Question 1

We are maximizing our utility when the ______ of each good and service we purchase is equal to ______.
A)total utility;its price
B)marginal utility;its price
C)marginal utility;one
D)total utility;one

Accepted Answer

Maximizing utility requires that the ratio of marginal utility to price is equal across all goods and services. This ensures that the last unit of each good and service consumed provides the same additional satisfaction per dollar spent, and therefore allocates spending in the most efficient way possible. Therefore, the answer is B, as we are maximizing our utility when the marginal utility of each good and service we purchase is equal to its price.

Question 2

Suppose you buy eight pairs of shoes every spring.This year,your shoe store has a huge sale and you end up buying 12 pairs.How does your consumer surplus now compare to how much it would have been had there been no sale?
A)It is higher.
B)It remains the same.
C)It is lower.

Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay for a good or service and the actual price paid. In this case, if you were willing to pay $50 for a pair of shoes and they were on sale for $30, your consumer surplus would be $20. If you buy 8 pairs of shoes at $50 each, your total consumer surplus would be $160. However, if you buy those same 8 pairs of shoes on sale for $30 each, your total consumer surplus would be $320. Therefore, with the sale, your consumer surplus is higher.

Question 3

We will keep buying digital music downloads from the Internet until the marginal utility of the music downloads
A)rises to the price of the download.
B)falls to the price of the download.
C)is greater than the price of the download.
D)is less than the price of the downloaD.

Accepted Answer

The principle of marginal utility in economics suggests that consumers will continue purchasing a good until the marginal utility (the additional satisfaction from consuming one more unit of the good) falls to equal the price of the good. This is because consumers aim to maximize their utility, and when the marginal utility of a good is equal to its price, it indicates that the satisfaction gained from purchasing the good is exactly worth its cost, making it the optimal stopping point for consumption.

Question 4

Mr.Noriega paid $700 for each of three suits.Since all of the suits were pleasing to his taste,he would have been willing to pay according to this schedule: $950 for the first suit,$800 for the second suit,and $700 for the third suit.How much was his consumer surplus?
A)$100
B)$150
C)$250
D)$350
E)$700

Accepted Answer

The answer of Mr.Noriega paid $700 for each of three...

Question 5

Alfred Marshall discovered the concept of
A)utility.
B)consumer surplus.
C)diminishing marginal utility.
D)the diamond-water paradox.

Accepted Answer

Alfred Marshall is credited with introducing the concept of consumer surplus in his book "Principles of Economics" in 1890. Consumer surplus refers to the difference between the total amount that consumers are willing to pay for a good or service and the total amount that they actually pay for it.

Question 6

The water-diamond paradox is resolved once we realize that the marginal utility of the last gallon of water consumed is very ____ and the marginal utility of the last diamond carat purchased is very ___.
A)low;low
B)high;high
C)high;low
D)low;high

Accepted Answer

The water-diamond paradox is resolved by understanding that water, although essential, is abundant, leading to a low marginal utility for the last gallon consumed. Diamonds, being rare, have a high marginal utility for the last carat purchased.

Question 7

Statement I: The more piano lessons you take,the greater the consumer surplus you enjoy.
Statement II: Utility is measured by how useful a good or service is.
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 based on the concept of consumer surplus, which refers to the difference between the maximum price a consumer is willing to pay for a good or service and the actual price paid. Taking more piano lessons can lead to a greater appreciation and enjoyment of music, thus increasing the value of the lessons to the consumer and potentially leading to a higher price they would be willing to pay. Statement II, on the other hand, defines utility as the usefulness of a good or service. While utility is related to consumer surplus, it is not a direct measure of it.

Question 8

Statement I: If you know a person's demand schedule for product J,you can derive her marginal utility schedule for product J.
Statement II: If Bob buys 10 Sidney Sheldon novels,he is enjoying a consumer surplus.
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 answer of Statement I: If you know a person's...

Question 9

If you were in the middle of the desert,came upon a lemonade stand,and paid $20 for a glass of lemonade,
A)you would definitely be overpaying.
B)you would have gotten at least $20 of utility from the lemonade.
C)there is no way to determine whether or not you overpaid.

Accepted Answer

The concept of utility in economics suggests that if you willingly pay $20 for a glass of lemonade, especially in a situation like being in the middle of the desert, it indicates that the satisfaction or utility you expect to gain from the lemonade is at least worth $20 to you at that moment.

Question 10

Statement I: Utility is measured by a product's usefulness.
Statement II: If you purchased eight ballpoint pens at 75 cents each,you would be enjoying a consumer surplus.
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 answer of Statement I: Utility is measured by a...

Question 11

If a person consumes excessive amounts of a good or service,to the point that their total utility actually begins declining,then that person's marginal utility of the last unit consumed is _________.
A)positive
B)negative
C)zero
D)None of these choices are correct.

Accepted Answer

The answer of If a person consumes excessive amounts of...

Question 12

When marginal utility is _________,total utility is _________.
A)positive;increasing
B)zero;maximized
C)negative;decreasing
D)All of the choices are correct.

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. When marginal utility is positive, it means that consuming an additional unit of the good or service increases total utility, indicating that total utility is increasing. When marginal utility is zero, it means that consuming an additional unit of the good or service does not change the total utility, indicating that total utility is maximized at that point. When marginal utility is negative, it means that consuming an additional unit of the good or service decreases total utility, indicating that total utility is decreasing. Therefore, all the choices correctly describe the relationship between marginal utility and total utility.

Question 13

-Assume the demand curve is line AD.If price is OF,the consumer surplus is bounded by letters
A)OAFB.
B)OACE.
C)OAD.
D)ECD.
E)FBD.

