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# ECON 202 FINAL EXAM

07-02 Describe how rationalconsumers maximizeutility by comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

33.

Answer thequestion on the basisof the following two schedules,which show theamounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products Jand K.

Units of J

MUj

Units of K

MUk

1

56

1

32

2

48

2

28

3

32

3

24

4

24

4

20

5

20

5

12

6

16

6

10

7

12

7

8

If the consumer hasmoney income of \$52 and the prices of J and K are \$8 and \$4 respectively, the consumer will maximize her utility by purchasing

2 units of J and 7 units of K.

5 units of J and 5 units of K.

C. 4 units of J and 5 units of K.

D. 6 units of J and 3 units of K.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Type: Table

Answer thequestion on the basisof the following two schedules,which show theamounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products Jand K.

Units of J

MUj

Units of K

MUk

1

56

1

32

2

48

2

28

3

32

3

24

4

24

4

20

5

20

5

12

6

16

6

10

7

12

7

8

What level of total utilityis realized from theequilibrium combination of J andK, if the consumerhas a money income of\$52 and the prices of J and K are \$8 and \$4, respectively?

156 utils

124 utils

C. 276utils

D. 36 utils

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Type: Table

Answer thequestion on the basisof the following two schedules,which show theamounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products Jand K.

Units of J

MUj

Units of K

MUk

1

56

1

32

2

48

2

28

3

32

3

24

4

24

4

20

5

20

5

12

6

16

6

10

7

12

7

8

If the consumer'smoney income were cut from \$52 to \$28, and the prices of J and K remain at \$8and \$4, respectively, she would maximizehersatisfaction by purchasing

3 units of J and 3 units of K.

1 unit of J and 3 units of K.

4 units of J and 1 unit of K.

D. 2 units of J and 3 units of K.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Type: Table

Ben is exhausting his money income consumingproducts A and B insuch quantities that MUa/Pa =5 and MUb/Pb = 8. Ben should purchase

more of A and less of B.

B. more of Band less of A.

more of both A and B.

less of both A and B.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

The marginalutility of the last unit of apples consumed is 12, and themarginal utility of the last unit of bananas consumed is 8. What setof prices for apples andbananas, respectively, would be consistent with consumerequilibrium?

\$4 and \$6

B. \$6 and \$4

\$8 and \$12

\$16 and \$9

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Suppose you have a limited money income and you are purchasingproducts A andB, whose prices happen to be thesame. To maximize your utility,youshould purchase A and B in such amounts that

their marginal utilities are thesame.

their total utilities are thesame.

their marginal andtotal utilities are proportionate.

the income andsubstitution effects associated with each are equal.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

A consumer is maximizing her utility with a particular money incomewhen

the total utility derived from each product consumed is the same.

B. MUa/Pa = MUb/Pb = MUc/Pc =. . . = MUn/Pn.

MUa =MUb =MUc =. . . = MUn.

Pa =Pb = Pc =. . . = Pn.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Suppose that Ms. Thomson is currentlyexhausting her money incomebypurchasing 10 units of A and 8 units of B at prices of \$2 and \$4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson

has preferencesthat are at odds with the principle of diminishing marginalutility.

considers A and B to be complementary goods.

should buy less Aand more B.

D. shouldbuyless B and more A.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

If a rational consumeris in equilibrium, which of the following conditions will hold true?

MUa = MUb = MUc = . . . =MUn.

The marginal utility of each goodpurchased will be zero.

C. Themarginal utility of the last dollarspent on each good purchased will be the same.

D. Thetotal utility obtained from each good purchased will be thesame.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

42.

Assume MUc andMUd represent themarginal utility that a consumer getsfrom products C and D,therespective prices of which are Pc andPd.The consumer will increase his total utility from a specific money outlay by spendingmore on C and lesson D if initially

A.

B.

C.

D.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

A consumer whohasa limited budget will maximizeutility or satisfaction when the

ratios of the marginal utility of each product purchased divided by its price are equal.

total utility derivedfrom each productpurchased is thesame.

marginal utility of each product purchased isthesame.

price of each product purchased is thesame.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

If MUa/Pa =100/\$35 = MUb/Pb =300/? = MUc/Pc =400/?, the prices of products B and C in consumerequilibrium

cannot be determined from the information given.

B. are \$105and \$140,respectively.

are \$105 and \$175,respectively.

are \$100 and \$200, respectively.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

45.

Answer thequestion on the basisof the following total utility dataforproducts L and M.Assume that the prices of L and M are \$3 and \$4, respectively, and that the consumer's income is \$18

Units of L

Total Utility

Units of M

Total Utility

1

9

1

16

2

15

2

28

3

18

3

36

4

20

4

40

5

21

5

42

How many units of the two products will the rational consumer purchase?

3 of L and none of M

4 of L and 2 ofM

3 of L and 5 ofM

D. 2 of L and 3 ofM

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Type: Table

46.

Answer thequestion on the basisof the following total utility dataforproducts L and M.Assume that the prices of L and M are \$3 and \$4, respectively, and that the consumer's income is \$18.

Units of L

Total Utility

Units of M

Total Utility

1

9

1

16

2

15

2

28

3

18

3

36

4

20

4

40

5

21

5

42

What level of total utilitydoes the rationalconsumer realizeinequilibrium?

87 utils

104 utils

C. 51 utils

D. 58 utils

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Type: Table

Other things equal, an increaseinthe price of productA will

increase the marginal utility per dollar spent on A.

B. decrease themarginal utility per dollar spent on A.

not affect themarginal utility per dollar spent on A.

cause utility-maximizing consumers to buy more of A.

