Question 1

Consumer surplus does not exist because some consumers cannot afford to purchase the product at all.

Accepted Answer

Consumer surplus exists for consumers who are willing and able to purchase the product at a price lower than their willingness to pay. However, for those who cannot afford the product, consumer surplus does not apply.

Question 2

If there is no budget constraint,utility maximization is achieved when marginal utility is zero.

Accepted Answer

The answer of If there is no budget constraint,utility maximization...

Question 3

Price discrimination occurs when consumers have only partial information about a product's price and availability.

Accepted Answer

Price discrimination occurs when firms charge different prices to different groups of consumers for the same product or service, based on factors such as age, gender, location, or purchasing history. This can only happen when firms have enough information about the consumers to differentiate them and set different prices. Therefore, price discrimination requires more information, not partial information.

Question 4

Price discrimination occurs with products that consumers buy regularly.

Accepted Answer

The answer of Price discrimination occurs with products that consumers...

Question 5

According to consumer choice theory,rational behavior requires that consumers compare the marginal utility of each purchase with its price.

Accepted Answer

Consumer choice theory states that rational behavior means that consumers will weigh the marginal utility, or the additional satisfaction gained from consuming one more unit, with the price of that unit before making a purchase decision. This comparison allows consumers to choose the option that will provide the highest level of satisfaction for the money spent.

Question 6

Price discrimination occurs when stores mark down products for sale.

Accepted Answer

Price discrimination actually refers to the practice of charging different prices for the same product or service to different customers based on their willingness to pay. This could involve offering discounts or special deals to certain groups of customers while charging others full price.

Question 7

If marginal utility is rising,then total utility must be falling.

Accepted Answer

If marginal utility is rising, it means that the additional satisfaction obtained from consuming one more unit of a good is increasing. Therefore, total utility can still be increasing as long as the increase in marginal utility from each additional unit consumed is greater than the decrease in marginal utility from previous units. Total utility only starts to fall when marginal utility eventually decreases.

Question 8

All consumers in the market enjoy a consumer surplus.

Accepted Answer

Consumer surplus occurs when the price consumers are willing to pay for a product or service is higher than the actual price they pay. However, not all consumers experience consumer surplus, as it depends on individual valuations and market prices.

Question 9

Consumers who actually purchase a good either were willing to pay that price or more.

Accepted Answer

If consumers purchase a good, it means they were willing to pay at least the price at which it was offered. If they were not willing to pay that price or more, they would not have made the purchase.

Question 10

Utility maximization is always achieved where total revenue is maximized.

Accepted Answer

Utility maximization refers to the satisfaction or happiness that an individual gets from consuming goods or services. Total revenue, on the other hand, is the amount of money a company earns from selling its goods or services. They are not directly related, and therefore maximizing total revenue does not necessarily result in utility maximization for consumers.

Question 11

Advertisers currently spend about $1 million per year to change the demand for products.

Accepted Answer

Advertisers spend significantly more than $1 million per year on advertising to influence the demand for products. The actual amount is in the billions of dollars globally, reflecting the vast scale and importance of advertising in the economy.

Question 12

Price discrimination is illegal in the United States.

Accepted Answer

Price discrimination is legal in the United States as long as it is not based on discriminatory reasons such as race, gender, or religion. However, it is illegal under antitrust laws if it harms competition or leads to monopoly power.

Question 13

Colleges do not engage in price discrimination because it is illegal.

Accepted Answer

Colleges do engage in price discrimination, such as offering different financial aid packages to different students based on their financial circumstances. However, price discrimination based on certain factors like race, gender, or religion is illegal.

Question 14

Market demand is identical to individual demand.

Accepted Answer

Market demand is the sum of all individual demands in a market, so it is not identical to individual demand.

Question 15

Sellers can increase total revenues by charging different individuals the maximum they are willing to pay.

Accepted Answer

This is a basic principle of price discrimination, where the seller charges different prices to different customers based on their willingness to pay. By charging each customer the maximum they are willing to pay, the seller can capture more revenue than if they charged a single price to all customers.

Question 16

An individual's consumer surplus is the difference between the maximum price that she or he is willing to pay and the actual price.

Accepted Answer

Consumer surplus is defined as the difference between the maximum price a consumer is willing to pay for a good or service and the price that they actually pay. Therefore, the statement is true.

Question 17

If the marginal utility per dollar spent for candy bars is higher than the marginal utility per dollar spent for popcorn,you should buy more popcorn and fewer candy bars in order to maximize utility.

Accepted Answer

If the marginal utility per dollar spent for popcorn is higher than the marginal utility per dollar spent for candy bars, you should buy more popcorn and fewer candy bars in order to maximize utility.

Question 18

Optimal consumption is the mix of consumer goods sold that maximizes utility for producers.

Accepted Answer

Optimal consumption is the mix of consumer goods consumed or purchased by individuals that maximizes their utility or satisfaction, not producers.

Question 19

Consumer surplus is represented graphically under the demand curve and below the equilibrium price.

Accepted Answer

The answer of Consumer surplus is represented graphically under the...

Question 20

The law of diminishing marginal utility gives us insight into the downward-sloping demand curve because consumers are willing to pay a higher price for goods with high marginal utility.

Accepted Answer

The law of diminishing marginal utility states that as an individual consumes more units of a good or service, the additional satisfaction that they derive from each additional unit will eventually decrease. This implies that consumers are willing to pay a higher price for the initial units of a good with high marginal utility, but are willing to pay less for each subsequent unit as the marginal utility diminishes. As a result, the law of diminishing marginal utility helps explain why demand curves slope downward: as the price of a good or service increases, consumers become less willing to purchase additional units due to the diminishing marginal utility they derive.

Quiz 19: Consumer Choice Appendix: Indifference Curves