Question 1

Utility can be thought of as the same as:
A)opportunity cost.
B)satisfaction.
C)choice.
D)none of the above.

Accepted Answer

Utility is the satisfaction or happiness derived from consuming or using a good/service. Therefore, option B is the best choice as it directly relates to the definition of utility. Option A (opportunity cost) refers to the cost of the next best alternative forgone and option C (choice) refers to the selection of one alternative over others. Option D (none of the above) is not a suitable choice as B is the correct answer.

Question 2

Suppose that Erin spends all of her income on two goods,pizza and fiction novels.If the price of pizza rises then:
A)the current marginal utility per dollar spent on pizza will rise.
B)the current marginal utility per dollar spent on pizza will fall.
C)the current marginal utility per dollar spent on fiction novels will rise.
D)the current marginal utility per dollar spent on fiction novels will fall.

Accepted Answer

When the price of pizza rises, Erin's budget constraint is affected, meaning she cannot afford to purchase as much pizza as before. This will decrease the marginal utility per dollar spent on pizza, whereas the marginal utility per dollar spent on fiction novels will remain constant.

Question 3

The equimarginal rule:
A)equates the marginal utility per dollar spent on each good purchased.
B)states that in order to maximize utility the consumer should buy more of those goods with a high marginal utility.
C)states that in order to maximize utility the consumer should buy more of those goods that cost less.
D)none of the above

Accepted Answer

The equimarginal rule states that a consumer should allocate their budget in such a way that the marginal utility per dollar spent is equal for all goods. This means that they should continue purchasing goods until the marginal utility per dollar spent is the same for all goods, allowing them to achieve maximum utility from their budget.

Question 4

Table 7.6
-Refer to Table 7.6.Pete has $10 to spend.He buys four cookies and three candies.Using the equimarginal rule which of the following is true?
A)Pete is maximizing his utility.
B)Pete is not spending the entire $10.
C)Pete could make himself better off by buying less candy and more cookies.
D)Pete could make himself better off by buying less cookies and more candy.

Accepted Answer

The answer of  Table 7.6
-Refer to Table 7.6.Pete has...

Question 5

Recall the application about measuring diminishing marginal utility with new techniques,what was shown in the study that the neuroscientists did on subjects and their reaction to varying monetary rewards?
A)It showed that general rewards are subject to diminishing marginal utility.
B)It showed a direct demonstration of the law of diminishing marginal utility.
C)It showed a direct demonstration of the subject's opportunity cost.
D)Nothing was shown in the study.

Accepted Answer

The study showed that general rewards are subject to diminishing marginal utility, meaning that the more of a reward a person receives, the less additional satisfaction they get from each additional unit of the reward.

Question 6

If the marginal utility per dollar is not the same for each good,the consumer could ________ her utility by spending ________ on goods for which the marginal utility per dollar is higher.
A)increase;more
B)increase;less
C)decrease;more
D)minimize;more

Accepted Answer

If the marginal utility per dollar is not the same for each good, the consumer can increase her overall utility by spending more on goods that provide higher marginal utility per dollar. This is because each additional dollar spent on these goods will provide a greater increase in overall utility compared to goods with lower marginal utility per dollar. Therefore, increasing spending on goods with higher marginal utility per dollar will enable the consumer to maximize her overall utility.

Question 7

Table 7.2
-Refer to Table 7.2.The total utility of the five slices of pie per day is:
A)95.
B)105.
C)85.
D)75.

Accepted Answer

The total utility of the five slices of pie per day is 95, as indicated in Table 7.2.

Question 8

Juan is consuming 3 sandwiches and 6 sodas.If a sandwich costs twice as much as a soda then:
A)Juan should buy more sodas.
B)Juan should buy more sandwiches.
C)Juan is maximizing his utility if he derives twice as much utility from the last soda as from the last sandwich.
D)Juan is maximizing his utility if he derives twice as much utility from the last sandwich as from the last soda.

Accepted Answer

Juan is maximizing his utility if the marginal utility per dollar spent is equal across all goods. Since a sandwich costs twice as much as a soda, he should derive twice as much utility from the last sandwich consumed as from the last soda to maximize utility, according to the principle of marginal utility per dollar spent.

