1. A
cost that is incurred when an actual monetary payment is made is a(n)
__________ cost.
a.
|
Explicit
|
b.
|
Implicit
|
c.
|
Positive
|
d.
|
Expressed
|
2. A
cost of resources used in production for which no actual monetary payment is
made is a(n) __________ cost.
a.
|
Tacit
|
b.
|
Implicit
|
c.
|
Covert
|
d.
|
Explicit
|
3. Which
of the following statements is true?
a.
|
Costs are always explicit, never
implicit.
|
b.
|
Costs are always implicit, never
explicit.
|
c.
|
George runs a stationery shop; he paid
Frank $5,000 for the carpet he installed in the shop. The $5,000 for carpet
is an implicit cost.
|
d.
|
An implicit cost is a cost that
represents the value of resources used in production for which no actual
monetary payment is made.
|
e.
|
none of the above
|
4. Five
months ago Wilson opened up a health club. Which of the following is an
implicit cost related to the health club?
a.
|
Wilson paid $120 for an outside laundry service
to clean the towels used at the club.
|
b.
|
Wilson paid $100 for the pest control
exterminator to spray the health club.
|
c.
|
Wilson previously worked as an
accountant, earning $3,000 a month.
|
d.
|
Wilson usually eats four hamburgers a
day, priced at $3 each.
|
5. Which
of the following statements is false?
a.
|
Money must change hands before a cost
can be incurred.
|
b.
|
No monetary payment takes place when an
implicit cost is incurred.
|
c.
|
Costs may be either explicit costs or
implicit costs.
|
d.
|
Cost implies that a sacrifice has been
made.
|
6. Consider
the following information about a business Diane opened last year: price = $4,
quantity sold = 10,000; implicit cost = $14,000; explicit cost = $20,000. What
was Diane's economic profit?
a.
|
$20,000
|
b.
|
$34,000
|
c.
|
$6,000
|
d.
|
$42,000
|
7. Consider
the following information about a business Rodriguez opened last year: price =
$5; quantity sold = 15,233; implicit cost = $18,000; explicit cost = $33,000.
What was Rodriguez's accounting profit?
a.
|
$43,165
|
b.
|
$25,165
|
c.
|
$58,165
|
d.
|
$61,165
|
8. Joe
is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $100,000
in total revenues and paid $75,000 to his employees and suppliers. During the
course of the year, he received three offers to work for other barbers, with
the highest offer being $45,000 per year. What are Joe's explicit costs?
a.
|
$105,000
|
b.
|
$75,000
|
c.
|
$35,000
|
d.
|
$45,000
|
e.
|
$60,000
|
9. Joe
is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $100,000
in total revenues and paid $75,000 to his employees and suppliers. During the
course of the year, he received three offers to work for other barbers, with
the highest offer being $45,000 per year. What are Joe's implicit costs?
a.
|
$105,000
|
b.
|
$65,000
|
c.
|
$25,000
|
d.
|
$45,000
|
e.
|
$60,000
|
10. Joe
is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $100,000
in total revenues and paid $75,000 to his employees and suppliers. During the
course of the year, he received three offers to work for other barbers, with
the highest offer being $45,000 per year. What are Joe's accounting profits?
a.
|
$0
|
b.
|
-$25,000
|
c.
|
-$20,000
|
d.
|
$40,000
|
e.
|
$25,000
|
11. An
unrecoverable cost that should be disregarded in any current or future decision
is also called a(n) __________ cost.
a.
|
Sunk
|
b.
|
Explicit
|
c.
|
Implicit
|
d.
|
Variable
|
12. You
paid $25 for your ticket to the football game, only to see your favorite team losing
28-0 at the end of the first quarter. That $25 should now be regarded as a(n)
__________ cost that should be __________ in your decision on whether or not to
stay at the game.
a.
|
explicit; included
|
b.
|
explicit; disregarded
|
c.
|
sunk; included
|
d.
|
sunk; disregarded
|
13. Carol
says the following to an economist: "I hate playing the guitar, but I have
taken lessons for 10 years, so I might as well continue. There is a chance I
will become a professional guitarist one day." An economist would probably
make which of the following statements?
a.
