Econ Chapter 21

60 Questions | Total Attempts: 1059

SettingsSettingsSettings
Please wait...
Econ Chapter 21

Questions and Answers
  • 1. 
         1.   The diamond-water paradox is the observation that
    • A. 

      Those things that have the greatest price often have little value in exchange and those things that have the lowest price often have the greatest value in exchange.

    • B. 

      Those things that have the greatest value in use often have little value in exchange and those things that have little value in use often have the greatest value in exchange.

    • C. 

      Those things that have the least value in use often have little value in exchange and those things that have the greatest value in use often have the greatest value in exchange.

    • D. 

      Those things that have the least price often have little value in exchange and those things that have the greatest price often have the greatest value in exchange.

  • 2. 
         2.   When an economist talks about utility, she is talking about
    • A. 

      A company that provides electricity, water, gas, etc.

    • B. 

      The satisfaction, in terms of price, that a producer receives from selling his product.

    • C. 

      The satisfaction that results from the consumption of a good.

    • D. 

      The amount of one good that a person is willing to give up in order to get a unit of another good.

    • E. 

      The satisfaction that results from the consumption of a good minus the price that must be paid to get the good.

  • 3. 
         3.   A util is an artificial construct used as a means of measuring the
    • A. 

      Price of a good.

    • B. 

      Satisfaction one receives from the consumption of a good.

    • C. 

      Costs of producing a good.

    • D. 

      Difference between the price and the value of a good.

  • 4. 
         4.   Total utility is defined as the
    • A. 

      Change in marginal utility a person derives from the consumption of a good.

    • B. 

      Change in total utility a person derives from the consumption of a good divided by the price of that good.

    • C. 

      Change in total utility a person derives from the consumption of a good divided by the change in the consumption of that good.

    • D. 

      Sum of the amounts of satisfaction a person receives from consuming a good.

    • E. 

      Change in total utility a person derives from the consumption of a good.

  • 5. 
         5.   Marginal utility is defined as the
    • A. 

      Change in marginal utility a person derives from the consumption of a good.

    • B. 

      Change in total utility a person derives from the consumption of a good divided by the price of that good.

    • C. 

      Change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed.

    • D. 

      Sum of the amounts of satisfaction a person receives from consuming a good.

    • E. 

      Change in total utility a person derives from the consumption of a good divided by the value in use of that good.

  • 6. 
       10.   Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150, respectively. The marginal utility of the sixth wing is __________ utils.
    • A. 

      14

    • B. 

      136

    • C. 

      20

    • D. 

      22.7

  • 7. 
       15.   Which of the following is true?
    • A. 

      It is possible for total utility to rise as marginal utility falls.

    • B. 

      Marginal utility is the same as total utility.

    • C. 

      As marginal utility falls, total utility always falls.

    • D. 

      A and c

  • 8. 
       20.   You and your roommate are eating pizza and have already consumed all but the last slice. Your roommate claims that he is hungrier than you and therefore should get the last slice of pizza. Your roommate has made
    • A. 

      A diamond-water paradox.

    • B. 

      An interpersonal utility comparison.

    • C. 

      A correct statement.

    • D. 

      A marginal error.

  • 9. 
       25.   Which of the following statements is true?
    • A. 

      The less you have of any one good, the less you would be willing to pay for one more unit of it.

    • B. 

      The less you have of any one good, the more you would be willing to pay for one more unit of it.

    • C. 

      The amount you have of any one good does not influence the price you would be willing to pay for it, but it does affect the marginal utility received from consuming a particular unit.

    • D. 

      None of the above

  • 10. 
       30.   Because there are so few diamonds in the world, the consumption of diamonds
    • A. 

      Takes priority over the consumption of water.

    • B. 

      Takes place at relatively high marginal utility.

    • C. 

      Takes place at relatively low marginal utility.

    • D. 

      Is more important than the consumption of water.

  • 11. 
       35.   Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ari consuming the correct quantities of these two goods to be in consumer equilibrium?
    • A. 

      No, she should consume more hamburgers and fewer hot dogs.

    • B. 

      No, she should consume more hot dogs and fewer hamburgers.

    • C. 

      Yes, so there is no need to change her eating habits.

    • D. 

      There is not enough information to answer the question.

  • 12. 
       40.   In the Texas A & M study of the "buying" behavior of two white rats, as the "relative price" of one beverage was raised,
    • A. 

      Both white rats began to consume more of the higher-priced beverage.

    • B. 

      Both white rats began to consume less of the higher-priced beverage.

    • C. 

      One white rat began to consume more of the higher-priced beverage and the other began to consume less.

    • D. 

      Both white rats continued consuming the same amount of the beverage as before its price was raised.

    • E. 

      There was no study done at Texas A & M with white rats.

