Consumer Choice


1. Marginal utility:
A. is the change in total utility caused by the consumption of an addition unit of a good.
B. is equal to total utility divided by total consumption.
C. always decreases as consumption increases.
D. is never negative.
E. all of the above.
2. In a given market, consumers' surplus would, all else equal, be increased by:
A. leftward shifts of the demand and supply curves that leave price unchanged.
B. a decrease in supply.
C. an increase in price.
D. an increase in supply.
3. In a competitive market, diminishing marginal utility implies that:
A. the first units bought will contribute the most to consumer surplus.
B. the last units bought will contribute the most to consumer surplus.
C. the higher the price, the greater will be the consumer surplus, all else equal.
D. each unit bought will contribute an equal amount to consumer surplus.
E. nothing, since consumer surplus and marginal utility are totally unrelated.
4. Consumer surplus is:
A. the area above the market price but below the demand curve.
B. a measure of the net welfare buying a particular good gives to consumers.
C. the difference between the dollar amounts people would willingly pay for specific quantities of goods and the amounts they pay at market prices.
D. less for goods that are luxuries than for necessities.
E. all of the above.
5. Marginal utilities:
A. reflect subjective preferences that are not easily measured.
B. are easily compared between individuals if measured by money.
C. are determined by society as a whole.
D. increase as total utility falls.
E. include electric and gas companies threatened by bankruptcy.
6. Which of the following seems a contradiction to the law of diminishing marginal utility?
A. Ken enjoys his 30th beer of the evening more than his first.
B. Joan finds that the effort associated with preparing for a date exceeds the enjoyment gained.
C. Howard has a decreasing desire for more wealth the richer he becomes.
D. Natasha must work increasingly hard to cast extra steel ingots as she attempts to exceed her production quota.
E. Morris the cat likes catnip more than canned tuna, and canned tuna more than dry cat food.
7. The consumer maximizes utility whenever spending patterns cause:
A. it to be possible to realize net increases in total utility by buying differently.
B. the marginal utilities of all goods consumed to be equal.
C. conformance with the principle of equal marginal utilities per dollar.
D. total utility to be at its maximum value.
E. marginal utility to be at its maximum value.
8. According to the law of diminishing marginal utility:
A. marginal utility always falls with the extra consumption of a good.
B. a consumer inevitably reaches a point where the additional satisfaction from consuming each additional unit of a good rises.
C. a consumer inevitably reaches a point where he or she decreasingly values additional units of a good.
D. utility is easily measured by dollar values.
E. none of the above.
9. When a household is allocating its expenditure among commodity A and all other commodities so as to maximize total utility, then a decrease in the price of commodity A will lead the household to buy more of commodity A:
A. so that the marginal utility of a unit of commodity A will increase.
B. because a dollar spent on commodity A will now yield less utility than before the decrease in price.
C. because a dollar spent on another commodity would now yield more utility if spent on commodity A.
D. because the marginal utility of a unit of commodity A has increased.
10. If total utility is increasing, marginal utility:
A. must be increasing.
B. must be decreasing.
C. may either be increasing or decreasing, although it must be greater than zero.
D. must be increasing at an increasing rate.
E. none of the above.
11. Marginal utility is a measure:
A. of the total utility derived from consuming marginally beneficial goods.
B. of the additional utility derived through the consumption of an additional unit of a good.
C. computed by dividing total utility by the number of units of a good consumed.
D. determined strictly by interactions of supply and demand.
E. none of the above.
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