Question 1

Statement I: Consumer surplus is the difference between what you have to pay and what you would have been willing to pay.
Statement II: A person's total utility reaches a maximum when that person's marginal utility falls to zero.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Statement I is a correct definition of consumer surplus. And statement II is a correct statement related to the concept of utility. It means that when the additional usefulness of a product declines to zero, the total utility will be at its maximum. Therefore, both statements are true.

Question 2

-Assume the demand curve is line AC.If price is OD,the consumer surplus is bounded by letters
A)OABD.
B)OAC.
C)DBC.
D)None of these are true.

Accepted Answer

C

Question 3

The economist most closely associated with consumer surplus is
A)Karl Marx.
B)Adam Smith.
C)Milton Friedman.
D)John Maynard Keynes.
E)Alfred Marshall.

Accepted Answer

Alfred Marshall is most closely associated with the concept of consumer surplus, which refers to the difference between what a consumer is willing to pay for a product and the actual price they pay. Marshall developed this idea as part of his analysis of supply and demand in his influential textbook "Principles of Economics."

Question 4

As you consume more and more of a service,
A)your consumer surplus is increasing.
B)your consumer surplus is remaining constant.
C)your consumer surplus is decreasing.

Accepted Answer

As you consume more of a service, the additional units typically provide less additional satisfaction, but if the price remains the same, the difference between what you are willing to pay and what you actually pay (consumer surplus) increases.

Question 5

If a restaurant served free steaks,people would consume more and more steaks until their ________ fell to zero.
A)marginal utility
B)total utility
C)consumer surplus
D)None of the choices are correct.

Accepted Answer

Marginal utility refers to the extra satisfaction or benefit obtained by consuming an additional unit of a good or service. At the beginning, consumers would enjoy each free steak they receive, increasing their total utility. However, as they consume more and more steaks, the marginal utility of each additional steak would start to decrease until it eventually becomes negative, i.e. the satisfaction obtained from an additional steak is lower than the cost (in terms of stomach space, potential discomfort, etc.). Therefore, people would stop consuming steaks when their marginal utility falls to zero.

Question 6

When you are maximizing your utility for product A,
A)marginal utility of A = 0.
B)marginal utility of A = 1.
C)marginal utility of A = price of
D)None of these are true.

Accepted Answer

When maximizing utility for a product (A in this case), the marginal utility of consuming an additional unit of A should equal the price of A. This is a fundamental principle of consumer choice theory, indicating that consumers allocate their budget to equate the marginal utility per dollar spent across all goods.

Question 7

As long as total utility is increasing,we know that marginal utility is
A)positive.
B)decreasing.
C)increasing.
D)negative.

Accepted Answer

Marginal utility refers to the additional satisfaction or utility that a consumer receives from consuming an additional unit of a good or service. If total utility is increasing, it means that each additional unit consumed is still providing some level of satisfaction, hence the marginal utility must be positive. Negative marginal utility would imply that consuming an additional unit decreases total utility, which contradicts the premise.

Question 8

Mr.Fefferberg had determined that the marginal utility of the last dollar he spent on cowboy boots is greater than the marginal utility of the last dollar that he spent on Nikes.Since he is a rational fellow,he will
A)buy equal quantities of Nikes and cowboy boots.
B)buy more cowboy boots and fewer Nikes.
C)buy more Nikes and fewer cowboy boots.
D)give up cowboy boots entirely.
E)give up Nikes entirely.

Accepted Answer

Mr. Fefferberg should buy more cowboy boots and fewer Nikes because the marginal utility of the last dollar spent on cowboy boots is higher than that of Nikes. This means that he will derive more satisfaction from purchasing another cowboy boot than he would from another Nike. Buying more cowboy boots and fewer Nikes would allow him to maximize his overall satisfaction or utility.

Question 9

If marginal utility is declining but still greater than zero,then total utility is
A)unrelated to the changes in marginal utility.
B)declining as well.
C)increasing.
D)declining for a while but increasing as it approaches zero.
E)staying the same.

Accepted Answer

When marginal utility is declining but still positive, it means that each additional unit of consumption is adding less utility than the previous one, but is still adding to the total utility, hence total utility is increasing.

Question 10

If total utility is decreasing,then
A)marginal utility is zero.
B)marginal utility is decreasing but still greater than zero.
C)marginal utility is equal to one.
D)marginal utility is increasing.
E)marginal utility is less than zero.

Accepted Answer

When total utility is decreasing, it means that the additional satisfaction (marginal utility) obtained from consuming one more unit of a good is negative, indicating that consuming more of the good actually reduces overall satisfaction.

Question 11

Jason's cooking is so terrible that Melissa says she will have to be paid in order to even try it.Thus,her marginal utility for Jason's cooking is
A)constant.
B)increasing.
C)positive.
D)negative.

Accepted Answer

Since Melissa believes that she will have to be paid to try Jason's cooking, it implies that her marginal utility for his cooking is negative. This means that each additional unit of Jason's cooking that she consumes will decrease her overall satisfaction or utility.

Question 12

As a person buys increasing amounts of a good,their marginal utility ______ and their consumer surplus _____.
A)decreases;increases
B)decreases;decreases
C)increases;increases
D)increases;decreases

Accepted Answer

As a person buys more of a good, the additional satisfaction (marginal utility) they get from each additional unit typically decreases, while the total benefit over what they paid (consumer surplus) increases.

