1.Complete the table and then use the information to answer the question(s) below.

Quantity Consumed Total Utility (TU) Marginal Utility (MU)

1 10 10

2 ___ 5

3 19 ___

4 ___ 1

In Table 1, the marginal utility of the third unit is:

A.4

B.19

C.5

D.1

2.Which of the following best describes the law of diminishing marginal utility?

A.Rice gives me no satisfaction, so I won't buy any.

B.The more I work as an accountant, the more I want to change my career.

C.The more coke I drink, the more I want to drink.

D.Since we need gasoline more than we need paper, gasoline is more valuable.

3.Which of the following is the best reason why we pay a relatively low price for water?

A.Water is abundant; the marginal utility we receive is relatively high.

B.The supply of water is so great that we pay a low price with small demand.

C.Additional units of water are normally not worth much to us.

D.Water is abundant; the total utility we receive is relatively low.

4.Suppose the price elasticity of demand for gas is 0.50.If the price of gas increases by 10 percent, then the quantity demanded of gas should,ceteris paribus(holding the other factors unchanged):

A.Decrease by 20 percent

B.Decrease by 5 percent

C.Rise by 5 percent

D.Rise by 20 percent

5.Mr. X still has money in pocket to spend. If only two products are available to him, apple (A) and beef (B), the current marginal utility (MU) and unit price (P) are as the following: MU_A=3, MU_B=10, P_A=$1, P_B=$4. In order to maximize his total utility, Mr. X should

A.purchase more beef because he likes it.

B.purchase more apples because the marginal utility per dollar is greater than beef's.

C.purchase more apples because the price is fair.

D.purchase more beef because its marginal utility is greater than apple's.

6.If the price elasticity of demand for a product is2, this means that,ceteris paribus, quantity demanded will increase by

A.1 unit for each $2 decrease in price.

B.2 units for each $1 decrease in price.

C.1 percent for each 2 percent decrease in price.

D.2 percent for each 1 percent decrease in price.

7.Price elasticity of demand indicates the consumer response to changes in:

A.Quantity

B.Demand

C.Price

D.All of the above

8.Holding the other factors constant, when demand is inelastic, a rise in:

A.Total revenue indicates a reduction in price.

B.Total revenue due to a price change means quantity rises.

C.Price leads to lower total revenue

D.Price leads to greater total revenue

9.Maximum total utility is achieved where:

A.Marginal utility is zero.

B.Price elasticity of demand is 1.

C.Marginal utility is maximized.

D.Price is zero.