Accepted Answer

The answer of 
-Assume the demand curve is line AD.If...

Question 14

Kelly eats five slices of pizza on a Friday night but admits each slice of pizza doesn't taste as good as the previous one.This suggests that for Kelly
A)the marginal utility of a slice of pizza is negative.
B)the total utility of slices of pizza is increasing by larger and larger increments.
C)the total utility of slices of pizza is declining.
D)the marginal utility of a slice of pizza is positive but decreasing.

Accepted Answer

Marginal utility refers to the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. In Kelly's case, each additional slice of pizza still provides positive satisfaction (utility) but less than the previous slice, indicating that the marginal utility is positive but decreasing.

Question 15

If Mrs.T.F.Baker buys 29 pairs of false eye lashes at the local drug store,
A)she is definitely enjoying a consumer surplus.
B)she may or may not be enjoying a consumer surplus.
C)she is definitely not enjoying a consumer surplus.

Accepted Answer

Mrs.T.F.Baker is enjoying a consumer surplus because she is buying 29 pairs of false eye lashes at the local drug store, which is more than the quantity she would be willing to buy at the market price.

Question 16

If Rachel bought too many hot dogs,her marginal utility would become negative and her total utility would
A)rise more slowly.
B)stop rising.
C)begin to fall.
D)become negative.

Accepted Answer

When Rachel bought too many hot dogs, her marginal utility would decrease and eventually become negative. This means that the additional hot dogs she consumes would provide less and less satisfaction, and eventually even cause dissatisfaction. As a result, her total utility would start to decline, indicating that she is worse off from consuming more hot dogs beyond a certain point. Therefore, the answer is C - her total utility would begin to fall.

Question 17

As people buy more and more of a service,their consumer surplus
A)increases.
B)decreases.
C)falls to zero.
D)becomes negative.

Accepted Answer

Consumer surplus increases as people buy more of a service because they are able to purchase additional units at a price lower than what they are willing to pay, thus increasing the total surplus they receive.

Question 18

If water became very scarce and diamonds became very plentiful
A)the marginal utility of diamonds and water would both rise.
B)the marginal utility of both water and diamonds would both fall.
C)the marginal utility of diamonds would rise and the marginal utility of water would fall.
D)the marginal utility of water would rise and the marginal utility of diamonds would fall.

Accepted Answer

The marginal utility of a good increases as it becomes scarcer and decreases as it becomes more plentiful. Therefore, if water became very scarce, its marginal utility would rise, and if diamonds became very plentiful, their marginal utility would fall.

Question 19

If your marginal utility from your last session with your personal trainer is equal to the price they charged you,then
A)you have had exactly the right number of sessions.
B)you have had too many sessions.
C)you have not had enough sessions.
D)there is no way to determine whether you have had enough sessions.

Accepted Answer

If the marginal utility from the last session is equal to the price charged, it means that the satisfaction received from the session is worth the amount paid. Therefore, it implies that the customer has received the optimal number of sessions that are worth the cost. There is no need for additional sessions as they would not add any further satisfaction value. Hence, the customer has had exactly the right number of sessions.

Question 20

-Assume the demand curve is line AD.If price is CB,then in the graph above,consumer surplus is bounded by
A)CAD.
B)CBED.
C)BAE.
D)None of these are correct.

Accepted Answer

The answer of 
-Assume the demand curve is line AD.If...

Quiz 19: Theory of Consumer Behavior

We are maximizing our utility when the of each good and service we purchase is equal to .

Suppose you buy eight pairs of shoes every spring.This year,your shoe store has a huge sale and you end up buying 12 pairs.How does your consumer surplus now compare to how much it would have been had there been no sale?

We will keep buying digital music downloads from the Internet until the marginal utility of the music downloads

Mr.Noriega paid $700 for each of three suits.Since all of the suits were pleasing to his taste,he would have been willing to pay according to this schedule: $950 for the first suit,$800 for the second suit,and $700 for the third suit.How much was his consumer surplus?

Alfred Marshall discovered the concept of

The water-diamond paradox is resolved once we realize that the marginal utility of the last gallon of water consumed is very __ and the marginal utility of the last diamond carat purchased is very _.

Statement I: The more piano lessons you take,the greater the consumer surplus you enjoy. Statement II: Utility is measured by how useful a good or service is.

Statement I: If you know a person's demand schedule for product J,you can derive her marginal utility schedule for product J. Statement II: If Bob buys 10 Sidney Sheldon novels,he is enjoying a consumer surplus.

If you were in the middle of the desert,came upon a lemonade stand,and paid $20 for a glass of lemonade,

Statement I: Utility is measured by a product's usefulness. Statement II: If you purchased eight ballpoint pens at 75 cents each,you would be enjoying a consumer surplus.

If a person consumes excessive amounts of a good or service,to the point that their total utility actually begins declining,then that person's marginal utility of the last unit consumed is _________.

When marginal utility is _,total utility is _.

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

Kelly eats five slices of pizza on a Friday night but admits each slice of pizza doesn't taste as good as the previous one.This suggests that for Kelly

If Mrs.T.F.Baker buys 29 pairs of false eye lashes at the local drug store,

If Rachel bought too many hot dogs,her marginal utility would become negative and her total utility would

As people buy more and more of a service,their consumer surplus

If water became very scarce and diamonds became very plentiful

If your marginal utility from your last session with your personal trainer is equal to the price they charged you,then

-Assume the demand curve is line AD.If price is CB,then in the graph above,consumer surplus is bounded by