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Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Frank is purchasingproducts C and D in utility-maximizing amounts. If the price of C is \$4 andthe price of D is \$2,then

the marginalutility of D is twice that of C.

the marginalutility of D is the same as that of C.

C. themarginal utility of C is twice that of D.

D. themarginal utility of C is four times that of D.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

The theory of consumer behavior assumesthat consumers attemptto maximize

the difference between total and marginal utility.

B. total utility.

average utility.

marginal utility.

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Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

When a consumer shifts purchases from product X to product Y, themarginal utility of

X falls andthe marginal utility of Y rises.

B. X rises and the marginal utility of Y falls.

both X and Y rises.

both X and Y falls.

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Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Which of the following best explainswhy most people donâ€™t consumeunits of goods to the point that their marginal utility falls tozero?

A.

If marginal utility is falling, then total utility isfalling.

B. Consumers facebudget constraints that limit how much they can purchase.

Governments tend tolimit how much of a good a person is allowed to consume.

The price of a goodtends to rise as an individual attempts topurchase more.

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Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Prashanth decides tobuya \$75 ticket to a particular New York professional hockey gamerather than a \$50 ticket for a particular Broadway play.We can conclude that Prashanth

is relatively unappreciativeof the arts.

obtains more marginal utility from the play than from the hockey game.

C. has a higher "marginal utility-to-priceratio" for the hockey game than for the play.

D. has recently attended several other Broadway plays.

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Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase.

Test Bank: I

Topic: Theory of Consumer Behavior

Diminishing marginal utility explains why

the income effect exceedsthesubstitution effect.

the substitution effect exceeds theincome effect.

supply curves are upsloping.

D. demandcurves are downsloping.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-03 Explain how a demand curve can be derivedby observing the outcomes of price changes in the utility-maximization model. Learning Objective: 07-04 Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.

Test Bank: I

Topic: Income and Substitution Effects Topic: Utility Maximization and the Demand Curve

What do theincome effect, the substitution effect, and diminishing marginal utility have in common?

All are requiredto explain theutility-maximizing position of a consumer.

They are allempirically measurable.

They all help explainthe upsloping supply curve.

D. They all help explain thedownsloping demand curve.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-03 Explain how a demand curve can be derivedby observing the outcomes of price changes in the utility-maximization model. Learning Objective: 07-04 Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.

Test Bank: I

Topic: Income and Substitution Effects Topic: Utility Maximization and the Demand Curve

A consumer's demand curve for a product isdownsloping because

total utility falls below marginalutility as more of a product is consumed.

B. marginal utility diminishes as more of a productis consumed.

time becomes less valuable as more of a product is consumed.

the income andsubstitution effects preciselyoffset each other.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-03 Explain how a demand curve can be derivedby observing the outcomes of price changes in the utility-maximization model.

Test Bank: I

Topic: Utility Maximization and the Demand Curve

56.

Answer thequestion on the basisof the following marginal utility dataforproducts X and Y.Assume that the prices of X and Y are \$4 and \$2, respectively, and that theconsumer's income is \$18.

Units of X

Marginal Utility, X

Units of Y

Marginal Utility, Y

1

20

1

16

2

16

2

14

3

12

3

12

4

8

4

10

5

6

5

8

6

4

6

6

What quantities of Xand Y should be purchased to maximize utility?

2 of X and 1 of Y

4 of X and 5 of Y

C. 2 of X and 5 of Y

D. 2 of X and 6 of Y

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase. Learning Objective: 07-03 Explain how a demand curve can be derivedby observing the outcomes of price changes in the utility-maximization model.

Test Bank: I

Topic: Theory of Consumer Behavior Topic: Utility Maximization and the Demand Curve

Type: Table

57.

Answer thequestion on the basisof the following marginal utility dataforproducts X and Y.Assume that the prices of X and Y are \$4 and \$2, respectively, and that theconsumer's income is \$18.

Units of X

Marginal Utility, X

Units of Y

Marginal Utility, Y

1

20

1

16

2

16

2

14

3

12

3

12

4

8

4

10

5

6

5

8

6

4

6

6

What level of total utilitywill the utility-maximizing consumer realize?

A. 96 utils

108 utils

72 utils

142 utils

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-02 Describehow rational consumersmaximize utilityby comparing the marginal utility-to-price ratios ofallthe products they could possibly purchase. Learning Objective: 07-03 Explain how a demand curve can be derivedby observing the outcomes of price changes in the utility-maximization model.

Test Bank: I

Topic: Theory of Consumer Behavior Topic: Utility Maximization and the Demand Curve

Type: Table

58.

Answer thequestion on the basisof the following marginal utility dataforproducts X and Y.Assume that the prices of X and Y are \$4 and \$2, respectively, and that theconsumer's income is \$18.

Units of X

Marginal Utility, X

Units of Y

Marginal Utility, Y

1

20

1

16

2

16

2

14

3

12

3

12

4

8

4

10

5

6

5

8

6

4

6

6

If the priceof X decreases to\$2, then the utility-maximizing combination of the twoproducts is

2 of X and 5 of Y.

4 of X and 6 of Y.

6 of X and 3 of Y.

D. 4 of X and 5 of Y.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium Gradable: automatic

Learning Objective: 07-03 Explain how a demand curve can be derivedby observing the outcomes of price changes in the utility-maximization model.

Test Bank: I

Topic: Utility Maximization and the Demand Curve

Type: Table

59.

Answer thequestion on the basisof the following marginal utility dataforproducts X and Y.Assume that the prices of X and Y are \$4 and \$2, respectively, and that theconsumer's income is \$18.