  • 13. 
       45.   Diamonds are more expensive than water because
    • A. 

      Markets do not always reflect value.

    • B. 

      They have fewer uses.

    • C. 

      They yield higher marginal utility.

    • D. 

      They yield higher total utility.

    • E. 

      All of the above

  • 14. 
       50.   According to the traditional theory of marginal utility as presented in the textbook, as more units of a good are acquired, the consumer's marginal utility
    • A. 

      Always continues to rise.

    • B. 

      Diminishes.

    • C. 

      Remains constant.

    • D. 

      May diminish at first, but it must eventually rise.

    • E. 

      May rise at first, but it must eventually become constant.

  • 15. 
       55.   Given two goods, X and Y, and their prices, PX and PY a consumer will maximize utility by allocating expenditures such that
    • A. 

      MUX/PY = MUY/PX.

    • B. 

      PY/MUX = PX/MUY.

    • C. 

      MUX/PX = MUY /PY.

    • D. 

      MUX = PX = MUY = PY = MU$.

    • E. 

      MUX = MUY = PX = PY = MU$.

  • 16. 
       60.   Marginal utility is
    • A. 

      The extra satisfaction derived from consuming an additional unit of a good.

    • B. 

      The total satisfaction derived from consuming an additional unit of a good.

    • C. 

      The total satisfaction derived from consuming a good.

    • D. 

      The change in total satisfaction as an additional unit of a good is consumed.

    • E. 

      A and d

  • 17. 
    Units of Plums Total Utility of Plums (utils) 1 22 2 34 3 44 4 52 5 57    61.   Refer to Exhibit 21-1. The marginal utility of the third plum is
    • A. 

      17 utils.

    • B. 

      10 utils.

    • C. 

      8 utils.

    • D. 

      3 utils.

    • E. 

      Cannot be determined

  • 18. 
    Units of Plums Total Utility of Plums (utils) 1 22 2 34 3 44 4 52 5 57    62.   Refer to Exhibit 21-1. The marginal utility of the second plum is
    • A. 

      18.5 utils.

    • B. 

      7.5 utils.

    • C. 

      37 utils.

    • D. 

      12 utils.

  • 19. 
    Units of Plums Total Utility of Plums (utils) 1 22 2 34 3 44 4 52 5 57    63.   Refer to Exhibit 21-1. The marginal utility of the fourth plum is
    • A. 

      8 utils.

    • B. 

      2 utils.

    • C. 

      10 utils.

    • D. 

      13.5 utils.

    • E. 

      50 utils.

  • 20. 
    Units of Plums Total Utility of Plums (utils) 1 22 2 34 3 44 4 52 5 57    64.   Refer to Exhibit 21-1. In this example, marginal utility
    • A. 

      Constantly increases.

    • B. 

      Constantly diminishes.

    • C. 

      Increases then diminishes.

    • D. 

      Diminishes then increases.

  • 21. 
    Units of Oranges Marginal Utility of Oranges (utils) 1 20 2 16 3 13 4 11 5   8    65.   Refer to Exhibit 21-2. Total utility for the first two units is
    • A. 

      36 utils.

    • B. 

      20 utils.

    • C. 

      40 utils.

    • D. 

      36 utils.

    • E. 

      Cannot be determined

  • 22. 
    Units of Oranges Marginal Utility of Oranges (utils) 1 20 2 16 3 13 4 11 5   8    66.   Refer to Exhibit 21-2. Total utility for the first three units is
    • A. 

      12 utils.

    • B. 

      62 utils.

    • C. 

      49 utils.

    • D. 

      15 utils.

    • E. 

      42 utils.

  • 23. 
    Units of Oranges Marginal Utility of Oranges (utils) 1 20 2 16 3 13 4 11 5   8    67.   Refer to Exhibit 21-2. Total utility for the first four units is
    • A. 

      11 utils.

    • B. 

      60 utils.

    • C. 

      52 utils.

    • D. 

      15 utils.

    • E. 

      40 utils.

  • 24. 
    Units of Oranges Marginal Utility of Oranges (utils) 1 20 2 16 3 13 4 11 5   8    68.   Refer to Exhibit 21-2. Total utility for all five units is
    • A. 

      70 utils.

    • B. 

      12 utils.

    • C. 

      68 utils.

    • D. 

      80 utils.

    • E. 

      40 utils.

  • 25. 
       70.   The law of diminishing marginal utility
    • A. 

      Allows us to make interpersonal utility comparisons.

    • B. 

      Tells us that an additional dollar is worth less to a millionaire than to a poor person.

    • C. 

      Tells us the worth of an additional dollar of income.

    • D. 

      Tells us that an additional dollar of income is worth less than the preceding dollar of income.

    • E. 

      A, b, and d