.

Question 66

Any point on the budget constraint

A) Gives the consumer the highest level of utility.
B) Represent a combination of two goods that are affordable.
C) Represents combinations of two goods that yield the same utility.
D) Reflects the price of one good divided by the price of another good.

Question 67

An indifference curve shows the

A) Maximum utility that can be achieved for a given consumer budget.
B) Maximum utility that can be achieved for different amounts of a good.
C) Combinations of goods giving equal utility to a consumer.
D) Optimal consumption combinations between two goods.

Question 68

Refer to Figure 19.2. Diminishing marginal utility begins after

A) The fourth apple.
B) The fifth apple.
C) The third apple.
D) The first apple.

Question 69

The In the News article titled "Men vs. Women: How They Spend" differentiates the spending habits of women and men: "Men spend almost twice as much as women do on electronic equipment … young women spend twice as much money on clothing, personal care items, and their pets." Which determinant of demand is most likely involved?

A) Income.
B) Tastes.
C) Expectations.
D) Other goods (availability and prices).

Question 70

If Josh's income increases, then

A) His entire budget constraint will shift toward the origin.
B) His entire budget constraint will shift away from the origin.
C) His indifference curves will shift away from the origin.
D) One end of his budget constraint will move away from the origin.

Question 71

Assume that Anna buys peanut butter and bread. If the price of peanut butter falls, then

A) One end of her budget constraint will move away from the origin.
B) Her entire budget constraint will shift toward the origin.
C) Her entire budget constraint will shift away from the origin.
D) Her indifference curves will shift away from the origin.

Question 72

The point where the budget constraint and an indifference curve are tangent

A) Represents maximum total revenue.
B) Indicates the optimal level of production.
C) Represents the optimal consumption point.
D) Indicates profit maximization.

Question 73

The slope of the indifference curve is equal to the

A) Ratio of the price of one good to the price of the other good.
B) Income of the consumer.
C) Marginal rate of substitution.
D) Slope of the demand curve.

Question 74

When choosing among products, consumers look at

A) The marginal utility per dollar and their budget constraint.
B) The total utility that will be gained at the end of all consumption.
C) Only their budget.
D) The marginal utility of the good.

Question 75

The slope of the budget constraint, when a consumer has reached optimal consumption of two goods, is equal to the

A) Marginal rate of substitution.
B) Cross-price elasticity of the two goods.
C) Total utility for the two goods.
D) Marginal rate of indifference.

Question 76

A successful advertising campaign will

A) Increase the demand for the advertised good.
B) Increase the price elasticity of demand for the advertised good.
C) Cause the quantity supplied of the advertised good to increase.
D) Reduce the perceived utility of the good.

Question 77

If advertising is successful,

A) The demand becomes more elastic.
B) The demand curve shifts to the left.
C) The demand curve shifts to the right and becomes steeper.
D) The demand curve shifts to the left, and demand becomes more price-elastic.

Question 78

All of the possible combinations of two goods that lie on one indifference curve

A) Give the consumer the highest possible utility.
B) Yield the same level of utility.
C) Are affordable.
D) Yield the same level of marginal utility.

Question 79

An indifference map shows

A) A set of indifference curves.
B) One indifference curve.
C) A set of indifference curves and a set of budget constraints.
D) A set of budget constraints and one indifference curve.

Question 80

Marginal utility is the

A) Change in total utility obtained by spending one extra dollar on a good or service.
B) Change in total utility obtained by consuming one extra unit of a good or service.
C) Change in total utility obtained by selling one extra unit of a good or service.
D) Utility received from consuming the optimal combination of goods and services.