Question 13

Statement I: The water-diamond paradox is partially explained by the law of diminishing marginal utility.
Statement II: The marginal utility of the water we consume is quite low.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

The water-diamond paradox, which questions why diamonds are more expensive than water despite water being essential for life, is explained by the law of diminishing marginal utility. This law states that as we consume more of a good, the additional satisfaction (marginal utility) we get from consuming an additional unit decreases. Since we consume water in large quantities, the marginal utility of water is low, making its price low despite its necessity. Conversely, diamonds are rare and consumed in much smaller quantities, making their marginal utility (and price) high.

Question 14

Statement I: Utility is measured by how much a person is willing to pay for a good or service.
Statement II: If you buy four units of a good,your total utility is higher than if you purchased only three units.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Statement I is correct because utility is the satisfaction or happiness that a person receives from consuming a good or service, and the amount a person is willing to pay for it indicates the level of utility they derive from it. 
Statement II is correct because the total utility increases as more units of a good are consumed, up to a certain point where the marginal utility (additional satisfaction from each additional unit) starts to decrease. Therefore, buying four units will provide a higher total utility than buying three units.

Question 15

According to the general utility formula,the marginal utility of a good divided by the price of that good is _______.
A)less that negative one
B)equal to one
C)greater than one
D)equal to zero

Accepted Answer

The general utility formula suggests that for an optimal allocation of resources, the marginal utility per dollar spent on each good should be equal across all goods, which implies that the marginal utility of a good divided by the price of that good is equal to one. This ensures that the last dollar spent on each good provides the same amount of satisfaction, maximizing total utility.

Question 16

If a person wishes to maximize their satisfaction from the consumption of a free product,they should consume until
A)marginal utility is maximized.
B)marginal utility is equal to total utility.
C)total utility is equal to zero.
D)marginal utility is equal to zero.
E)total utility begins to increase.

Accepted Answer

To maximize satisfaction from the consumption of a free product, a person should consume until the marginal utility (the additional satisfaction from consuming one more unit) is equal to zero. This is because consuming beyond the point where marginal utility becomes zero would lead to a decrease in overall satisfaction, as per the law of diminishing marginal utility.

Question 17

Which statement is true?
A)Total utility is maximized when marginal utility is zero.
B)The utility of a Big Mac is greater than the utility of a Whopper.
C)As one consumes more and more of a service,one's marginal utility rises.
D)None of these are true.

Accepted Answer

Total utility is maximized when marginal utility is zero because at this point, consuming additional units does not increase overall satisfaction.

Question 18

When Karen buys eight units of a particular good or service,______________.
A)she has no consumer surplus
B)she has a consumer surplus
C)there is no way of knowing whether she has a consumer surplus

Accepted Answer

If Karen buys eight units of a particular good or service, she has a consumer surplus if the total value that she places on the eight units is greater than the amount she paid for them. Thus, there is a possibility that she has a consumer surplus.

Question 19

Statement I: As we consume more and more of a product,our marginal utility declines.
Statement II: A person's marginal utility can never be negative.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Statement I is true because of the law of diminishing marginal utility, which states that as we consume more of a good, the satisfaction or utility we derive from each additional unit consumed decreases. Statement II is false because a person's marginal utility can be negative in certain situations, such as when consuming a product that has negative effects on their well-being or health.

Question 20

Statement I: If you knew a person's demand schedule,you could figure out her marginal utility schedule.
Statement II: As a person consumes more and more of a service,her total utility rises and her marginal utility declines.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Statement I is true because a person's demand schedule shows the quantity of a good or service that she is willing to buy at different prices. By analyzing changes in the price and quantity demanded, we can trace the consumer's willingness to pay for each unit of the good or service, which directly relates to her marginal utility schedule.

Statement II is also true since total utility rises as consumption of a good or service increases, but the marginal utility of each additional unit consumed declines. This diminishing marginal utility is the foundation of the law of demand, which states that as the price of a good or service falls, consumers will demand more of it.

Quiz 19: Theory of Consumer Behavior

Statement I: Consumer surplus is the difference between what you have to pay and what you would have been willing to pay. Statement II: A person's total utility reaches a maximum when that person's marginal utility falls to zero.

-Assume the demand curve is line AC.If price is OD,the consumer surplus is bounded by letters

The economist most closely associated with consumer surplus is

As you consume more and more of a service,

If a restaurant served free steaks,people would consume more and more steaks until their ________ fell to zero.

When you are maximizing your utility for product A,

As long as total utility is increasing,we know that marginal utility is

Mr.Fefferberg had determined that the marginal utility of the last dollar he spent on cowboy boots is greater than the marginal utility of the last dollar that he spent on Nikes.Since he is a rational fellow,he will

If marginal utility is declining but still greater than zero,then total utility is

If total utility is decreasing,then

Jason's cooking is so terrible that Melissa says she will have to be paid in order to even try it.Thus,her marginal utility for Jason's cooking is

As a person buys increasing amounts of a good,their marginal utility __ and their consumer surplus _.

Statement I: The water-diamond paradox is partially explained by the law of diminishing marginal utility. Statement II: The marginal utility of the water we consume is quite low.

Statement I: Utility is measured by how much a person is willing to pay for a good or service. Statement II: If you buy four units of a good,your total utility is higher than if you purchased only three units.

According to the general utility formula,the marginal utility of a good divided by the price of that good is _______.

If a person wishes to maximize their satisfaction from the consumption of a free product,they should consume until

Which statement is true?

When Karen buys eight units of a particular good or service,______________.

Statement I: As we consume more and more of a product,our marginal utility declines. Statement II: A person's marginal utility can never be negative.

Statement I: If you knew a person's demand schedule,you could figure out her marginal utility schedule. Statement II: As a person consumes more and more of a service,her total utility rises and her marginal utility declines.