Ch 11

Name: ________________________ Class: ___________________ Date: __________

ID: A

CH 11
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. Timmy makes $100 per week as a taxidermist. He spends all this income to buy pizza and hair gel. The price of a pizza is $10 and the price of a bottle of hair gel is $4. If Timmy buys 5 bottles of hair gel, then he buys
____ pizzas.
a. 10
b. 4
c. 8
d. 20
e. None of the above answers is correct.
2. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. If Sarah spends $170 per week on sushi, the maximum quantity of rose bushes can she buy each week is ____ bushes.
a. 33
b. 330
c. 3
d. 17
e. None of the above answers is correct.
3.

Susan can watch movies or attend plays. The table above gives combinations of movies and plays that are on her budget line. If the price of a movie is $5, then her budget for movies and plays is
a. $5 per month.
b. $25 per month.
c. $30 per month.
d. $60 per month.
e. unknown from the information.

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Name: ________________________

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ID: A

4. The figure above shows a consumer's budget line for sodas and DVD rentals. Point a represents an
a. affordable combination of sodas and DVDs that spends the entire budget.
b. affordable combination of sodas and DVDs that does not spend the entire budget.
c. unaffordable combination of sodas and DVDs.
d. affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure.
e. None of the above answers is correct.
5. If the price of a good that a consumer purchases falls, the consumer's budget line will
a. rotate outward and its slope will change.
b. rotate inward and its slope will change.
c. shift outward and its slope will not change.
d. shift inward and its slope will not change.
e. either rotate or shift outward depending on whether the good has positive or negative marginal utility.
6. You consume hamburgers and hot dogs. If the price of a hamburger increases while the price of a hot dog and your budget do not change, then your budget line will
a. not change because your budget hasn't changed.
b. shift outward and not change its slope.
c. rotate outward and change its slope.
d. rotate inward and change its slope.
e. shift inward and not change its slope
7. In the United States from 1995 to 2005, which of the following products had the largest relative price decrease? a. long-distance phone calls
b. gasoline
c. college books and supplies
d. apples
e. personal computers

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Name: ________________________
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ID: A

8. If the total utility of 2 bags of chips is 25, the total utility of 3 bags is 33, and the total utility of 4 bags is 40 units, then the marginal utility of the 3rd and 4th bags are
a. 8 and 7, respectively.
b. 12.5 and 11, respectively.
c. 11 and 10, respectively.
d. 58 and 73, respectively.
e. 33 and 40, respectively.
9. Kevin likes weasel leg stew. But every bite of the stew that he eats provides him with less and less total utility. This fact means that Kevin's marginal utility is
a. decreasing.
b. increasing, but at a decreasing rate.
c. increasing at an increasing rate.
d. not changing.
e. changing but the rate of change is not certain without more information.

____ 10. The table above shows Buffy's utility from wooden stakes and cloves of garlic. The total utility Buffy gets from 5 wooden stakes is
a. 7.
b. 65.
c. 222.
d. 122.
e. None of the above answers is correct.
____ 11. Carter spends his entire budget on pizza and Pepsi. He maximizes his utility when he allocates his entire available budget and buys pizza and Pepsi so that the
a. marginal utility from pizza is equal to the marginal utility from Pepsi.
b. total utility from both pizza and Pepsi is maximized.
c. marginal utility per dollar spent on pizza is equal to the marginal utility per dollar spent on Pepsi.
d. total utility per dollar for both pizza and Pepsi are equal.
e. None of the above answers is correct.
____ 12. If Raul's marginal utility per dollar spent on bread is 25 and the marginal utility per dollar spent on butter is
30,
a. Raul should purchase more butter and less bread to increase his total utility.
b. Raul's marginal utility of butter will fall if he buys more butter.
c. Raul's marginal utility of bread will rise if he buys less bread.
d. Only answer B and answer C are correct.
e. Answer A, answer B, and answer C are correct.

