Deck 6: Consumer Choice Theory

Question 1

If utility is not maximized, then:

A) some change in consumption will increase satisfaction.
B) no change in consumption will increase utility.
C) only a change in income will increase utility.
D) only a change in price will increase utility.
E) the principle of diminishing marginal utility does not hold.

Answer 1

A

Question 2

Utility is most closely defined by which of the following terms?

A) Useful.
B) Worthiness.
C) Necessary.
D) Satisfaction.

Answer 2

D

Question 3

​Which of the following best describes the economic concept of utility?

A) Utility is the total number of units a consumer buys.
B) Utility measures the usefulness of goods, such as tools or food, and so goods such as artwork or attractive landscaping by definition has no utility.
C) Utility measures the satisfaction, or pleasure, that people receive from consuming a good or service.
D) None of the above are correct.

Answer 3

C

Question 4

A util:

A) can measure satisfaction with factual accuracy.
B) is not a valid concept.
C) applies to a good but not to a service.
D) is purely a fictitious measure of the satisfaction a consumer derives from a product.
E) can be used in place of money in some countries.

Question 5

Utility is:

A) easily measured, because all people derive the same utility from consumption.
B) easily measured, because it is an objective concept.
C) easily measured, because it is a subjective concept.
D) hard to measure, because it is a subjective concept.
E) hard to measure, because it is an objective concept.

Question 6

The marginal utilities associated with the first 4 units of consumption of good Y are 10, 12, 9, and 7, respectively. What is the total utility associated with the third unit?

A) 3.
B) 9.
C) 25.
D) 31.
E) The amount cannot be determined from the marginal utilities.

Question 7

In the context of consumer choice theory, utility means:

A) usefulness.
B) satisfaction.
C) practicality.
D) boring.
E) action.

Question 8

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

A) zero.
B) positive.
C) negative.
D) one.
E) infinite.

Question 9

John loves to travel. He would never turn down the opportunity to go on a trip. This means that, for John:

A) the total utility of travel always increases.
B) marginal utility of travel never decreases.
C) the law of diminishing marginal utility does not apply to travel.
D) marginal utility of travel is always zero.
E) extra travel yields zero consumer surplus.

Question 10

What term do economists use to refer to the satisfaction that an individual expects to receive from consuming a good or service?

A) Utility.
B) Response.
C) Usability.
D) Demand.
E) Desirable.

Question 11

____ is the subjective measure of the physical and mental satisfaction that is anticipated from consumption.

A) Demand
B) Supply
C) Recognition
D) Utility
E) Cognition

Question 12

A util represents a unit of measurement for the:

A) dollars a consumer spends on a good.
B) profit a firm makes from producing a good.
C) way a consumer will respond to a change in price.
D) happiness a person obtains from consuming a good.
E) way a producer will respond to a change in price.

Question 13

Utility refers to the:

A) relationship of demand to the supply of a product.
B) satisfaction a consumer experiences after a good or service is purchased.
C) satisfaction a consumer expects to receive from a good or service.
D) ability of a good or a service to have value in the marketplace.
E) usefulness of the product consumed.

Question 14

The term utility refers to the:

A) usefulness of a good in relation to its scarcity.
B) necessity of a good.
C) price of a good.
D) number of goods a consumer has.
E) pleasure or satisfaction a consumer receives upon consuming a good.

Question 15

Generally speaking, as more of a particular good is purchased, a consumer's marginal utility ____ and total utility ____.

A) increases; decreases
B) decreases; increases
C) increases; increases
D) decreases; decreases
E) generalizations cannot be made

Question 16

The marginal utilities associated with the first 5 units of consumption of good Y are 15, 15, 10, 7, and 3, respectively. What is the total utility associated with those 5 units?

A) 5.
B) −12.
C) 12.
D) 35.
E) 50.

Question 17

The ability of a good to satisfy a want refers to its:

A) usefulness.
B) utility.
C) worthiness.
D) necessity.

