Question 1

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

According to the law of diminishing marginal utility, as more of any one good is consumed in a given period, the additional satisfaction or utility derived from each additional unit consumed decreases. This leads to a decrease in the marginal utility of the good. Total utility may continue to increase as long as marginal utility is positive, but it will eventually decrease as marginal utility turns negative. Therefore, option B is the best choice.

Question 2

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

Accepted Answer

The answer of  
Table 7.2
-Refer to Table 7.2.The total...

Question 3

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) total utility is always 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 consumed provides less satisfaction than the previous one. Choice A is incorrect because marginal utility decreases, not increases, as consumption increases. Choice C is incorrect because total utility can be positive, negative, or zero depending on the level of consumption. Choice D is partially correct but incomplete.

Question 4

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's limited income requires her to prioritize the goods that provide the most utility per dollar spent. This means that she should determine the marginal utility of each good and then divide that by the price of the good to determine the utility per dollar spent. By doing this, she can allocate her income in a way that maximizes her overall satisfaction. Option A and B do not take into account the price of the goods, which is an important consideration for someone with a fixed income. Option D assumes that all goods provide equal marginal utility, which is unlikely to be the case in reality.

Question 5

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 will shift inwardly, meaning she can buy less pizza than before. As a result, she will have to substitute pizza with some other good, in this case fiction novels, to maintain her level of satisfaction. This means she will be buying more novels and fewer pizzas. Since her consumption of pizzas has decreased, the marginal utility per dollar spent on pizzas will fall.

Question 6

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 is the additional satisfaction or usefulness that a consumer derives from consuming one more unit of a good or service. It is not the total utility or average utility. It is also not directly related to the price of the good, as indicated in option D.

Question 7

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 8

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 benefit gained from consuming one more unit of a good or service. It is not the total amount of satisfaction but rather the incremental increase in satisfaction from consuming an additional unit.

Question 9

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 for which the marginal utility per dollar is higher. By doing so, she can maximize her overall satisfaction and achieve a better value for her money.

Question 10

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 pleasure a consumer derives from consuming a good or service. Therefore, it can be thought of as the same as satisfaction. Option A, opportunity cost, refers to the cost of the next best alternative foregone when making a decision. Option C, choice, refers to the act of selecting an option from a set of alternatives. Option D, none of the above, is incorrect as option B, satisfaction, is the correct answer.

Question 11

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 12

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 13

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 14

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 15

Table 7.3
-Refer to Table 7.3.The marginal utility of the first book is
A) 1.1.
B) 20.
C) 21.
D) 22.

Accepted Answer

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

Question 16

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) 3.
C) 6.
D) 12.

Accepted Answer

According to the table, the marginal utility for the fourth movie is 6 and the marginal utility for the fifth movie is also 6. This means that the additional satisfaction gained from watching the fifth movie is the same as the additional satisfaction gained from watching the fourth movie. Therefore, the marginal utility of the fifth movie is 6.

The best choice for the consumer would be to stop at the fourth movie since the marginal utility of the fifth movie is equal to the marginal utility of the fourth movie. Any additional movies watched would result in a decrease in marginal utility, indicating diminishing marginal utility.

Question 17

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 in order to maximize total utility, a consumer should allocate their spending in such a way that the marginal utility per dollar spent on each good purchased is equal. In other words, the consumer should continue buying goods until the marginal utility per dollar spent is the same for each good. Choice B and C both contain incorrect statements.

Question 18

The principle of opportunity cost is
A) the opportunity cost of something is what someone sacrifices to get it.
B) the satisfaction of obtaining the best next alternative.
C) 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. This means that when making a decision, someone must give up the opportunity to do something else in order to pursue the chosen option. Therefore, option A is the best choice.

Question 19

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.

Question 20

When the price of a good falls,the ratio of the marginal utility of that good divided by its price ________ and as a result,consumers purchase ________ of that good.
A) rises; more
B) falls; more
C) rises; less
D) falls; less

Accepted Answer

When the price of a good falls, the marginal utility per dollar spent on that good increases because you're getting more utility for each dollar spent. As a result, consumers are incentivized to purchase more of that good to maximize their overall utility.

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

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

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

According to the law of diminishing marginal utility,

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

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

Marginal utility is defined as the

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?

Marginal utility is the

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.

Utility can be thought of as the same as

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

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?

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

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

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

The equimarginal rule

The principle of opportunity cost is

Consumers should allocate their scarce income so that

When the price of a good falls,the ratio of the marginal utility of that good divided by its price and as a result,consumers purchase of that good.