|
In a world of scarcity and unhappy
alternatives, guitar playing may be your best bet.
|
b.
|
You're right; it is better not to let
all that time, energy, and money on guitar lessons go to waste. That would be
uneconomical and irrational.
|
c.
|
The music made by a guitar is nice;
maybe you should stay with it, you may come to like it.
|
d.
|
The cost you have incurred for guitar
lessons is sunk. You should not allow something that can't be undone to
influence a current decision.
|
14. A
fixed input is an input whose quantity
a.
|
can be changed as output changes in the
short run.
|
b.
|
cannot be changed as output changes in
the short run.
|
c.
|
cannot be changed as output changes in
the long run.
|
d.
|
a and c
|
e.
|
b and c
|
15. Which
of the following statements is true?
a.
|
The short run is always somewhere
between six and twelve months.
|
b.
|
In the short run, changes in output can
only be brought about by a change in the quantity of variable inputs.
|
c.
|
The long run is any period of time over
one year.
|
d.
|
In the short run, there are variable
costs but no fixed costs.
|
e.
|
b and d
|
16. Average
fixed cost
a.
|
is usually greater at lower levels of
output than at higher levels.
|
b.
|
does not change as output changes.
|
c.
|
exists only in the short run.
|
d.
|
is usually greater at higher levels of
output than at lower levels of output.
|
e.
|
a and c
|
17. Ryan recently went into the business of
producing and selling cardboard boxes. For this business, which of the
following is most likely to be a fixed cost?
a.
|
fire insurance
|
b.
|
labor costs
|
c.
|
paper costs
|
d.
|
long-distance telephone costs
|
e.
|
b, c, and d are equally likely to be
fixed costs
|
18. Costs
that do not change with output are called __________ costs.
a.
|
Marginal
|
b.
|
Average
|
c.
|
Fixed
|
d.
|
Variable
|
19. Fixed
costs
a.
|
are equal to explicit costs plus
implicit costs.
|
b.
|
do not vary with output.
|
c.
|
are the same as total costs for any
level of output greater than zero.
|
d.
|
are another name for sunk costs.
|
20. Which
of the following statements is false?
a.
|
Since (total) fixed costs are constant
as output changes in the short run, it follows that average fixed cost is
constant in the short run.
|
b.
|
Marginal cost is the cost of producing
an additional unit of output.
|
c.
|
Changes in variable costs are reflected
dollar-for-dollar in changes in total cost.
|
d.
|
Fixed costs exist in the short run, but
not in the long run.
|
21. At
100 units of output, total cost is $30,000 and total variable cost is $14,000.
What does average fixed cost equal at 100 units?
a.
|
$300
|
b.
|
$160
|
c.
|
$140
|
d.
|
There is not enough information to
answer the question.
|
22. At
200 units of output, total cost is $36,000 and total variable cost is $20,000.
What does total fixed cost equal at 200 units?
a.
|
$38,000
|
b.
|
$20,000
|
c.
|
$16,000
|
d.
|
$80
|
e.
|
none of the above
|
23. Which
of these statements is false?
a.
|
There are no fixed costs in the long
run.
|
b.
|
Total costs are equal to total fixed
costs plus total variable costs.
|
c.
|
In the short run, all inputs are fixed
inputs.
|
d.
|
A fixed cost is a cost that does not
change as output changes.
|
24. The
change in total cost that results from a change in output is __________ cost.
a.
|
average fixed
|
b.
|
average variable
|
c.
|
average total
|
d.
|
Marginal
|
25. The
law of diminishing marginal returns holds for a situation in which
a.
|
all inputs are variable.
|
b.
|
all inputs are fixed.
|
c.
|
some inputs are variable and some inputs
are fixed.
|
d.
|
all inputs are increased in the same
proportion.
|
26. "As
additional units of a variable input are added to a fixed input, eventually the
marginal physical product of the variable input will decline." This is a
statement of the
a.
|
law of supply.
|
b.
|
average-marginal rule.
|
c.
|
law of diminishing marginal utility.
|
d.
|
law of diminishing marginal returns.
|
27. A
rising marginal cost curve is a reflection of a
a.
|
rising marginal physical product curve.
|
b.
|
falling marginal physical product curve.
|
c.