Question 18

Utility is defined as the:

A) sense of pleasure or satisfaction derived from consuming goods and services.
B) cost of acquiring goods and services.
C) profits consumers earn from consuming goods and services.
D) monetary value to consumers of goods and services.
E) desire to consume goods and services.

Question 19

The utility of a good is:

A) different for different consumers.
B) the same for all consumers.
C) constant no matter how much is consumed.
D) related to the cost of producing it.
E) easily measured.

Question 20

Which of the following statements is true about the total utility provided by a good?

A) Total utility can never be negative.
B) Total utility is maximized when marginal utility is maximized.
C) Total utility continues to increase as more of the good is consumed.
D) Total utility is maximized when marginal utility is zero (for total utility > 0).
E) Total utility is maximized when marginal utility is zero (for total utility < 0).

Question 21

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that:

A) gasoline is an economic good but water is not.
B) the marginal utility of gasoline is greater than the marginal utility of a gallon of water.
C) the average utility of a gallon of gasoline is greater than the average utility of a gallon of water.
D) the total utility of gasoline exceeds the total utility of water.

Question 22

Under which of the following circumstances might a gallon of water be more valuable than a flawless one carat diamond? ​

A) ​At a diamond shop next door to a clean public drinking fountain.
B) ​At a diamond shop next door to a typical grocery store selling bottled water.
C) ​In any U.S. city with safe, clean drinking water.
D) ​In a life raft with 8 passengers who have been adrift on a remote part of the Pacific Ocean for a week with few prospects of an immediate rescue.

Question 23

If water is essential for life, while diamonds are not, then why is water cheaper than diamonds?

A) Because most people would rather die with a big diamond ring than live without one.
B) Because the total utility generated by diamonds is larger than the total utility generated by water.
C) Because most people do not understand their total need for water.
D) Because water is abundant, the marginal utility of water is low, and price reflects marginal utility, not total utility.

Question 24

If total utility is falling, marginal utility is:

A) positive.
B) negative
C) positive, but declining.
D) either positive or negative.
E) zero.

Question 25

Which of the following is true about marginal utility?

A) Marginal utility is total utility divided by the total quantity consumed.
B) Marginal utility is the change in total utility divided by the change in total quantity demanded.
C) Marginal utility is the satisfaction that a consumer experiences from all the units of a good or service consumed.
D) None of the above are true.

Question 26

Marginal utility (MU) equals:

A) P/Q.
B) Q/TU.
C) PQ/TU.
D) TU/P.
E) TU/Q.

Question 27

Consumers tend to maximize:

A) marginal utility.
B) marginal utility per dollar.
C) total utility.
D) money holdings.
E) consumer surplus.

Question 28

A utility-maximizing consumer would never purchase a good if the:

A) MU/P is positive.
B) marginal utility is positive.
C) marginal utility is negative.
D) none of these is correct.

Question 29

Marginal utility is defined as:

A) the extra satisfaction the consumer receives from an extra $1 of income.
B) the total level of satisfaction a consumer receives upon the consumption of a certain number of goods.
C) the number of hours a consumer would be willing to work to receive a certain product.
D) the extra satisfaction a person derives from consuming an additional unit of a good.
E) a comparison of the utility a good provides with the price of that good.

Question 30

If finding the last stamp to complete your collection makes you happier than finding the first, then:

A) marginal utility is zero.
B) marginal utility is negative.
C) total utility is decreasing.
D) total utility is constant.
E) marginal utility is not diminishing.

Question 31

If the marginal utility of each good consumers buy does not diminish but remains constant, we should witness consumers:

A) buying no goods at all.
B) spending all of their income on the good with the highest MU.
C) buying one of each good.
D) buying only the least expensive goods.
E) become indifferent to what goods they buy.

Question 32

The conceptual measure of the satisfaction a person obtains by consuming all the units of a good or service during a given time period is:

A) total product.
B) total revenue.
C) total utility.
D) total product.

Question 33

Total utility is measured by a mythical unit called the:

A) bliss unit.
B) useful unit.
C) pleasure unit.
D) util.