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Name: ________________________

ID: A

____ 13. The demand curve for macadamia nuts is downward sloping. This slope is because consumers maximize their utility and an increase in the price of macadamia nuts leads to
a. no change in quantity demanded.
b. an increase in the marginal utility per dollar spent on macadamia nuts.
c. a decrease in the marginal utility per dollar spent on macadamia nuts.
d. consumers' budget lines rotating outward with their slopes changing.
e. consumers' budget lines shifting outward with no change in their slope.
____ 14. Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100. Juan spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5 per pint. To maximize his utility, Juan should
a. buy more cream and fewer strawberries.
b. buy less cream and more strawberries.
c. buy more cream and more strawberries.
d. buy less cream and fewer strawberries.
e. change nothing because Juan is maximizing his utility now.
____ 15. When making a decision between purchasing soda or pizza, a consumer compares
a. only the marginal utility derived from the purchase of each unit of the items.
b. only the prices of each item.
c. marginal utility per-dollar-consumed for each item.
d. marginal utility per dollar spent for each item.
e. the price of each item to his or her total utility from the item.
____ 16. The paradox of value with respect to water and diamonds can be explained using consumer surplus because
a. water is cheap but provides a large consumer surplus, while diamonds are expensive with a small consumer surplus.
b. diamonds are in large supply relative to their demand, while water is scarce in supply relative to its demand.
c. water is cheap but provides a small consumer surplus, while diamonds are expensive but provide a large consumer surplus.
d. the total consumer surplus from diamonds is greater than the total consumer surplus from water. e. None of the above answers is correct.
____ 17. An indifference curve is a line that shows
a. combinations of goods among which a consumer is indifferent.
b. different combinations of goods a consumer is able to buy.
c. the indifference of consumers for the budget constraint.
d. Both answers B and C are correct.
e. Both answers A and C are correct.
____ 18. Sam's budget is $60.00. The combinations of gasoline and coffee along one of Sam's indifference curves are combinations a. that require the same total expenditure.
b. that he can afford with his $60.00 budget.
c. among which he is indifferent.
d. that give him the same marginal rate of substitution.
e. None of the above answers are correct.

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Name: ________________________

ID: A

____ 19. Along an indifference curve the
a. marginal rate of substitution is constant.
b. consumer does not prefer one consumption point to another.
c. marginal rate of substitution is equal to 0.
d. consumer prefers some of the consumption points to others.
e. marginal rate of substitution for a good increases as more of the good is consumed.
____ 20. A point where the budget line is just touching an indifference curve at one point is
a. the least affordable point.
b. the best affordable point.
c. on the lowest attainable indifference curve.
d. Both answers B and C are correct.
e. Both answers A and C are correct.
____ 21. The point where an indifference curve just touches the budget line at one point
a. is the best affordable point.
b. is where the marginal rate of substitution exceeds the relative price by as much as possible. c. is a point on the consumer's supply of spending curve.
d. cannot be possible because indifference curves always cross the budget line at two points.
e. None of the above answers are correct
____ 22. Roger earns $60 per month, which he spends on frisbees and CDs. The price of a frisbee is $6, and the price of a CD is $12. Which of the following combinations of frisbees and CDs is most likely to be his best affordable point?
a. 8 frisbees and 1 CD
b. 5 frisbees and 2 CDs
c. 3 frisbees and 4 CDs
d. 2 frisbees and 5 CDs
e. 2 frisbees and 2 CDs
____ 23. Gertrude has a $15 budget to spend on soda and crackers. Soda costs $1 per bottle and crackers cost 50¢ each.
If the price of soda increases to $2 per bottle, the ____ rotates inward and there is a movement along the
____.
a. budget line; demand curve for crackers
b. demand curve; indifference curve for crackers
c. budget line; demand curve for soda
d. demand curve; indifference curve for soda
e. indifference curves; demand curve for soda

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Name: ________________________

