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Utility refers to the:


A) satisfaction that a consumer derives from a good or service.
B) rate of decline in a product demand curve.
C) relative scarcity of a product.
D) usefulness of a product.

E) A) and B)
F) B) and C)

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Which of the following statements is correct?


A) Both cash and noncash gift-giving cause value losses.
B) Neither cash nor noncash gift-giving causes value losses.
C) Noncash gift-giving creates a value loss,but cash gifts do not.
D) Cash gifts create a value loss,but noncash gifts do not.

E) B) and C)
F) A) and D)

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Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D,the respective prices of which are Pc and Pd.The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:


A)
MUd<MUc\mathrm { MU } _ { d } < \mathrm { MU } _ { c }
B)
MUcPc<MUdPc\frac { \mathrm { MU } _ { c } } { P _ { c } } < \frac { \mathrm { MU } _ { d } } { P _ { c } }
C)
MUcPc>MUdPd\frac { \mathrm { MU } _ { c } } { P _ { c } } > \frac { \mathrm { MU } _ { d } } { P _ { d } }
D)
MUd>MUc\mathrm { MU } _ { d } > \mathrm { MU } _ { c }

E) None of the above
F) B) and C)

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If you receive a gift whose market price is $20,but you consider it to be worth only $10,then:


A) there is a $10 or 50 percent value gain.
B) there may or may not be a value loss.
C) there is a $10 or 50 percent value loss.
D) you can be relatively certain the giver was a sibling or other close relative.

E) A) and D)
F) A) and C)

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Any combination of goods lying outside of the budget line:


A) implies that the consumer is not spending all his income.
B) yields less utility than any point on the budget line.
C) yields less utility than any point inside the budget line.
D) is unattainable,given the consumer's income.

E) B) and D)
F) All of the above

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When the price of a product falls,the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.

A) True
B) False

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(Consider This) Newspaper dispensing devices seemingly "trust" people to take only a single paper,but the devices actually rely on the law of:


A) supply.
B) increasing opportunity costs.
C) demand.
D) diminishing marginal utility.

E) None of the above
F) A) and B)

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When total utility is at a maximum,marginal utility is zero.

A) True
B) False

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According to economists,gift registries,returning gifts for cash refunds,and "recycling gifts":


A) are inefficient because the time spent in these activities is never worth the benefit recipients receive from doing them.
B) are equally efficient because the recipient gets exactly what he wants.
C) are more efficient than if givers simply gave cash gifts.
D) increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying.

E) C) and D)
F) None of the above

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The diamond-water paradox arises because:


A) essential goods may be cheap while nonessential goods may be expensive.
B) the marginal utility of certain products increases,rather than diminishes.
C) essential goods are always higher priced than nonessential goods.
D) we sometimes fail to use money as a standard of value.

E) A) and B)
F) A) and C)

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


A) cannot be determined from the information given.
B) are $105 and $140 respectively.
C) are $105 and $175 respectively.
D) are $100 and $200 respectively.

E) All of the above
F) B) and D)

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As a consumer moves down a given indifference curve,his or her total utility will diminish.

A) True
B) False

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(Consider This) The lines on a topographical map are analogous to a(n) :


A) series of demand curves.
B) series of supply curves.
C) indifference map.
D) series of budget constraints.

E) All of the above
F) None of the above

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The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility.His total utility from three Pepsis is 38 units of utility.The marginal utility of the third Pepsi is:


A) 26 units of utility.
B) 6 units of utility.
C) 8 units of utility.
D) 38 units of utility.

E) A) and B)
F) B) and C)

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Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. Unitsof X ‾123456MarginalUtility, X‾201612864Unitsof Y ‾123456MarginalUtility, Y‾1614121086\begin{array}{c}\begin{array}{c}\text {Units}\\\underline{\text {of X }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, X}}\\20\\16\\12\\8\\6\\4\end{array}\begin{array}{c}\text {Units}\\\underline{\text {of Y }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, Y}}\\16\\14\\12\\10\\8\\6\end{array}\end{array} Refer to the data.What quantities of X and Y should be purchased to maximize utility?


A) 2 of X and 1 of Y
B) 4 of X and 5 of Y
C) 2 of X and 5 of Y
D) 2 of X and 6 of Y

E) All of the above
F) A) and D)

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In moving northeasterly from the origin,we encounter indifference curves that reflect higher and higher levels of total utility.

A) True
B) False

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Graphically,the consumer maximizes total utility where the budget line is tangent to an indifference curve.

A) True
B) False

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"Essential" water is cheaper than "nonessential" diamonds because:


A) new industrial uses for diamonds have been discovered.
B) the supply of water is great relative to demand and the supply of diamonds is small relative to demand.
C) although the total utility of diamonds is greater,their marginal utility is small.
D) the supply of diamonds is great relative to demand and the supply of water is small relative to demand.

E) B) and D)
F) B) and C)

Correct Answer

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Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. Unitsof X ‾123456MarginalUtility, X‾201612864Unitsof Y ‾123456MarginalUtility, Y‾1614121086\begin{array}{c}\begin{array}{c}\text {Units}\\\underline{\text {of X }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, X}}\\20\\16\\12\\8\\6\\4\end{array}\begin{array}{c}\text {Units}\\\underline{\text {of Y }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, Y}}\\16\\14\\12\\10\\8\\6\end{array}\end{array} Refer to the data.If the price of X decreases to $2,then the utility-maximizing combination of the two products is:


A) 2 of X and 5 of Y.
B) 4 of X and 6 of Y.
C) 6 of X and 3 of Y.
D) 4 of X and 5 of Y.

E) C) and D)
F) B) and D)

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In moving along a given budget line:


A) the prices of both products and money income are assumed to be constant.
B) each point on the line will be equally satisfactory to consumers.
C) money income varies,but the prices of the two goods are constant.
D) the prices of both products are assumed to vary,but money income is constant.

E) All of the above
F) A) and B)

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