Question 34

Marginal utility is the change in:

A) total utility when an extra unit of output is produced.
B) marginal utility when an extra unit of output is consumed.
C) total utility when an extra unit of output is consumed.
D) marginal utility when an extra unit of output is produced.
E) average utility when an extra unit of output is consumed.

Question 35

If total utility from consuming two cups of coffee is 20 utils, and if the total utility from consuming three cups of coffee is 25 utils, then which of the following is the marginal utility of the third cup of coffee?​

A) ​0.
B) 5.​
C) ​10.
D) ​20.
E) ​25.

Question 36

On Thanksgiving, Jake's mother gives him a huge platter of food. If Jake were to keep eating just to please his mother (even when he really wanted to stop), his marginal utility would be:

A) the same as his total utility.
B) large.
C) minus one.
D) positive.
E) negative.

Question 37

At the point where total utility is at its peak, marginal utility is:

A) zero.
B) positive.
C) negative.
D) positive, but declining.
E) positive, but increasing.

Question 38

Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24. An economist would conclude that:

A) Tina likes cake more than Jerry likes cake.
B) Jerry likes cake more than Tina likes cake.
C) Tina likes cake less than Jerry likes cake.
D) Jerry likes cake less than Tina likes cake.
E) we can't make a comparison to see who values cake more.

Question 39

Bonnie gets her hair cut at her usual salon and is very happy with the results. Later that afternoon, she goes to the mall and sees that a hair salon is giving away free haircuts only on that day. If Bonnie does not take advantage of the giveaway, it is because the:

A) marginal utility of the next haircut would be zero or negative.
B) marginal utility of the next haircut would increase.
C) marginal utility of the next haircut would be zero or positive.
D) total utility of both haircuts would be zero or negative.
E) total utility of both haircuts would be higher than just one haircut.

Question 40

Utility theory assumes that marginal utility:

A) increases as an individual consumes more of a product.
B) decreases as an individual consumes more of a product.
C) is zero as long as the individual derives utility from the product.
D) is constant as long as the individual derives utility from the product.
E) is constant as long as the individual derives satisfaction from the product.

Question 41

As more Big Macs are consumed each day, the marginal utility that a person gets from each additional Big Mac:

A) rises at a steady rate.
B) decreases.
C) remains constant.
D) accelerates.

Question 42

Which of the following most directly reflects the law of diminishing marginal utility?

A) After watching two football games, Terry decides to watch a third game.
B) A sports fan enjoys watching Monday night football rather than going to the theater.
C) After listening to three compact discs, Kim decides to go bowling rather than listen to a fourth disc.
D) A musician receives the biggest ovation of the evening after playing the final number of a recital.

Question 43

The amount by which an additional unit of a good or service increases a consumer's total utility is:

A) marginal bliss.
B) marginal benefit.
C) marginal utility.
D) marginal.

Question 44

The total utilities associated with the first 5 units of consumption of good X are 15, 30, 40, 47, and 50, respectively. What is the marginal utility associated with the third unit?

A) 15.
B) 70.
C) 85.
D) 10.
E) 45.

Question 45

A fall in marginal utility reflects:

A) the water and diamond paradox.
B) the law of supply.
C) the principle of diminishing marginal utility.
D) decreased consumption of a good.
E) the fact that total utility must be declining.

Question 46

"I'm tired of eating muffins for breakfast. Today, I'm trying a bagel." These statements most clearly reflect the:

A) law of increasing returns to scale.
B) second law of demand.
C) law of diminishing marginal utility.
D) law of comparative advantage.

Question 47

Marginal utility is measured by:

A) a ray from the origin to a point on the total utility curve.
B) the change in total utility for a 1-unit change in the quantity consumed.
C) total utility divided by total quantity consumed.
D) the first utility minus the last utility.
E) average utility multiplied by the total quantity consumed.