|
falling average fixed cost curve.
|
d.
|
rising average variable cost curve.
|
28. The
law of diminishing marginal returns is
a.
|
the same as economies of scale.
|
b.
|
the same as the law of diminishing
marginal utility.
|
c.
|
important for long-run economic
analysis.
|
d.
|
relevant to the production of goods, but
not services.
|
e.
|
none of the above
|
29. As
the marginal physical product curve rises,
a.
|
the marginal cost curve rises.
|
b.
|
the marginal cost curve falls.
|
c.
|
the total cost curve rises.
|
d.
|
the total cost curve falls.
|
30. The
change in output that results from changing a variable input by one unit,
holding all other inputs fixed, is called the marginal __________ product.
a.
|
Physical
|
b.
|
Value
|
c.
|
Average
|
d.
|
Explicit
|
31. The
marginal physical product (MPP) of a variable input is
a.
|
total output divided by the quantity of
the input used.
|
b.
|
the change in total output that results
from changing the variable input by one unit.
|
c.
|
the change in total revenue that results
from changing the variable input by one unit.
|
d.
|
the change in total output that results
from changing the fixed input by one unit.
|
e.
|
the change in total costs that results
from a change in output.
|
32. Which
of the following curves should one look at to observe the law of diminishing
marginal returns?
a.
|
the average fixed cost curve
|
b.
|
the total fixed cost curve
|
c.
|
the marginal physical product curve
|
d.
|
the long run average total cost curve
|
33. Suppose
that a firm produces hard candies using both machines and labor, and that its
quantity of machines is currently fixed but it can vary the number of workers.
As more workers are added to operate the machines, output increases. Is this a
refutation of the law of diminishing marginal returns?
a.
|
Yes, because the law definitely states
that output will decrease as more workers are added.
|
b.
|
No, because we must be observing output
in the long run if the stated scenario is occurring.
|
c.
|
Yes, because the only way that this
could occur is if the number of machines being used is also increasing.
|
d.
|
No, because it is entirely possible for
output to increase even when the law is in operation.
|
Table 1
(1)
|
(2)
|
(3)
|
(4)
|
Variable
Input
|
Fixed
Input
|
Quantity
of Output
|
MPP of
Variable Input
|
0
|
1
|
0
|
|
1
|
1
|
20
|
A
|
2
|
1
|
41
|
B
|
3
|
1
|
63
|
C
|
4
|
1
|
86
|
D
|
5
|
1
|
108
|
E
|
6
|
1
|
129
|
F
|
34. Refer
to Table 1. The numbers that go in blanks A and B are, respectively,
a.
|
20 and 22.
|
b.
|
0 and 21.
|
c.
|
20 and 61.
|
d.
|
1 and 2.
|
e.
|
20 and 21.
|
35. Refer
Table 1. The numbers that go in blanks C and F are, respectively,
a.
|
22 and 21.
|
b.
|
20 and 22.
|
c.
|
23 and 24.
|
d.
|
22 and 20.
|
e.
|
none of the above
|
36. Refer
to Table 1. Diminishing marginal returns set in with the addition of which unit
of the variable input?
a.
|
the fourth
|
b.
|
the fifth
|
c.
|
the sixth
|
d.
|
the second
|
37. Refer
to Table 1. What number goes in blank D?
a.
|
4.0
|
b.
|
21.5
|
c.
|
23.0
|
d.
|
149.0
|
38. As
the marginal physical product of a variable input __________, the marginal cost
__________.
a.
|
increases; increases
|
b.
|
increases; decreases
|
c.
|
decreases; increases
|
d.
|
b and c
|
39. Suppose
that one fixed and one variable input are used to produce good X. As the
marginal physical product of the variable input increases, then marginal cost
a.
|
increases.
|
b.
|
decreases.
|
c.
|
remains constant.
|
d.
|
There is not enough information to
answer the question.
|
40. Suppose
a given marginal cost curve starts out downward sloping and at some point turns
upward. The point at which it turns upward is the point at which
a.
|
marginal physical product increases.
|
b.
|
total cost rises.
|
c.
|
average fixed cost declines.
|
d.
|
average variable cost is below marginal
cost.
|
e.
|
diminishing marginal returns set in.
