Chapter 9
Consumer Choice and Demand
Checkpoint 9.1 Consumption Possibilities
9.1.1) The budget line shows
A) the person?s lifetime earnings.
B) a person?s budget and its limits.
C) a family?s budget and what it plans to buy for the year.
D) the utility gained from successive amounts of a good.
E) only the affordable combinations of goods and services the person can buy.
9.1.2) A budget line shows the
A) unlimited combinations of goods and services that can be consumed.
B) limits to consumption possibilities.
C) limits to production possibilities.
D) unlimited combinations of goods and services that can be produced.
E) None of the above answers are correct.
9.1.3) A consumption point inside the budget line
A) is unaffordable.
B) is possible to afford but has some unspent income.
C) shows that the consumer has chosen to spend all of his or her income on both products.
D) shows that the consumer spends income on only one of the goods.
E) is affordable and, because it is inside the budget line, means that all the person?s budget
has been spent.
9.1.4) Which of the following statements is correct?
A) Consumers have the ability to buy everything they desire.
B) A consumer?s budget line shows the limits to what a consumer can buy.
C) A consumer?s budget line shows the goods with the highest marginal utilities.
D) Rich consumers are unaffected by prices.
E) A budget line changes only if the person?s budget changes.
9.1.5) A budget line
A) keeps the budgets of all consumers in line with their needs.
B) shows the satisfaction people get from their budget.
C) describes the limits to consumption choices, given the income of the consumer and the prices of goods and services.
D) has a positive slope.
E) has no slope.
9.1.6) Which of the following statements is correct?
A) The slope of the budget line shows the opportunity cost of the good measured along the x-axis.
B) Along the budget line, consuming more of one good implies consuming more of the other.
C) The slope of the budget line shows there is no tradeoff between the two goods because the consumer can buy each of them.
D) If the consumer?s budget increases, the budget line shifts leftward and its slope
does not change.
E) None of the above answers is correct.
9.1.7) A budget line
A) shows the limits to what can be consumed.
B) has a slope equal to a relative price.
C) rotates or shifts only when the consumer?s budget changes.
D) Answers B and C are both correct.
E) Answers A and B are both correct.
9.1.8) A budget line shows
A) what consumption choices a person will make.
B) a person?s consumption possibilities.
C) the total utility of possible consumption combinations.
D) Both answers A and C are correct.
E) Both answers A and B are correct.
9.1.9) In order to draw a budget line for a consumer, we need to know
A) only the consumer?s budget.
B) only the prices of the goods the consumer demands.
C) both the consumer?s budget and the prices of the goods the consumer demands.
D) the consumer?s budget, the prices of the goods the consumer demands, and the utilities of the goods the consumer buys.
E) the utilities of the goods the consumer buys.
9.1.10) Katie has $15. She likes M&M candies and Hershey?s white chocolate bars.
M&M candies are $1.50 a pack and (the large) Hershey bars are $3.00 each. Katie can choose to buy
A) 4 Hershey bars and 2 packs of M&Ms.
B) 2 Hershey bars and 6 packs of M&Ms.
C) 5 Hershey bars and 10 packs of M&Ms.
D) Both answer A and answer B are correct.
E) Answer A, answer B, and answer C are correct.
9.1.11) 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.
9.1.12) 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 6 pizzas per week, how many bottles of gel can he purchase?
A) 10
B) 60
C) 20
E) None of the above answers is correct.
9.1.13) Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing lures and steaks. Lures cost $5 each, steaks cost $10 each. With this level of income, which consumption points are not possible?
A) 200 lures, 0 steaks
B) 100 lures, 60 steaks
C) 80 lures, 20 steaks
D) 0 lures, 50 steaks
E) 50 lures, 50 steaks
9.1.14) Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing lures and steaks. Lures cost $5 each, steaks cost $10 each. If Reb purchases 124 lures per week, how many steaks can he buy?
A) 620
B) 38
C) 123
D) 380
E) 100
9.1.15) 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.
B) 330
C) 3
D) 17
Checkpoint 9.2 Marginal Utility Theory
9.2.1) Utility is
A) an index of how much a person wants something.
B) the satisfaction a person gets from the consumption of a good.
C) an abstract concept measured in arbitrary units.