Question 48

If the price of a good falls, the marginal utility per dollar spent on that good:

A) also falls.
B) stays the same.
C) rises.
D) will rise or fall, depending on the consumer.
E) remains unchanged, provided the consumer buys no more of the good.

Question 49

If marginal utility is positive, then total utility is:

A) constant.
B) negative.
C) increasing.
D) decreasing.
E) zero.

Question 50

The statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the:

A) water and diamond paradox.
B) law of diminishing marginal utility.
C) law of total utility.
D) marginal-utility-to-price ratio equalization rule.
E) law of diminishing demand.

Question 51

Marginal utility will generally decrease when:

A) more of a particular good is consumed.
B) less of a particular good is consumed.
C) average utility is the least.
D) per capita utility is the least.
E) the TU curve's slope is positive rather than negative.

Question 52

Marginal utility can be measured by the change in:

A) total utility / the change in quantity.
B) income / the change in utility.
C) quantity / the change in income.
D) price / the change in utility.
E) income / the change in price.

Question 53

Suppose that for Merv the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10. For his snack, Merv should buy:

A) the caviar if he has the $50; otherwise, the popcorn.
B) the caviar if he has the $50; otherwise, nothing.
C) the popcorn, whether he has the $50 or not.
D) one serving each of the caviar and popcorn, if he has $51.
E) five servings of popcorn for each serving of caviar.

Question 54

The change in total utility due to a 1-unit change in the quantity consumed is:

A) marginal utility.
B) average utility.
C) per capita utility.
D) total utility.
E) the principle of diminishing marginal utility.

Question 55

"As consumption of a good increases, the extra satisfaction received from consuming an additional unit of the good decreases." This statement is known as the law of:

A) demand.
B) increasing costs.
C) diminishing marginal utility.
D) diminishing marginal returns.
E) total utility.

Question 56

Assume the total utilities corresponding to the first four units of a product consumed are 8, 12, 14, and 15, respectively. The marginal utility of the second unit consumed is:

A) 0.
B) 4.
C) 12.
D) 20.

Question 57

Marginal utility is best computed as the ratio of:

A) total utility to change in quantity consumed.
B) the change in total utility to total quantity consumed.
C) total quantity consumed to total utility.
D) the change in total utility to change in quantity consumed.

Question 58

As a general rule, marginal utility will be less:

A) as less of the good is consumed.
B) as more of the good is consumed.
C) when average utility is at a maximum.
D) only when the good is inferior.
E) when satisfaction is less than cost.

Question 59

Assume the total utilities corresponding to the first four units of a product consumed are 8, 12, 14, 15, respectively. The marginal utility of the third unit consumed is:

A) 2.
B) 14.
C) 3
D) 34.

Question 60

As more bananas are consumed, other things constant, marginal utility tends to decrease at:

A) the same rate for all people.
B) the same rate for all goods for a given person.
C) the same rate for all people.
D) different rates for different people and for other goods.
E) different rates for different people, but at the same rate as other goods.

Question 61

The principle of diminishing marginal utility says that:

A) as more of a good or service is consumed, demand decreases.
B) as more of a good or service is consumed, the price will rise.
C) the marginal utility of additional units consumed increases.
D) an increase in income causes demand to increase.
E) the marginal utility of additional units consumed decreases.

Question 62

If the price of a product rises, consumers buy less of the good because the:

A) MU/P of the good falls below the MU/P of other goods.
B) MU/P of the good rises above the MU/P of other goods.
C) marginal utility of the good diminishes.
D) total utility of the good diminishes.
E) marginal utility of the good rises.

Question 63

Suppose the law of diminishing marginal utility holds for coffee. As a person drinks more coffee during the day, the total utility he or she receives will:

A) increase faster and faster.
B) fall steadily.
C) remain constant.
D) rise, but at slower and slower rates.

Question 64

The law of diminishing marginal utility is the principle that the marginal utility curve ____ as people consume more of a product in a given period.

A) rises.
B) falls.
C) remains unchanged.
D) first falls and then rises.

