Question 1

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

Accepted Answer

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that the marginal utility of gasoline is greater than the marginal utility of a gallon of water. This means that consumers are willing to pay more for a unit of gasoline because they derive more satisfaction or usefulness from it than they do from a unit of water. This does not mean that water is not an economic good, or that gasoline has a greater total or average utility than water.

Question 2

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

Accepted Answer

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, a gallon of water would be more valuable than a flawless one carat diamond because water is necessary for survival and can mean the difference between life and death in this situation. The diamond would not have any practical use in this scenario. In all other scenarios presented, access to clean drinking water is readily available, making a gallon of water less valuable than a valuable diamond.

Question 3

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

Accepted Answer

The price of a good is determined by its marginal utility, not total utility. While water is essential for life, it is abundant and has a low marginal utility for most people, meaning that the value of each additional unit of water they consume is not very high. Conversely, diamonds are relatively scarce and have a high marginal utility for many people, meaning that the value of each additional diamond they acquire is relatively high. Therefore, even though water is more essential for life than diamonds, it is cheaper because its abundance and low marginal utility drive the market price down.

Question 4

If total utility is falling, marginal utility is:

Accepted Answer

According to the law of diminishing marginal utility, as total utility increases, marginal utility decreases. Therefore, if total utility is falling, it means that the marginal utility has become negative.

Question 5

Which of the following is true about marginal utility?

Accepted Answer

Marginal utility is the additional satisfaction or utility gained from consuming an extra unit of a good or service. It can be calculated as the change in total utility divided by the change in quantity demanded. Option A is incorrect as total utility is not divided by total quantity consumed to calculate marginal utility. Option C is incorrect as marginal utility refers to the satisfaction from an additional unit consumed, not all the units consumed. Option D is incorrect as option B is true.

Question 6

Marginal utility (MU) equals:

Accepted Answer

Marginal utility (MU) is expressed as the change in total utility (TU) resulting from a one-unit increase in the quantity (Q) of a good consumed. Therefore, MU = ΔTU/ΔQ or TU(Q+1)-TU(Q). As a result, the best choice is E, which is TU/Q.

Question 7

Consumers tend to maximize:

Accepted Answer

The answer of Consumers tend to maximize:
...

Question 8

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

Accepted Answer

A utility-maximizing consumer would never purchase a good if the marginal utility (MU) is negative. This is because consuming an additional unit of the good would decrease the total utility (TU) and lead to a decrease in overall satisfaction. In order to maximize utility, a consumer would continue purchasing a good until the marginal utility is zero or positive.

Question 9

Marginal utility is defined as:

Accepted Answer

Marginal utility is the extra satisfaction a person derives from consuming an additional unit of a good.

Question 10

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

Accepted Answer

Marginal utility is not diminishing because the additional satisfaction (utility) from the last stamp is greater than from the first, indicating increasing or at least non-diminishing marginal utility.

Question 11

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

Accepted Answer

If the marginal utility (MU) of a good remains constant, consumers will continue to derive the same level of satisfaction from each additional unit. Therefore, they will spend all their income on the good with the highest MU to maximize their total utility.

Question 12

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:

Accepted Answer

Total utility is the conceptual measure of satisfaction obtained by consuming all the units of a good or service during a given time period. Total product refers to the total output of a firm or industry, while total revenue is the amount of money earned from selling a good or service. Therefore, the correct answer is C.

Question 13

Total utility is measured by a mythical unit called the:

Accepted Answer

Total utility is measured by the util, a theoretical unit of measurement that represents the amount of utility or satisfaction a consumer derives from consuming a certain amount of goods or services. The other choices are incorrect as they do not represent the actual unit of measurement used for total utility.

Question 14

Marginal utility is the change in:

Accepted Answer

Marginal utility refers to the change in total utility that results from consuming one additional unit of a good or service.

Question 15

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?​

Accepted Answer

The marginal utility of the third cup of coffee can be calculated by subtracting the total utility of two cups of coffee from the total utility of three cups of coffee: 
Marginal utility = Total utility of 3 cups – Total utility of 2 cups 
Marginal utility = 25 – 20 
Marginal utility = 5

Therefore, the answer is B (5).

As for the best choice, it depends on the context of the situation. If the person is trying to maximize total utility, then they should consume three cups of coffee. However, if the person is trying to maximize their overall well-being and health, they may want to consider the negative effects of consuming too much caffeine and limit their coffee intake.

Question 16

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:

Accepted Answer

Marginal utility is the satisfaction derived from consuming one additional unit of a good. If Jake were to keep eating even when he didn't want to, the satisfaction he receives from each additional bite would decrease (as he becomes more and more full and possibly uncomfortable). This means that his marginal utility would be negative, reflecting a decrease in satisfaction.

Question 17

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

Accepted Answer

When total utility is at its peak, marginal utility is zero because any additional consumption does not increase total utility further.

Question 18

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:

Accepted Answer

Marginal utility is subjective and cannot be directly compared between individuals. It only indicates the additional satisfaction each person gets from consuming one more unit of a good.

Question 19

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:

Accepted Answer

Since Bonnie is already very happy with her haircut from her usual salon, the marginal utility of getting another haircut for free would most likely be zero or negative. There would be no additional satisfaction gained from the second haircut and it might even be a hassle to have another person cut her hair so soon after getting it done. Thus, it would not make sense for Bonnie to take advantage of the giveaway.

Question 20

Utility theory assumes that marginal utility:

Accepted Answer

Utility theory assumes that as an individual consumes more of a product, the additional utility (marginal utility) obtained from each additional unit decreases. This is known as the law of diminishing marginal utility, which is a fundamental concept in economics. Therefore, choice B is the correct answer.

Quiz 6: Consumer Choice Theory

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

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

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

If total utility is falling, marginal utility is:

Which of the following is true about marginal utility?

Marginal utility (MU) equals:

Consumers tend to maximize:

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

Marginal utility is defined as:

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

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

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:

Total utility is measured by a mythical unit called the:

Marginal utility is the change in:

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?

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:

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

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:

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:

Utility theory assumes that marginal utility:

Quiz 6: Consumer Choice Theory

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

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

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

If total utility is falling, marginal utility is:

Which of the following is true about marginal utility?

Marginal utility (MU) equals:

Consumers tend to maximize:

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

Marginal utility is defined as:

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

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

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:

Total utility is measured by a mythical unit called the:

Marginal utility is the change in:

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?​

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:

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

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:

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:

Utility theory assumes that marginal utility:

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

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?