|
41. When
an economist talks about utility, she is talking about
a.
|
a company that provides electricity,
water, gas, etc.
|
b.
|
the satisfaction, in terms of price,
that a producer receives from selling his product.
|
c.
|
the satisfaction that results from the
consumption of a good.
|
d.
|
the amount of one good that a person is
willing to give up in order to get a unit of another good.
|
e.
|
the satisfaction that results from the
consumption of a good minus the price that must be paid to get the good.
|
42. A
util is an artificial construct used as a means of measuring the
a.
|
price of a good.
|
b.
|
satisfaction one receives from the
consumption of a good.
|
c.
|
costs of producing a good.
|
d.
|
difference between the price and the
value of a good.
|
43. Total
utility is defined as the
a.
|
change in marginal utility a person
derives from the consumption of a good.
|
b.
|
change in total utility a person derives
from the consumption of a good divided by the price of that good.
|
c.
|
change in total utility a person derives
from the consumption of a good divided by the change in the consumption of
that good.
|
d.
|
sum of the amounts of satisfaction a
person receives from consuming a good.
|
e.
|
change in total utility a person derives
from the consumption of a good.
|
44. Marginal
utility is defined as the
a.
|
change in marginal utility a person
derives from the consumption of a good.
|
b.
|
change in total utility a person derives
from the consumption of a good divided by the price of that good.
|
c.
|
change in total utility a person derives
from the consumption of a good divided by the change in the quantity of the
good consumed.
|
d.
|
sum of the amounts of satisfaction a
person receives from consuming a good.
|
e.
|
change in total utility a person derives
from the consumption of a good divided by the value in use of that good.
|
45. Suppose
Alice receives 123 utils from consuming one hamburger and 50 utils from
consuming a second hamburger. What is the marginal utility of the second
hamburger?
a.
|
173 utils
|
b.
|
73 utils
|
c.
|
50 utils
|
d.
|
0 utils
|
e.
|
none of the above
|
46. Suppose
Will receives 50 utils from consuming one banana and 86 utils from consuming
two bananas. What is the marginal utility of the second banana?
a.
|
136 utils
|
b.
|
63 utils
|
c.
|
36 utils
|
d.
|
58 utils
|
e.
|
none of the above
|
47. Suppose
you are eating slices of pizza and after consuming the first slice you have 14
utils, after the second you have 22 utils, and after the third 25 utils. Then
a.
|
the law of diminishing marginal utility
is not applicable because your total utility is increasing instead of
diminishing.
|
b.
|
your total utility is 61 utils.
|
c.
|
your total utility is 25 utils, and the
marginal utility of the first slice is 8 utils (22 - 14).
|
d.
|
your total utility is 25 utils, and the
marginal utility of the third slice is 3 utils.
|
48. Suppose
you are eating buffalo wings at a local happy hour. The total utils from doing
so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150,
respectively. The marginal utility of the seventh wing is __________ utils.
a.
|
14
|
b.
|
150
|
c.
|
70
|
d.
|
21.4
|
49. Suppose
you are eating buffalo wings at a local happy hour. The total utils from doing
so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150,
respectively. The marginal utility of the sixth wing is __________ utils.
a.
|
14
|
b.
|
136
|
c.
|
20
|
d.
|
22.7
|
50. Suppose
you are eating buffalo wings at a local happy hour. The total utils from doing
so after the fourth, fifth, sixth, and seventh wings are 30, 50, 65, 72,
respectively. In this situation we have __________ marginal utility, which is
generally __________ in the analysis of consumer choice.
a.
|
increasing; assumed
|
b.
|
increasing; not assumed
|
c.
|
diminishing; assumed
|
d.
|
diminishing; not assumed
|
51. The
law of diminishing marginal utility can be stated as follows:
a.
|
As the amount of a good consumed increases,
the sum of satisfaction received tends to decrease.
|
b.
|
As the amount of a good consumed
increases, the additional satisfaction gained from consuming additional units
tends to decrease.
|
c.
|
As the amount of a good consumed
decreases, the additional satisfaction gained from consuming additional units
tends to increase.
|
d.
|
As the amount of a good consumed
increases, the sum of satisfaction received tends to increase but at a
diminishing rate.
