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Multiple Choice Quiz
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1
Which of the following best expresses the law of diminishing marginal utility?
A)the more a person consumes of a product, the smaller becomes the total utility that he receives from its consumption.
B)the more a person consumes of a product, the smaller becomes the additional utility that he receives from consuming each additional unit.
C)the less a person consumes of a product, the smaller becomes the total utility that he receives from its consumption.
D)the less a person consumes of a product, the smaller becomes the additional utility that he receives from consuming each additional unit.
2
Human behaviour that seeks to maximize total utility is called
A)rational behaviour
B)consumer choice theory
C)marginal utility
D)substitution effect
3
Marginal utility is positive, but declining, when total utility is positive and
A)rising at an increasing rate.
B)falling at an increasing rate.
C)rising at a decreasing rate.
D)falling at a decreasing rate.
4
A budget constraint is faced by
A)consumers below the poverty line
B)consumers earning less than the average income in a given society
C)consumers whose expenditures typically exceed their income
D)all consumers, no matter what their income is
5
The substitution effect encourages a consumer to buy more of a product when its price decreases because
A)the real income of the consumer has increased
B)the real income of the consumer has decreased
C)the product is now relatively more expensive than it was
D)other products are now relatively less expensive than they were
6
How does the law of diminishing marginal utility explain why a demand curve is downward sloping?
A)as the quantity consumed increases, marginal utility received from each successive unit decreases, so the price the consumer is willing to pay for higher quantities will fall.
B)as the quantity consumed increases, marginal utility from each successive unit increases, so the price the consumer is willing to pay for larger quantities will rise.
C)as the quantity consumed decreases, marginal utility from each successive unit increases, so the consumer is willing to pay less for smaller quantities of the good.
D)as the quantity consumed decreases, marginal utility received from each successive unit decreases, so the consumer is willing to pay less for smaller quantities of the good.
7
A decrease in the price of product Z will
A)increase the marginal utility per dollar spent on Z
B)decrease the marginal utility per dollar spent on Z
C)decrease the total utility per dollar spent on Z
D)cause no change in the marginal utility per dollar spent on Z
8
After eating eight chocolate chip cookies, you turn down the ninth cookie. Your refusal indicates that
A)the marginal utility for chocolate chip cookies is negative
B)the total utility for chocolate chip cookies is negative
C)the marginal utility is positive for the eighth and negative for the ninth cookie
D)the total utility was zero because you ate one cookie and refused the other
9
A consumer has two basic choices: rent a movie for $4.00 which takes 2 hours of time to watch, or spend $15 for a restaurant meal which takes 1 hour to consume. If the marginal utilities of the movie and the dinner are the same, and the consumer values time at $15 an hour, the rational consumer will most likely
A)rent more movies and buy fewer restaurant meals
B)buy more restaurant meals and rent fewer movies
C)buy fewer restaurant meals and rent fewer movies
D)consume both equally
10
Stella is maximizing her satisfaction by consuming equal amounts of two goods, X and Y. If the marginal utility of X is half that of Y, what is the price of X if the price of Y is $1.00?
A)$2.00
B)$1.00
C)$1.50
D)$0.50
11
Which of the following is not true of the concept of "utility"?
A)utility is the amount of satisfaction a good or service provides
B)the utility received from a given good is subjective and differs from person to person
C)the utility of a product is measured by how useful it is
D)it is difficult to attach number values to the measure of utility
12
The price of water is substantially less than the price of diamonds because
A)the marginal utility of a diamond is significantly less than the marginal utility of a gallon of water
B)the marginal utility of a diamond is significantly greater than the marginal utility of a gallon of water
C)the total utility of diamonds is greater than the total utility of water
D)diamonds have a low marginal utility
13
The full price of a product to a consumer is
A)its market price
B)its market price plus the value of its consumption time
C)its market price less the value of its consumption time
D)the value of its consumption time less its market price
14
Most economists contend that non-cash gifts are
A)of greater total utility but less marginal utility
B)of less total utility but greater marginal utility
C)more efficient because they do not waste scarce resources
D)less efficient because they may not match recipient's preferences
15
The law of demand can be explained by the income effect because
A)as income increases, the demand for normal goods increases
B)as the price of a good increases, all else equal, the consumer's purchasing power falls, and quantity demanded falls as well
C)as the price of a good increases, all else equal, the consumer's purchasing power rises, and quantity demanded rises as well
D)as income falls, the demand for inferior goods will rise







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