Question 65

Exhibit 6-1 Total utility for good X $$\begin{array} { | l | r | r | r | r | r | r | } \hline \text { Total utility (utils) } & 0 & 80 & 120 & 148 & 160 & 155 \\\hline \text { Quantity con sumed per day } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline\end{array}$$

-As shown in Exhibit 6-1, the marginal utility for the fifth unit consumed is:

A) 305.
B) 155.
C) 5.
D) 0.

Question 66

Diminishing marginal utility means that as you consume more of a good, other things constant, the:

A) total satisfaction you obtain from consuming this good falls.
B) total amount produced falls.
C) marginal product falls.
D) additional satisfaction you obtain from each additional unit of the good falls.
E) total satisfaction you obtain from each extra good becomes constant.

Question 67

Exhibit 6-2 Total utility for hamburgers, fries, and Cokes $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { T otal Utility } \\\text { from Hamburgers }\end{array} & \begin{array} { c } \text { Total Utility } \\\text { from Fries }\end{array} & \begin{array} { l } \text { Total Utility } \\\text { from Cokes }\end{array} \\\hline 1 \text { hamburger (100 utils) } & 1 \text { order of fries (30 utils) } & 1 \text { Coke (40 utils) } \\2 \text { hamburgers (180 utils) } & 2 \text { orders of fries } ( 50 \mathrm { utils } ) & 2 \text { Cokes } ( 60 \mathrm { util } \mathrm { s } ) \\3 \text { hamburgers (240 utils) } & 3 \text { orders of fries } 60 \mathrm { utils } ) & 3 \text { Cokes } ( 70 \mathrm { utils } ) \\\hline\end{array}$$

-In Exhibit 6-2 assume that the price of hamburgers is $2 each, fries cost 50 cents each, and Cokes cost $1 each. What is the marginal utility of having a second order of fries?

A) 10 utils.
B) 20 utils.
C) 30 utils.
D) 50 utils.

Question 68

If Mr. Smith thinks the last dollar spent on shirts yields less satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should:

A) decrease his spending on cola.
B) decrease his spending on cola and increase his spending on shirts.
C) increase his spending on shirts.
D) increase his spending on cola and decrease his spending on shirts.

Question 69

Exhibit 6-2 Total utility for hamburgers, fries, and Cokes $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { T otal Utility } \\\text { from Hamburgers }\end{array} & \begin{array} { c } \text { Total Utility } \\\text { from Fries }\end{array} & \begin{array} { l } \text { Total Utility } \\\text { from Cokes }\end{array} \\\hline 1 \text { hamburger (100 utils) } & 1 \text { order of fries (30 utils) } & 1 \text { Coke (40 utils) } \\2 \text { hamburgers (180 utils) } & 2 \text { orders of fries } ( 50 \mathrm { utils } ) & 2 \text { Cokes } ( 60 \mathrm { util } \mathrm { s } ) \\3 \text { hamburgers (240 utils) } & 3 \text { orders of fries } 60 \mathrm { utils } ) & 3 \text { Cokes } ( 70 \mathrm { utils } ) \\\hline\end{array}$$

-In Exhibit 6-2, assume that the price of hamburgers is $2 each, fries cost 50 cents each, and Cokes cost $1 each. Suppose the consumer has $6 to spend on hamburgers, fries, and Cokes. Which of the following meals gives the consumer the most utility?

A) 3 hamburgers, no fries, and no Cokes.
B) 2 hamburgers, no fries, and 2 Cokes.
C) 2 hamburgers, 2 orders of fries and 1 Coke.
D) 1 hamburger, 2 orders of fries, and 3 Cokes.

Question 70

Which of the following is true, according to the law of diminishing marginal utility?

A) The marginal utility of Diane's second Coke is greater than the marginal utility of her third pretzel, other things constant.
B) The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant.
C) The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant.
D) The total utility of two Cokes is greater than the total utility of three Cokes, other things constant.
E) The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant.

