1.The consumer surplus associated with a good is best understood as the difference between the______________of each unit of the good and each unit's Market price paid by consumers.

a.Marginal cost of production

b.Market price paid by consumers

c.Marginal utility derived

d.Average cost of production

2.The law of demand suggests a(n) inversely-correlated relationship between the price of a good and its quantity demanded, and that relationship exists because______________.

I. consumers value a good more when it is lower-priced than when it is higher-priced

II. consumers experience higher real income when prices fall

III. consumers adjust consumption to obtain the highest marginal utility per dollar when prices change

IV. of shortages and surpluses in the markets for goods with changing prices

a.I only

b.II only

c.II and IV

d.II and III

3.Assume that a consumer is currently maximizing satisfaction and buying popcorn and apple pies. If the price of popcorn increases, what will happen to the marginal utilities of popcorn and apple pies once the consumer adjusts to the new price of popcorn?

The marginal utility of popcorn will______________and the marginal utility of apple pies will______________.

a.increase; decrease

b.increase; increase

c.decrease; decrease

d.decrease; increase

e.decrease; not change

4.Preferences change so that we like a good less. The marginal utility of the good decreases. What will happen to the good's marginal utility after that? The marginal utility will eventually be______________the marginal utility following the change in tastes and______________its level before the change in tastes.

a.greater than; greater than

b.less than; greater than

c.greater than; less than

d.less than; less than

5.If you are maximizing utility and the marginal utility of one good you buy is much greater than the marginal utility of the other good, then it must mean

a.the price of the good with the lower marginal utility is lower

b.the price of the good with the lower marginal utility is higher

c.the good with a higher price is a necessity

d.the good with a higher price is a luxury

6.Marginal utility is actually the slope of a utility curve (change in utility over the change in consumption). Given that, what happens to the slope of the utility curve as you increase the consumption of a good?

a.increases

b.decreases

c.slope stays the same

7.You're 10 years old and your parents give you $10 to buy some candy. When you walk in the store, you see that the price of tootsie roll pops has decreased and you exclaim: "Wow! My money can buy me more than it could before!" Is 10-year-old you excited about an income or substitution effect?

a.income

b.substitution

8.In your grocery basket are five different goods, which all give you the same marginal utility. What must be true about the prices of the goods?

a.All of the prices are equal to your marginal utility

b.All of the prices are such that the marginal utility per dollar is equal to one

c.All of the prices are the same

d.The marginal utility per dollar of each good is different

9.Utility measures____while marginal utility measures____.

a.overall benefit from consumption; additional benefit from next unit

b.additional benefit from next unit; overall benefit from consumption

c.overall welfare of society; additional cost to society from next unit

d.cost of consumption; benefit from consumption

10.An individual goes to the store to buy apple juice and orange juice. Last week, this person had bought 5 bottles of orange juices and 4 bottles apple juices for the week. If he finds that the price of apple juice has gone up, he will adjust his basket. If he is consuming optimally, he will find that his marginal utility of apple juice will go___.

a.Up

b.Down