ECO 101 - If the price of one good changes while other prices
- If the price of one good changes while other prices are held constant,
- A.there is an income effect as real income changes.
- B.there is a substitution effect as relative prices change.
- C.the marginal utility per dollar spent on that good will change.
- D.the quantity demanded of that good will change.
- E.All of the above.
QUESTION 2
- The substitution effect occurs because when the price of one good increases, consumers will buy fewer substitute goods.
- A.True
- B.False
QUESTION 3
- If X and Y are any two goods or services and MUx/Px= MUy/Pyand all income is spent, then:
- A.Px is less than all other product prices.
- B.the consumer could increase his or her satisfaction by purchasing less of X.
- C.the consumer could increase his or her satisfaction by purchasing more of X.
- D.Pxis greater than all other product prices.
- E.the consumer is in equilibrium.
- If a consumer is purchasing three goods, as long as the marginal utility per dollar for at least two of the goods is equal, the consumer will be in equilibrium.
- A.True
- B.False
QUESTION 5
- Assume MUx = 1,000, MUy = 200, Px= $50, and Py= $20. This consumer
- A.should buy less of X and less of Y.
- B.should buy more of X and less of Y.
- C.is in equilibrium.
- D.should buy more of X and more of Y.
- E.should buy more Y because MUx > MUy
QUESTION 6
- In order to maximize utility, consumers
- A.will continue to make purchases until the marginal utility of each good is zero.
- B.compare the marginal utilities of the last dollar spent on each good.
- C.equate the total utilities of each good consumed.
- D.continue to purchase a good until total utility is equal to zero.
- E.None of the above.
QUESTION 7
Number of Utility from Number of ice Utility from ice
Bundle pepsicles pepsictes cream cones cream cones
A 10 700 0 0
B 8 720 1 500
C 6 650 2 700
D 4 550 3 750
E 2 400 4 760
F 0 0 5 760
Considering the information in the table shown, Jack's total utility from consuming bundle D would be:
A.1,160.
B.1,300.
C.950.
D.2,220.
- A price change triggers the income effect but not the substitution effect.
- A.True
- B.False
- Suppose that wrenches cost twice as much as pliers. When will the consumer be in equilibrium?
- A.When the quantity of pliers is twice that of wrenches
- B.When the price of wrenches is twice as much as pliers
- C.When the total utility of pliers is twice that of wrenches
- D.When the marginal utility of wrenches is twice that of pliers
- E.When the marginal utility of pliers is twice that of wrenches
QUESTION 10
- The law of diminishing marginal utility explains why the demand curve is downward sloping.
- A.True
- B.False
QUESTION 11
Quantity Total Utility of X Total Utility of Y
1 24 85
2 42 130
3 56 160
4 66 185
5 74 200
6 80 210
7 84 215
Refer to the table above. Assume that the price of good X is $2 per unit, that the price of good Y is $5 per unit, and that the consumer has $14 to spend buying X and Y. Under the circumstances, a utility-maximizing consumer should buy
A.7 units of X.
B.2.8 units of Y.
C.2 units of X and 2 units of Y.
D.anything she wants because it is not possible to determine the utility-maximizing combination.
E.6 units of X and 7 of Y.
- Which of the following statements is true for a consumer in equilibrium?
- A.The marginal utilities of the last dollars spent on goods and services are equal to one another.
- B.The total utility is the same for every good and service consumed.
- C.MUa = MUb = MUc = ... = MUz
- D.The total utility for the last good or service purchased is zero.
- E.Total utility is decreasing at an increasing rate.
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Solution: ECO 101 - If the price of one good changes while other prices