If the marginal utility of a product is diminishing relative to the marginal utility

1.If the marginal utility of a product is diminishing relative to the marginal utility of other products, then _____.

a. the price of the product must have increased

b. the consumer has been purchasing relatively more of the product

c. the price of the product must have decreased

d. the consumer is in equilibrium

e. the consumer has been purchasing relatively less of the product

2. The equimarginal principle illustrates:

a. that people behave irrationally.

b. that people behave in rather inconsistent ways.

c. that consumers are essentially robots.

d. that people behave in rather consistent ways in order to maximize happiness.

e. that people will spend all their incomes.

3. The below figure shows the various combinations of the goods X and Y that yield different levels of utility.

Figure 7.3

Refer to Figure 7.3. The consumer prefers _____ to _____.

a. B; A

b. I1; I2

c. D; E

d. A; C

e. B; D

4.According to neuroeconomists, our logical brain knows we should spend as much as possible when we have money.

a. True

b. False

5.The law of diminishing marginal utility states that:

a. the marginal utility of all products consumed must be equal.

b. as more of a good or service is consumed, the marginal utility derived from it decreases.

c. as more of a good or service is consumed, the marginal utility derived from it, relative to other products, increases.

d. the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed.

e. as more of a good or service is consumed, the marginal utility derived from it, relative to other products, remains the same.

7.

An indifference map shows _____.

a. a set of indifference curves for a representative consumer

b. all combinations of two goods that a consumer can afford to purchase

c. all combinations of two goods that provide the same level of utility

d. the combination of goods that a consumer can afford to buy

e. all combinations of price and quantity that provide the same level of utility

8. Consumer equilibrium exists when the marginal utility per dollar of expenditure is the same for all goods and services.

a. True

b. False

9. If a consumer purchases only two goods, X and Y, and if (MUx / Px) = (MUy / Py), then the consumer cannot reallocate her expenditures on X and Y to increase her utility unless she has more money to spend.

a. True

b. False

10. One explanation for the status quo bias is an aversion to loss.

a. True

b. False