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Question 1

If a consumer consumes two goods, A and B, and the price of A falls, then the substitution effect would cause the consumer to:

a.

buy less A and less B.

b.

buy more A and less B.

c.

buy more A and more B.

d.

buy less A and more B.

Question2

The term "utlility" refers to:

a.

Self-fulfillment

b.

Satisfaction

c.

Happiness

d.

Any of these could be considered "utility."

Question3

Montana is currently spending all of her income on goods S and T. Good S has a price of $30 per unit and Good T has a price of $16 per unit. The marginal utility of Good S is currently 150 utils. If Montana is maximizing her utility, what must be the marginal utility for Good T?

a.

136 utils

b.

80 utils

c.

56 utils

d.

160 utils

Question4

Right now, Oscar is consuming goods X and Y, which have prices of $4 and $5 respectively, such that the marginal utility of X is 100 and the marginal utility of Y is 150. Is Oscar maximizing his utility?

a.

There is not enough information to answer this question

b.

No, he should purchase more Y and less X

c.

No, he should purchase more X and less Y

d.

Yes, because the marginal rate of substitution equals the price ratio

Question5

If a consumer consumes two goods, A and B, and the price of A falls, then the combined impact of the substitution effect and the income effect would cause the consumer to:

a.

buy less A.

b.

buy less B.

c.

buy more A.

d.

buy more B.

Question6

If Zeinab's income is $300 per week and the two goods she consumes, bottled water and beef jerky, have prices of $3 and $2 per unit respectively, which one of the following consumption bundles lies outside of her budget line (budget constraint)?

a.

40 bottles of water and 90 pieces of beef jerky

b.

75 bottles of water and 50 pieces of beef jerky

c.

50 bottles of water and 75 pieces of beef jerky

d.

60 bottles of water and 60 pieces of beef jerky

Question7

If a consumer consumes two goods, A and B, and the price of A falls, then the income effect would cause the consumer to:

a.

buy less A and less B.

b.

buy less A and more B.

c.

buy more A and less B.

d.

buy more A and more B.

Question8

If marginal utility is diminishing but positive, then if you receive 300 utils from 1 slice of pizza, which of the following could be the utility you get from 2 slices of pizza?

a.

500 utils

b.

300 utils

c.

600 utils

d.

150 utils

Question9

Suppose consumption bundle A contains 2 books and 5 candy bars, consumption bundle B contains 4 books and 4 candy bars, and consumption bundle C contains 3 books and 2 candy bars. Which of the following CANNOT be the bundle that a consumer likes the most?

a.

Consumption bundle A

b.

Consumption bundle B

c.

Consumption bundle C

Question10

If the consumer's income increases:

a.

the budget constraint shifts in and its slope increases.

b.

the budget constraint shifts out and its slope increases.

c.

the budget constraint shifts out and its slope does not change.

d.

the budget constraint shifts in and its slope does not change.

Question11

Which of the following is most like "bang for the buck"?

a.

Price of X divided by Marginal Utility of X

b.

Marginal Utility of X times Price of X

c.

Marginal Utility of X plus Price of X

d.

Marginal Utility of X divided by Price of X

Question12

Which one of these is the same as saying "more is better"?

a.

Total utility is always positive

b.

Marginal utility is diminishing

c.

Marginal utility is always increasing

d.

Marginal utility is always positive

Question13

Right now, Jorge is consuming goods X and Y, which have prices of $4 and $5 respectively, such that the marginal utility of X is 80 and the marginal utility of Y is 90. Is Jorge maximizing his utility?

a.

No, because MUY/PY > MUX/PX

b.

There is not enough information to answer this question

c.

Yes, because MUX/PX = MUY/PY

d.

No, because MUX/PX > MUY/PY

Question14

The slope of the budget constraint (or budget line) is the:

a.

opposite of the price ratio.

b.

marginal rate of substitution.

c.

opposite of the marginal rate of substitution.

d.

opposite of the ratio of the marginal utility.

Question15

Suppose consumption bundle A contains 2 books and 5 candy bars, consumption bundle B contains 4 books and 4 candy bars, and consumption bundle C contains 3 books and 2 candy bars. If consumption bundle A provides the same amount of utility as consumption bundle C, which of the following must be true?

a.

The marginal utility of candy bars is greater than the marginal utility of books

b.

The marginal utility of books is greater than the marginal utility of candy bars

c.

Consumption bundle B provides the most utility

d.

Consumption bundle B provides the least utility

Question16

Suppose consumption bundle A contains 2 books and 5 candy bars, consumption bundle B contains 4 books and 4 candy bars, and consumption bundle C contains 3 books and 2 candy bars. Between which two bundles is it NOT possible for a consumer to be INDIFFERENT?

a.

Consumption bundle A and consumption bundle C

b.

Consumption bundle A and consumption bundle B

c.

Consumption bundle B and consumption bundle C

Question17

Sara is currently spending all of her income on goods J and K. Good J has a price of $10 per unit and Good K has a price of $12 per unit. The marginal utility of Good J is currently 72 utils and the marginal utility of Good K is currently 80 utils. What should Sara do?

a.

Buy more of Good K and less of Good J

b.

Buy more of Good J and more of Good K

c.

Buy more of Good J and less of Good K

d.

She should not change anything; she is maximizing her utility

Question18

Laurie is currently spending all of her income on goods N and M. Good N has a price of $15 per unit and Good M has a price of $18 per unit. The marginal utility of Good N is currently 35 utils and the marginal utility of Good M is currently 42 utils. What should Sara do?

a.

She should not change anything; she is maximizing her utility

b.

Buy more of Good M and less of Good N

c.

Buy more of Good N and less of Good M

d.

Buy more of Good N and more of Good M

Question19

Right now, Oscar is consuming goods X and Y, which have prices of $4 and $5 respectively, such that the marginal utility of X is 100 and the marginal utility of Y is 125. Is Oscar maximizing his utility?

a.

There is not enough information to answer this question

b.

Yes, because the marginal rate of substitution equals the price ratio

c.

No, because the marginal rate of substitution does not equal the price ratio

d.

Yes, because the marginal utility per dollar is equal for both goods

Question20

If Zeinab's income is $300 per week and the two goods she consumes, bottled water and beef jerky, have prices of $3 and $2 per unit respectively, which one of the following consumption bundles lies on her budget line (budget constraint)?

a.

75 bottles of water and 75 pieces of beef jerky

b.

50 bottles of water and 50 pieces of beef jerky

c.

75 bottles of water and 50 pieces of beef jerky

d.

50 bottles of water and 75 pieces of beef jerky