Question 1

As long as a person had to pay a positive price for a good,he would never consume to the point where his total utility was falling with additional consumption.

Accepted Answer

This statement reflects the law of diminishing marginal utility, which states that as a person consumes more units of a good, the additional satisfaction (marginal utility) they derive from each unit decreases eventually. However, as long as the person has to pay a positive price for the good, they will continue consuming until the marginal utility of the last unit equals the price paid. Therefore, they will not consume to the point where their total utility is falling, as this would mean the marginal utility of the last unit is negative, which would not be worth the price paid.

Question 2

Marginal utility must be positive.

Accepted Answer

Marginal utility can be negative, zero, or positive, depending on the situation. It measures the change in utility from consuming an additional unit of a good or service, and can decrease as more units are consumed, potentially becoming negative.

Question 3

If a consumer is maximizing utility,she will purchase quantities of output to the point where the total utility per dollar spent on consumption is equal across all goods.

Accepted Answer

A consumer maximizes utility by equalizing the marginal utility per dollar spent across all goods, not the total utility per dollar.

Question 4

Behavioral economists use findings from psychology to explain complex consumer behavior that cannot always be explained by traditional economic models.

Accepted Answer

This statement is true. Behavioral economists incorporate insights from psychology to better understand and predict consumer decision making, particularly in situations where traditional economic models fall short.

Question 5

When a person's income doubles,her consumption of each good will double in order for her to stay in consumer equilibrium.

Accepted Answer

This statement assumes that the person's preferences and budget constraints remain constant, which may not necessarily be true. Changes in income can lead to changes in preferences and/or budget constraints, which could affect the person's consumption of each good differently. Therefore, we cannot assume that the consumption of each good will double with a doubling of income in all cases.

Question 6

Utility theory is an efficient tool in making interpersonal utility comparisons.

Accepted Answer

Utility theory is primarily concerned with individual preferences and does not provide a reliable method for comparing utility across different individuals.

Question 7

At consumer equilibrium income is allocated to purchases so that the ratio of marginal utility to price is equal for different goods.

Accepted Answer

At consumer equilibrium, the consumer allocates their income in a way that the marginal utility derived from the last unit of each good consumed is proportionate to its price. This means that the MU/price ratio is equal for all goods. Hence, option A is true.

Question 8

The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve.

Accepted Answer

The law of diminishing marginal utility suggests that the more of a product that a consumer consumes, the less satisfaction they will get from each additional unit consumed. This means that as the quantity consumed increases, the marginal utility (additional satisfaction obtained from consuming an additional unit) decreases. Therefore, as the price of a product increases, the quantity demanded by consumers will decrease due to the diminishing marginal utility they obtain from each additional unit consumed. This results in a negatively sloped demand curve, which is consistent with the law of diminishing marginal utility.

Question 9

The law of diminishing marginal utility is the reason for upward sloping supply curves.

Accepted Answer

The law of diminishing marginal utility refers to the decrease in satisfaction or usefulness as additional units of a good or service are consumed. It does not have a direct relationship with supply curves, which depict the relationship between the price of a product and the quantity that producers are willing and able to supply. In general, supply curves tend to slope upward because as the price of a good increases, producers can earn higher profits and are motivated to produce more, while at the same time consumers may be incentivized to buy less due to the higher price.

Question 10

The income effect occurs when an individual switches to another similar good when the price of the preferred good increases.

Accepted Answer

The income effect refers to the change in consumption resulting from a change in real income, not a switch to another good. The substitution effect is responsible for switching to a similar good when the price of the preferred good increases.

Question 11

If housing prices have increased for the past 20 years,it is almost certain that prices will increase the following year.

Accepted Answer

Just because housing prices have increased for the past 20 years does not guarantee that they will continue to increase in the following year. Many factors can influence the housing market, including economic conditions, interest rates, and demographic changes. Therefore, past performance cannot be relied upon to predict future outcomes with certainty.

Question 12

If a consumer is maximizing utility,he will purchase quantities of output to the point where the price of the last unit purchased is equal across all goods.

Accepted Answer

A consumer maximizes utility by purchasing quantities of goods such that the marginal utility per dollar spent is equal across all goods, not the price of the last unit.

Question 13

If a university cafeteria changes from selling each food item separately to offering all-you-can-eat meals for one low price,one would expect that the marginal utility of the last food item consumed in the cafeteria by the typical student would decrease since more food is now likely to be consumed by students who eat a meal in the cafeteria.

Accepted Answer

With all-you-can-eat meals, students are likely to consume more food than they would if they were buying each item separately. This means that the marginal utility of the last food item consumed will decrease, as students are likely to continue eating even if they are not receiving as much additional satisfaction from each additional food item.

Question 14

If total utility from consuming five cups of cocoa is 10,22,32,41,and 49 utils,respectively,the marginal utility of the fourth cup of coffee is 9.

Accepted Answer

The marginal utility of the fourth cup is calculated by subtracting the total utility of the third cup from the total utility of the fourth cup: 41 - 32 = 9 utils.

Question 15

If a coin toss comes up heads five times in a row,on the sixth flip the odds are better that this coin will come up tails.

Accepted Answer

The odds of a coin coming up heads or tails is always 50/50, regardless of how many times it has come up heads or tails in a row. Each flip is independent of the previous flips. Therefore, the outcome of the sixth flip is not influenced by the previous five flips.

Question 16

When marginal utility begins to diminish,total utility always diminishes.

Accepted Answer

Marginal utility diminishes when each additional unit of a good provides less additional satisfaction, but total utility can still increase as long as marginal utility is positive.

Question 17

The total utility from consuming five muffins is 14,24,35,43,and 50 utils,respectively.Marginal utility begins to diminish after consuming the first muffin.

Accepted Answer

The statement mentions that "Marginal utility begins to diminish after consuming the first muffin", which implies that the marginal utility of each subsequent muffin consumed is lower than the marginal utility of the previous one. This statement is true based on the law of diminishing marginal utility, which states that as a person consumes more of a good, the additional utility (marginal utility) from consuming each additional unit decreases. Therefore, the answer is A.

Question 18

Traditional economists base their models of human behavior on simplifying assumptions regarding rationality and decision making.

Accepted Answer

Traditional economists assume that individuals are rational and make decisions based on a careful analysis of costs and benefits. This assumption helps in creating mathematical models to understand human behavior. However, critics argue that this assumption is a simplification of real-world decision-making and does not account for emotions, biases, and social influences.

Question 19

An individual's level of utility is based on fulfillment of needs as opposed to wants.

Accepted Answer

The answer of An individual's level of utility is based...

Question 20

At consumer equilibrium,the level of marginal utility per dollar spent is the same for all consumers.

Accepted Answer

At consumer equilibrium, the level of marginal utility per dollar spent is the same for all goods and services consumed by an individual, not across different consumers.

Quiz 10: Consumer Choice Theory