|
e.
|
b and d
|
52. The
law of diminishing marginal utility says that
a.
|
the marginal utility gained by consuming
equal successive units of a good will decline as the amount consumed
increases.
|
b.
|
the more of a particular good one
consumes, the greater is the utility received from the consumption of that
good.
|
c.
|
the marginal utility gained by consuming
equal successive units of a good will increase as the amount consumed
increases.
|
d.
|
the more of a particular product one
sells, the less utility one receives from selling.
|
e.
|
none of the above
|
53. Suppose
you are consuming a particular good and you could somehow give back the last
unit you consumed. What would happen to total and marginal utility (assuming
that the marginal utility of the unit given back is positive)?
a.
|
Both total and marginal utility would
decrease.
|
b.
|
Both total and marginal utility would
increase.
|
c.
|
Total utility would increase but
marginal utility would decrease.
|
d.
|
Total utility would decrease but
marginal utility would increase.
|
e.
|
There would be no change in marginal
utility but total utility would decrease.
|
54. Which
of the following is true?
a.
|
It is possible for total utility to rise
as marginal utility falls.
|
b.
|
Marginal utility is the same as total
utility.
|
c.
|
As marginal utility falls, total utility
always falls.
|
d.
|
a and c
|
55. We
take one dollar from a millionaire and give it to a pauper. Assuming a
diminishing marginal utility of money,
a.
|
total utility in the economy must rise.
|
b.
|
total utility in the economy must fall.
|
c.
|
total utility in the economy must remain
the same.
|
d.
|
we cannot say whether or not total
utility changes.
|
56. Jackson
says that his fifth game of chess gave him greater utility than his first, and
therefore the law of diminishing marginal utility does not hold. An economist
who believes that marginal utility definitely and always declines with the
consumption of equal successive units of a good will likely say
a.
|
the fifth game of chess is a different
good than the first game of chess.
|
b.
|
there are exceptions to the law of
diminishing marginal utility.
|
c.
|
the law of diminishing marginal utility
does not apply to board games.
|
d.
|
a or b
|
e.
|
a or c
|
57. Suppose
you just finished your third plateful of Thanksgiving dinner and it yielded
zero units of additional satisfaction. Should you go back for more?
a.
|
Why not? Since the third plateful gave
you zero units, the fourth can't give you any less than zero.
|
b.
|
No way. You could get negative utility
from the fourth plateful.
|
c.
|
Yes or no. It won't make any difference
because your total utility is at its peak.
|
d.
|
Yes. If you received zero units of
satisfaction from the third, then obviously the law of diminishing marginal
utility is not working in this case.
|
58. You
and your roommate are eating pizza and have already consumed all but the last
slice. Your roommate claims that he is hungrier than you and therefore should
get the last slice of pizza. Your roommate has made
a.
|
a diminishing marginal utility analysis.
|
b.
|
an interpersonal utility comparison.
|
c.
|
a correct statement.
|
d.
|
a marginal error.
|
59. Which
of the following statements is false?
a.
|
A millionaire definitely receives less
utility from an additional dollar than a poor person.
|
b.
|
A poor person definitely receives less
utility from an additional dollar than a rich person.
|
c.
|
A millionaire definitely receives the
same utility from an additional dollar as a poor person.
|
d.
|
A millionaire generally receives less
utility from an additional dollar than a poor person.
|
e.
|
We do not know if any of the statements
are true or false, because we do not know how much utility one person
receives relative to another.
|
60. Rich
has $100,000 and Poore has $1,000. Which of these statements is most strongly
supported by the theory of consumer choice?
a.
|
An extra dollar given to Rich is worth
less to him than his 100,000th dollar.
|
b.
|
An extra dollar is worth less to Rich
than it is to Poore.
|
c.
|
An extra dollar is worth less to Poore
than it is to Rich.
|
d.
|
Rich's 1,000th dollar is worth more to
Rich than Poore's 1,000th dollar is worth to Poore.
|
e.
|
Rich's 100,000th dollar is worth to Rich
exactly what Poore's 1,000th dollar is worth to Poore.
|
61. In
which of the following settings is an interpersonal utility comparison being
made?
a.