ID: A

____ 24. The above figure shows one of Cheri's indifference curves. Suppose point a represents the best affordable point for Cheri. Cheri's best affordable point could move to point b if
a. marginal utility increases.
b. total utility increases.
c. the price of a CD falls and the price of a book rises.
d. the price of a CD rises and the price of a book falls.
e. Cheri's budget increases.
____ 25. The budget line is the boundary between
a. preferred and nonpreferred consumption combinations.
b. affordable and unaffordable consumption combinations.
c. goods and bads.
d. income and expenditure.
e. income and consumption.
____ 26. Sue consumes oysters and clams. Pounds of oysters are measured on the y-axis and pounds of clams on the x-axis. If the slope of Sue's budget line is 5 pounds of oysters per pound of clams, Sue must
a. give up 5 pounds of clams to obtain 1 pound of oysters.
b. give up 5 pounds of oysters to obtain 1 pound of clams.
c. pay $5 for a pound of clams only.
d. pay $5 for a pound of oysters only.
e. pay $5 for a pound of clams and pay $5 for a pound of oysters.
____ 27. If a consumer's budget increases, then the budget line
a. rotates outward and its slope changes.
b. rotates inward and its slope changes.
c. shifts outward and its slope does not change.
d. shifts inward and its slope does not change.
e. does not change.

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Name: ________________________

ID: A

____ 28. As more of a good is consumed, total utility
a. increases.
b. decreases.
c. remains the same.
d. becomes negative and then turns positive.
e. might change but whether or not it changes depends on why more of the good is consumed. ____ 29. If a consumer's total utility increases when another unit of a good is consumed, which of the following is true?
Marginal utility must be
a. negative.
b. equal to one.
c. positive.
d. increasing.
e. some amount, but more information is needed to determine if marginal utility is positive, negative, or equal to zero.
____ 30. Marginal utility curves describe a consumer's
a. ability to buy goods.
b. preferences.
c. income.
d. consumption.
e. reaction to the prices of the goods and services he or she consumes.
____ 31. As more of a good is consumed, marginal utility
a. increases.
b. decreases.
c. remains the same.
d. becomes negative and then turns positive.
e. is negative and stays negative.
____ 32.
Bottles of Soda

Slices of Pizza

The table above gives Ali's total utility from consuming bottles of soda and slices of pizza. The price of pizza is $2 per slice and the price of soda is $1 per bottle. Ali has $14 in his budget. When Ali maximizes his utility he buys ____ bottles of soda and ____ slices of pizza.
a. 4; 5
b. 6; 4
c. 2; 6
d. 6; 6
e. None of the above answers is correct.

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Name: ________________________

ID: A

____ 33. If a consumer has allocated his or her budget and found the combination of goods where all marginal utilities divided by price are equal, what would happen if the consumer were forced to consume some other combination of goods? The consumer
a. will definitely have higher total utility.
b. will definitely have lower total utility.
c. will definitely not experience any change in total utility.
d. might be have higher, lower, or the same total utility but more information is needed to determine which.
e. None of the above answers is correct.
____ 34. Marginal utility is the
a. change in total utility that results from a one-unit change in the quantity of a good consumed. b. total benefit from the consumption of a good or service.
c. quantity of a good a consumer prefers.
d. average utility per unit consumed.
e. change in total utility that results from a one dollar change in the price of a good consumed. ____ 35. From a consumer's point of view, every quantity on a demand curve
a. is efficient because it is the result of the consumer's utility maximization.
b. minimizes total utility.
c. maximizes marginal utility.
d. minimizes marginal utility.
e. sets the consumer's marginal utility equal to zero.
____ 36. Jen consumes 5 CDs and 2 tacos. She receives 500 units of utility from her 5th CD and 200 units of utility from her 2nd taco. The price of a CD is $10, the price of a taco is $4, and she is spending her entire budget.
Which of the following is true regarding Jen's choices?
a. Jen is operating on her demand curve for tacos.
b. Jen is maximizing utility.
c. Jen is operating on her demand curve for CDs.
d. Only answers A and B are correct
e. Answers A, B, and C are correct.
____ 37. The solution to the paradox of value is found by looking at which of the following?
a. total usefulness of different goods
b. the difference between marginal utility and total utility
c. relative prices and total utility
d. the difference between marginal utility and price
e. None of the above helps solve the paradox of value.
____ 38. One reason why water is cheap compared to diamonds is because the
a. marginal utility of water is enormous.
b. marginal utility of water is small.
c. total utility of water is enormous.
d. total utility of water is small.
e. total utility of water and diamonds must be equal but the marginal utility of water is much lower than the marginal utility of diamonds.