Question 71

Exhibit 6-1 Total utility for good X $$\begin{array} { | l | r | r | r | r | r | r | } \hline \text { Total utility (utils) } & 0 & 80 & 120 & 148 & 160 & 155 \\\hline \text { Quantity con sumed per day } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline\end{array}$$

-As shown in Exhibit 6-1, the marginal utility for the second unit consumed is:

A) 0.
B) 40.
C) 80.
D) 200.

Question 72

According to the law of diminishing marginal utility, the marginal utility curve is ____.

A) vertical
B) flat.
C) upward sloping.
D) downward sloping.

Question 73

A local restaurant offers an "all you can eat" ribs special. You pay $11.95, and then you can eat as many servings as you desire at no additional cost. It would follow that you will stop eating when:

A) your marginal utility (or value) derived from eating another serving is zero.
B) your total utility (or value) derived from all of the servings consumed just equals $11.95.
C) your marginal utility (or value) derived from another serving equals $11.95.
D) it is physically impossible for you to eat any more.

Question 74

The demand curve is downward-sloping because of the law of ____.

A) diminishing marginal utility
B) diminishing consumer equilibrium
C) consumer equilibrium
D) diminishing utility maximization

Question 75

In the consumer choice problem, consumers are confronted with which of the following?

A) ​A set of different consumer goods and services to choose from.
B) A set of prices for those goods and services.​
C) ​A finite budget that constrains the quantity of goods and services that consumers can buy.
D) ​Preferences or utility associated with consuming different quantities of each of the different goods and services.
E) All of the above answers are correct.​​

Question 76

The law of diminishing marginal utility exists for the first four units of a good if they have marginal utilities of:

A) 1, 2, 4, 8.
B) 8, 4, 1, 2.
C) 4, 8, 2, 1.
D) 8, 4, 2, 1.

Question 77

If the first four units of a good consumed have marginal utilities of 8, 4, 2, and 1, respectively, this trend is an indication of the:

A) law of consumer equilibrium.
B) law of diminishing marginal utility.
C) law of diminishing consumer surplus.
D) law of supply.

Question 78

Exhibit 6-2 Total utility for hamburgers, fries, and Cokes $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { T otal Utility } \\\text { from Hamburgers }\end{array} & \begin{array} { c } \text { Total Utility } \\\text { from Fries }\end{array} & \begin{array} { l } \text { Total Utility } \\\text { from Cokes }\end{array} \\\hline 1 \text { hamburger (100 utils) } & 1 \text { order of fries (30 utils) } & 1 \text { Coke (40 utils) } \\2 \text { hamburgers (180 utils) } & 2 \text { orders of fries } ( 50 \mathrm { utils } ) & 2 \text { Cokes } ( 60 \mathrm { util } \mathrm { s } ) \\3 \text { hamburgers (240 utils) } & 3 \text { orders of fries } 60 \mathrm { utils } ) & 3 \text { Cokes } ( 70 \mathrm { utils } ) \\\hline\end{array}$$

-In Exhibit 6-2, assume that the price of hamburgers is $2 each, fries cost 50 cents each, and Cokes cost $1 each. Suppose the consumer has $6 to spend on hamburgers, fries, and Cokes. In the consumer equilibrium, what is the marginal utility per dollar for each of the three goods?

A) 20 utils per dollar.
B) 40 utils per dollar.
C) 90 utils per dollar.
D) 270 utils per dollar.

Question 79

Exhibit 6-1 Total utility for good X $$\begin{array} { | l | r | r | r | r | r | r | } \hline \text { Total utility (utils) } & 0 & 80 & 120 & 148 & 160 & 155 \\\hline \text { Quantity con sumed per day } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline\end{array}$$

-As shown in Exhibit 6-1, the law of diminishing marginal utility is first observed at the:

A) first unit.
B) second unit.
C) third unit.
D) fourth unit.
E) fifth unit.

Question 80

The law of diminishing marginal utility indicates that the marginal utility curve is:

A) downward sloping.
B) upward sloping.
C) U-shaped.
D) flat.
E) vertical.