Question 9

Table 7.3
-Refer to Table 7.3.For the consumer whose preferences are depicted,the marginal utility of the fifth movie is:
A)zero.
B)12.
C)3.
D)6.

Accepted Answer

The marginal utility of the first movie is 10, the second is 8, the third is 6, the fourth is 4, and the fifth is 3. The marginal utility of the sixth movie is zero. The consumer should choose to see the fifth movie because it has the highest marginal utility among the remaining options (the sixth movie has a zero marginal utility).

Question 10

As more of any one good is consumed in a given period,its:
A)total utility decreases then remains constant.
B)marginal utility decreases.
C)total utility decreases then increases.
D)marginal utility increases.

Accepted Answer

This statement reflects the Law of Diminishing Marginal Utility, which states that as more units of a good are consumed in a given period of time, the marginal utility (i.e. additional satisfaction gained from consuming each additional unit) decreases. While total utility may initially increase as more goods are consumed, it will eventually reach a point where the increase in marginal utility becomes negative, causing total utility to decrease. Therefore, Option B is the best choice as it correctly reflects the concept of diminishing marginal utility.

Question 11

According to the law of diminishing marginal utility:
A)as the consumption of a particular good increases,marginal utility increases.
B)as the consumption of a particular good increases,marginal utility decreases.
C)refers to the idea that total utility is negative.
D)B and C are correct

Accepted Answer

The law of diminishing marginal utility states that as the consumption of a particular good increases, marginal utility decreases. This means that each additional unit of the good provides less and less marginal utility, eventually reaching a point where marginal utility becomes negative. Option A is incorrect because it incorrectly states that marginal utility increases as consumption increases. Option C is also incorrect because total utility cannot be negative by definition (it represents the total satisfaction received from consuming a good). Option D is incorrect because only B is correct.

Question 12

The principle of opportunity cost is:
A)the opportunity cost of something is what someone sacrifices to get it.
B)is the satisfaction of obtaining the best next alternative
C)is the choice someone has to make between two different goods.
D)the cost of paying for something someone needs.

Accepted Answer

The principle of opportunity cost states that the opportunity cost of something is what someone sacrifices to get it. It is the cost of the next best alternative that has to be given up in order to pursue a certain action or decision. Therefore, choice A is the correct answer.

Question 13

Suppose that a consumer is currently spending all of her income on 10 units of good A and 5 units of good B.The price of good A is $4 per unit,the price of good B is $10 per unit,the marginal utility of the last unit of good A consumed is 20,and the marginal utility of the last unit of good B consumed is 60.If the consumer wants to maximize her utility from consuming the two goods she should:
A)consume more of good B and less of good A.
B)consume more of good A and less of good B.
C)continue to consume 10 units of good A and 5 units of good B.
D)consume more of both goods.

Accepted Answer

To maximize utility, a consumer should allocate spending so that the marginal utility per dollar is equal for all goods. Here, the marginal utility per dollar for good A is 20/4 = 5, and for good B is 60/10 = 6. Since the marginal utility per dollar is higher for good B, the consumer should consume more of good B and less of good A.

Question 14

Maxine has a fixed income per month to spend on goods and services,so in allocating her limited income over a set of goods,she should purchase the goods that:
A)have the highest utility regardless of price.
B)have the highest marginal utility.
C)provide the most utility per dollar spent.
D)have equal marginal utilities.

Accepted Answer

Maxine should purchase the goods that provide the most utility per dollar spent, as this will ensure that she maximizes her overall satisfaction with the limited income she has available. Choosing goods based solely on their utility or marginal utility may result in overspending on certain items and not being able to afford other necessary goods. Having equal marginal utilities does not necessarily mean that the goods are equally worthy of purchase, as their overall cost must also be considered.

Question 15

Table 7.3
-Refer to Table 7.3.The marginal utility of the first book is:
A)20.
B)22.
C)1.10.
D)21.

Accepted Answer

The marginal utility of the first book is 22, which is higher than the marginal utility of the second and third books. Therefore, the best choice would be to purchase only the first book.