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Name: ________________________

ID: A

____ 39. In the paradox of value between expensive diamonds and inexpensive water, we see that
a. the consumer surpluses are very high for both goods.
b. diamonds have a low consumer surplus while water has a high consumer surplus.
c. diamonds have a high consumer surplus while water has a low consumer surplus.
d. the consumer surpluses are very low for both goods.
e. the consumer surpluses for the two goods cannot be compared.
____ 40. Consumers' preferences are described by
a. budget lines.
b. indifference curves.
c. relative prices.
d. household income.
e. demand curves.
____ 41. An indifference curve shows
a. different combinations of two goods among which the consumer is indifferent.
b. consumption possibilities that a consumer faces at different prices and income.
c. affordable combinations of goods.
d. the opportunity cost of one good relative to another.
e. the relative price of one good relative to another.
____ 42. A preference map is a set of
a. indifference curves.
b. budget lines.
c. demand curves.
d. substitution curves.
e. marginal rate of substitution curves.
____ 43. In a preference map, consumption combinations on higher indifference curves
a. always cost more than any combination on a lower indifference curve.
b. always are preferred to combinations on lower indifference curves.
c. always cost less than any combination on a lower indifference curve.
d. always are less preferred than combinations on lower indifference curves.
e. are sometimes more preferred, sometimes less preferred, and sometimes equally preferred than any combination on a lower indifference curve.
____ 44. The marginal rate of substitution measures the
a. change in income as more of a good is consumed.
b. additional satisfaction from an additional dollar's worth of a good.
c. rate at which a person will give up one good to get more of another and remain on the same indifference curve.
d. change in the relative price of a good.
e. change in income necessary to move to another indifference curve.
____ 45. The magnitude of the slope of an indifference curve at a particular point measures the
a. total utility.
b. marginal utility.
c. marginal rate of substitution.
d. total rate of substitution.
e. demand.

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Name: ________________________

ID: A

____ 46. In an indifference curve/budget line diagram, at the consumer equilibrium the slope of the budget line
a. equals the slope of the indifference curve.
b. is greater than the slope of the indifference curve.
c. is less than the slope of the indifference curve.
d. may be greater than, equal to, or less than the slope of the indifference curve.
e. has nothing to do with the equilibrium.
____ 47. In the indifference curve/budget line framework, at the consumer equilibrium, the consumer
a. is on the budget line.
b. is on the highest attainable indifference curve.
c. has a marginal rate of substitution equal to the relative price of the goods.
d. Only answers A and B are correct.
e. Answers A, B, and C are correct.
____ 48. Consumers reach higher indifference curves when
a. their budget decreases.
b. the price of only the good measured along the y-axis increases.
c. the price of only the good measured along the x-axis increases.
d. the price of either good falls.
e. the price of either good rises.
____ 49. Suppose you have one point on a demand curve. To plot another point for this demand curve using a group of indifference curves,
a. transfer all points from the indifference curve to the corresponding demand curve.
b. horizontally sum the indifference curves.
c. change the price of a good, rotate the budget line, and find the new best affordable point.
This new price and quantity is another point on the demand curve.
d. calculate the marginal rates of substitution from the indifference curve and transfer these values to the demand curve.
e. transfer the budget line so that it becomes the demand curve.
____ 50. To derive a demand curve using the indifference curve model, you must change the
a. consumer's preferences.
b. consumer's income.
c. price of one good, holding the price of the other good and income constant.
d. price of both goods simultaneously but by different amounts.
e. price of both goods simultaneously but by the same percentage.

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