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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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