|
Brandon says to Jack, "I get a lot
more satisfaction out of eating pizza than you do."
|
b.
|
Stephanie says, "I don't know what
Taylor is feeling or thinking; I can't read a person's heart or mind."
|
c.
|
David says to Maria, "I know you
like this course a lot more than I do."
|
d.
|
a and c
|
e.
|
a, b, and c
|
62. Which
of the following statements is true?
a.
|
The less you have of any one good, the
less you would be willing to pay for one more unit of it.
|
b.
|
The less you have of any one good, the
more you would be willing to pay for one more unit of it.
|
c.
|
The amount you have of any one good does
not influence the price you would be willing to pay for it, but it does
affect the marginal utility received from consuming a particular unit.
|
d.
|
none of the above
|
63. Suppose
you could quantify the amount of satisfaction you receive from consuming ice
cream in money terms. You might say, "I expect to get $3 worth of
satisfaction from this ice cream cone." According to traditional economic
theory, if the price of this ice cream cone were $3.05, would you buy one?
a.
|
Sure, why not? What's a nickel?
|
b.
|
Absolutely. It's worth it at that price.
|
c.
|
No way, because it's not worth it.
|
d.
|
There is no way to answer this question
because you really can't compare the price of something and the amount of
satisfaction you expect to receive from it.
|
64. Suppose
the government provides peanut butter to everyone free of charge and everyone
consumes it to the point at which he receives no additional satisfaction from
another spoonful. Is this necessarily good?
a.
|
Yes, because everyone is satisfied.
|
b.
|
No, because there might be some cases
where the resources used to produce peanut butter could have been better used
to produce more of other products.
|
c.
|
Yes, because the law of diminishing
marginal utility indicates that in order to get the greatest amount of
satisfaction from the use of resources, people should consume as much of
every good as they can.
|
d.
|
none of the above
|
65. Dan
is currently consuming 10 Cokes and 5 slices of pizza per week such that the
marginal utility of the tenth Coke is 12 utils and that of the fifth slice of
pizza is also 12 utils. How should Dan redirect his purchases so as to attain
consumer equilibrium?
a.
|
He should buy more pizza slices and less
Coke.
|
b.
|
He should buy fewer pizza slices and
more Coke.
|
c.
|
He is currently attaining consumer
equilibrium and should not redirect his purchases.
|
d.
|
He could gain more satisfaction by
buying less of both and more of something else.
|
e.
|
There is not enough information to
answer the question.
|
66. Suppose
the marginal utility (MU) of paperback books is 40 utils and each costs $4
while the MU of video movies is 50 utils and each rents for $4. If you consume
one movie and one book per week, are you attaining consumer equilibrium?
a.
|
Yes, so there is no need to change.
|
b.
|
No. You need to buy more books and rent
fewer videos.
|
c.
|
No. You need to rent more videos and buy
fewer books.
|
d.
|
There is not enough information to
answer the question.
|
67. Suppose
for a consumer the marginal utility (MU) of bread is 10 utils and the MU of
milk is 20 utils; the price of bread is $1 and the price of milk is $1. Given
this,
a.
|
more utility per dollar is gained from
consuming bread than milk.
|
b.
|
more utility per dollar is gained from
consuming milk than bread.
|
c.
|
the same amount of utility per dollar is
gained from consuming milk as bread.
|
d.
|
the consumer is in consumer equilibrium.
|
68. If a
person is receiving greater utility per dollar from consuming one good than
another, it follows that he or she is
a.
|
maximizing disutility.
|
b.
|
not maximizing utility.
|
c.
|
maximizing utility.
|
d.
|
There is not enough information to
answer the question.
|
69. Ashley
is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog
she consumed yielded 20 utils while the last hamburger she ate gave her 25
utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ashley consuming the
correct quantities of these two goods to be in consumer equilibrium?
a.
|
No, she should consume more hamburgers
and fewer hot dogs.
|
b.
|
No, she should consume more hot dogs and
fewer hamburgers.
|
c.
|
Yes, so there is no need to change her
eating habits.
|
d.
|
There is not enough information to
answer the question.
|
70. In
order for an individual to achieve consumer equilibrium through the consumption
of two goods, A and B, that individual must fulfill the condition
a.