Question 16

Table 7.6
-Refer to Table 7.6.Pete has $10 to spend.He buys two cookies and four candies.Using the equimarginal rule which of the following is true?
A)Pete is maximizing his utility.
B)Pete is not spending the entire $10.
C)Pete could make himself better off by buying less candy and more cookies.
D)Pete could make himself better off by buying less cookies and more candy.

Accepted Answer

The equimarginal rule states that consumers maximize their utility when the last dollar spent on each good or service yields the same level of marginal utility. If Pete follows this rule by buying two cookies and four candies with his $10, it implies he has allocated his budget in a way that maximizes his utility given the prices and his preferences.

Question 17

Marginal utility is the:
A)total amount of satisfaction gained by the consumption of a good or service.
B)additional satisfaction gained by the consumption or use of one more unit of something.
C)price of a good relative to the prices of other goods and services.
D)comparison of utility between two different people.

Accepted Answer

Marginal utility refers to the additional satisfaction or usefulness gained from consuming or using one more unit of something. It is not the total amount of satisfaction gained (option A) or the price of a good (option C). It is also not a comparison between two different people (option D).

Question 18

Table 7.3
-Refer to Table 7.3.The effect of the law of diminishing marginal utility is seen after:
A)the first movie and the first book.
B)the fifth movie and the second book.
C)the eighth movie and eighth book.
D)None of the above;this is a case where the law does not apply.

Accepted Answer

The answer of  Table 7.3
-Refer to Table 7.3.The effect...

Question 19

Marginal utility is defined as the:
A)additional utility gained by consuming an extra unit of a good.
B)total utility from all units consumed of a good.
C)total utility from all units consumed divided by the number of units consumed.
D)additional utility gained divided by the price of the good.

Accepted Answer

Marginal utility refers to the additional satisfaction or benefit that a consumer derives from consuming an extra unit of a good or service.

Question 20

Consumers should allocate their scarce income so that:
A)the marginal utility for all goods consumed is zero.
B)the marginal utility for all goods consumed is equal.
C)the marginal utility divided by price is equal for all goods consumed.
D)the marginal utility divided by price is maximized for all goods consumed.

Accepted Answer

The principle of consumer equilibrium suggests that consumers should allocate their scarce income in a way that the marginal utility per dollar spent (marginal utility divided by price) is equal across all goods consumed. This ensures the most efficient use of their income in terms of utility gained.

Quiz 7: Consumer Choice: Utility Theory and Insights From Neuroscience

Utility can be thought of as the same as:

Suppose that Erin spends all of her income on two goods,pizza and fiction novels.If the price of pizza rises then:

The equimarginal rule:

Table 7.6 -Refer to Table 7.6.Pete has $10 to spend.He buys four cookies and three candies.Using the equimarginal rule which of the following is true?

Recall the application about measuring diminishing marginal utility with new techniques,what was shown in the study that the neuroscientists did on subjects and their reaction to varying monetary rewards?

If the marginal utility per dollar is not the same for each good,the consumer could her utility by spending on goods for which the marginal utility per dollar is higher.

Table 7.2 -Refer to Table 7.2.The total utility of the five slices of pie per day is:

Juan is consuming 3 sandwiches and 6 sodas.If a sandwich costs twice as much as a soda then:

Table 7.3 -Refer to Table 7.3.For the consumer whose preferences are depicted,the marginal utility of the fifth movie is:

As more of any one good is consumed in a given period,its:

According to the law of diminishing marginal utility:

The principle of opportunity cost is:

Maxine has a fixed income per month to spend on goods and services,so in allocating her limited income over a set of goods,she should purchase the goods that:

Table 7.3 -Refer to Table 7.3.The marginal utility of the first book is:

Table 7.6 -Refer to Table 7.6.Pete has $10 to spend.He buys two cookies and four candies.Using the equimarginal rule which of the following is true?

Marginal utility is the:

Table 7.3 -Refer to Table 7.3.The effect of the law of diminishing marginal utility is seen after:

Marginal utility is defined as the:

Consumers should allocate their scarce income so that: