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| 1 | |
The law of demand says that: |
| | A) | people do less of what they want to do as the cost of doing it falls. |
| | B) | people do less of what they want to do, only if the explicit cost of doing it rises. |
| | C) | people do less of what they want to do as either the implicit or explicit cost of doing it rises. |
| | D) | people only consider the explicit costs of goods, and only the implicit costs of services. |
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| 2 | |
Economists model individuals' consumption choices with the assumption that: |
| | A) | individuals allocate their incomes so as to maximize total utility. |
| | B) | individuals only consider marginal utility when deciding whether or not to purchase something. |
| | C) | individuals will continue to consume something as doing so increases total utility. |
| | D) | individuals allocate their incomes so as to maximize consumption of all goods and services. |
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| 3 | |
Use the following information to answer the following table, representing an individual's quantity of consumption and total utility over a given period of time to answer the following questions.
Quantity | Total Utility | 0 | 0 | 1 | 10 | 2 | 24 | 3 | 30 | 4 | 35 | 5 | 38 | 6 | 40 | 7 | 39 |
Refer to the utility table above. Marginal utility begins to decline when this individual consumes the _____ quantity. |
| | A) | 2nd |
| | B) | 3rd |
| | C) | 6th |
| | D) | 7th |
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| 4 | |
Which of the following actions best illustrates the law of diminishing marginal utility? |
| | A) | Matt doesn't consume dairy products because he is lactose intolerant. |
| | B) | The utility per dollar Kristi receives from vitamins decreases when the price increases. |
| | C) | Richard doesn't enjoy his third bowl of Cheerios as much as he enjoyed his second bowl. |
| | D) | Kevin sees fewer movies when price of movie tickets increases. |
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| 5 | |
The following diagram represents Robert's total utility from consumption of soda cans. Use it to answer the following question.
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Robert's marginal utility associated with consuming the third soda can equals: |
| | A) | 10. |
| | B) | 15. |
| | C) | 40. |
| | D) | 30. |
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| 6 | |
The following table represents Ray's total utility received from eating pizza slices and drinking cans of soda. Use it to answer the following question.
Q Pizza | Total Utility | | Q Soda | Total Utility | 1 | 10 | | 1 | 25 | 2 | 15 | | 2 | 28 |
If pizza costs $1/slice and soda costs $0.50/can, then the marginal utility per dollar from eating the second slice of pizza and drinking the second can of soda, respectively, equals: |
| | A) | 15 utils per dollar and 28 utils per dollar. |
| | B) | 5 utils per dollar and 3 utils per dollar. |
| | C) | 5 utils per dollar and 6 utils per dollar. |
| | D) | 3 utils per dollar and 5 utils per dollar. |
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| 7 | |
The following table represents Bill’s marginal utility from goods X and Y.
Quantity X | M.U. of X |
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| M.U. of Y | 1 | 20 | | | 1 | | 20 | 2 | 18 | | | 2 | | 10 | 3 | 8 | | | 3 | | 8 | 4 | 4 | | | 4 | | 2 |
If the price of X is $2 and the price of Y is $1 and Bill has $4 to spend, which combination of X and Y will maximize his utility: |
| | A) | 2 X and 0 Y |
| | B) | 0 X and 4 Y |
| | C) | 1 X and 2 Y |
| | D) | None of the above combinations would maximize his utility |
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| 8 | |
The real price of a good is given by: |
| | A) | the price people actually pay for a good in dollar terms. |
| | B) | the price of a good subtracted from their income level. |
| | C) | the price of a good relative to the average price of all other goods. |
| | D) | the price people pay for a good divided by the inflation rate. |
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| 9 | |
Use the following diagram to answer the following question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007723183x/597569/image16.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (10.0K)</a>]]>
Suppose there are 10 individuals in the market, each with the demand curve shown above.
Which of the following statements is true about the market demand? |
| | A) | The price intercept will equal $20. |
| | B) | The quantity demanded at a price of $10 will equal 250. |
| | C) | The quantity demanded at a price of $0 will equal 500. |
| | D) | All of the above. |
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| 10 | |
Use the following market diagram to answer the following question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007723183x/597569/image17.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (14.0K)</a>]]>
In the market above, the equilibrium price and quantity are indicated by P* and Q* respectively. The area of consumer surplus is best indicated by letter(s): |
| | A) | A |
| | B) | A + B + C |
| | C) | A + B + C + D |
| | D) | A + B + C + E + F |
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