|
TUA = TUB.
|
b.
|
TUA/PA = TUB/PB.
|
c.
|
MUA = MUB.
|
d.
|
MUA/PA = MUB/PB.
|
e.
|
MUB/PA = MUA/PB.
|
71. A
consumer is in equilibrium if he or she derives the same
a.
|
total utility from each good consumed.
|
b.
|
total utility per dollar spent on each
good consumed.
|
c.
|
marginal utility from each good
consumed.
|
d.
|
marginal utility per dollar spent on
each good consumed.
|
72. Which
of the following statements is true?
a.
|
If a consumer is in equilibrium, it does
not necessarily follow that he or she is also achieving the greatest total
utility.
|
b.
|
If a consumer is in equilibrium, it
necessarily follows that he or she is also achieving the greatest total
utility.
|
c.
|
If a consumer is attaining the greatest
marginal utility, then it necessarily follows that he or she is also
achieving the greatest total utility.
|
d.
|
If a consumer is attaining the greatest
total utility, then it necessarily follows that he or she is also achieving
the greatest marginal utility.
|
73. The
law of diminishing marginal utility helps to explain
a.
|
why people trade.
|
b.
|
the law of demand.
|
c.
|
why the production possibilities
frontier is typically bowed-out.
|
d.
|
a and b
|
e.
|
all of the above
|
74. Suppose
a consumer is purchasing Coke (c) and pretzels (p) in quantities such that he
is achieving consumer equilibrium. Then the price of Coke increases. Which of
the following will be true?
a.
|
MUC/PC = MUP/PP
|
b.
|
MUC/PC > MUP/PP
|
c.
|
MUC/PC < MUP/PP
|
d.
|
We cannot say for certain what will
happen to the MUC/PC relative to the MUP/PP.
|
75. Suppose
a consumer is purchasing Coke and pretzels in quantities such that she is
achieving consumer equilibrium. Then the price of Coke decreases. The consumer
will likely __________ her consumption of Coke and the marginal utility of Coke
will __________ while the total utility from Coke will __________.
a.
|
increase; increase; increase
|
b.
|
increase; decrease; decrease
|
c.
|
increase; decrease; increase
|
d.
|
decrease; increase; increase
|
e.
|
decrease; decrease; decrease
|
76. Joe
is currently in consumer equilibrium by consuming cheese and crackers, such
that the last cracker consumed yielded 8 utils and the last piece of cheese
consumed yielded 12 utils. Assume the price of crackers is two cents per
cracker and the price of cheese is three cents per piece. If the price of
crackers increases to four cents, Joe should __________ his consumption of
crackers and his marginal utility from crackers will __________ and also __________
his consumption of cheese and his marginal utility from cheese will __________.
a.
|
increase; increase; increase; increase
|
b.
|
increase; increase; decrease; decrease
|
c.
|
increase; decrease; increase; decrease
|
d.
|
decrease; increase; decrease; increase
|
e.
|
decrease; increase; increase; decrease
|
77. Suppose
Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MUL
= 24 and MUE = 20. The price of eye shadow is $5, and the price of
lipstick is $4. What should Valerie do?
a.
|
Consume more eye shadow and less
lipstick.
|
b.
|
Consume more lipstick and less eye
shadow.
|
c.
|
Consume less of both.
|
d.
|
Consume more of both.
|
e.
|
Not change her consumption of either
good.
|
78. To an
economist, utility refers to the
a.
|
usefulness of a good or service.
|
b.
|
satisfaction that results from the
consumption of a good.
|
c.
|
relative scarcity of a good.
|
d.
|
rate of decline in the demand curve.
|
79. If
the total utilities corresponding to the first five units of a good consumed
are 10, 15, 19, 22, and 24, respectively, what is the marginal utility of the
fourth unit?
a.
|
22
|
b.
|
5
|
c.
|
4.5
|
d.
|
4
|
e.
|
3
|
80. Suppose
that the total utilities corresponding to the first five units of a good
consumed are 14, 20, 25, 29, and 32, respectively. The marginal utility of the
fifth unit is
a.
|
5.
|
b.
|
4.
|
c.
|
2.
|
d.
|
6.
|
e.
|
3.
|
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