D) Only answers A and B are correct.
E) Answers A, B, and C are correct.
9.2.2) The benefit or satisfaction that a person gets from the consumption of a good or service is called
A) marginal opportunity benefit.
B) utility.
C) demand.
D) quantity demanded.
E) purchased utility.
9.2.3) The word ?utility?means
A) benefit or satisfaction.
B) power generation.
C) demand.
E) quantity demanded.
9.2.4) The benefit that John gets from eating an additional grape is called the
A) net gain.
B) demand.
C) quantity demanded.
D) total utility.
E) marginal utility.
9.2.5) The benefit or satisfaction that a person gets from the consumption of a good or service is called
A) opportunity cost.
B) marginal return.
C) consumer cost.
D) utility.
E) demand.
9.2.6) The additional satisfaction from consuming one more unit of a product is called
A) marginal return.
B) marginal cost.
C) marginal utility.
D) total utility.
E) marginal demand.
9.2.7) Marginal utility is the change in total utility that results from
A) an increase in the price of the good.
B) a change in the budget line.
C) a one-unit change in the quantity of a good consumed.
D) a decrease in the price of the good.
E) an increase in the consumer?s income.
9.2.8) 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.
9.2.9) Diminishing marginal utility means that an increase in the consumption of a good leads to
A) a decrease in total utility.
B) a decrease in marginal utility.
C) an increase in marginal utility.
D) no change in marginal utility.
E) an increase in the consumer?s budget.
9.2.10) 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.
9.2.11) 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.
9.2.12) The table above shows Buffy?s utility from wooden stakes and cloves of garlic. If Buffy increases her consumption of wooden stakes from 4 to 5 stakes, her marginal utility from the 5th stake is
A) 65.
B) 7.
C) 58.
D) 7÷ 5 = 1.29.
E) None of the above answers is correct.
9.2.13) The table above shows Buffy?s utility from wooden stakes and cloves of garlic. The marginal utility of which clove of garlic is the largest?
A) the first clove
B) the second clove
C) the fifth clove
D) the third clove
E) The marginal utility of all cloves is the same.
12.2.14) The table above shows Buffy?s utility from wooden stakes and cloves of garlic. As Buffy uses more stakes, the marginal utility of a stake ________ and as she uses more cloves of garlic, the marginal utility of a clove of garlic ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
9.2.15) The table above gives Matt?s utility from consuming slices of pizza. His marginal utility from
the 3rd slice is
A) 27 units.
B) 5 units.
C) 9 units.
D) 11 units.
E) None of the above answers is correct.
Checkpoint 9.3 Efficiency, Price, and Value
9.3.1) The maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized is known as
A) demand.
B) marginal benefit.
C) quantity demanded.
D) total utility.
E) marginal utility.
9.3.2) The fact that diamonds have a much higher price than water
A) violates the rules of utility maximization because water is necessary for life.
B) does not violate the rules of utility maximization because globally, fresh water is actually very rare.
C) does not violate the rules of utility maximization because water?s marginal utility is low.
D) violates the rules of utility maximization because diamonds are not necessities.
E) violates the rules of utility maximization because the consumer actually consumes a large amount of water.
9.3.3) One reason why the price of diamonds is so high is because the
A) marginal utility of diamonds is zero.
B) marginal utility of diamonds is high.
C) marginal utility of diamonds is low.
D) total utility of diamonds is low.
E) total utility of diamonds is high.
9.3.4) Why does the paradox of value between diamonds and water arise?
A) because water has a low price and a low total utility, while diamonds have a high price and a high total utility
B) because water has a low price and a low marginal utility, while diamonds have a high price and a high marginal utility
C) because necessities like water are higher priced than luxuries like diamonds
D) because diamonds have a higher value to people even though water is essential to life
E) because water has a low price and a low total utility, while diamonds have a high
price but also a low total utility
Answer: B
9.3.5) Related to the paradox of value, which of the following statements is correct?
A) The marginal utility of water is enormous but the total utility is small.
B) We consume so much water so its marginal utility is enormous.
C) The marginal utility of water is small but the total utility is enormous.
D) The consumer surplus from water is small.
E) The total utility of water is equal to the marginal utility of water.
9.3.6) 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.
9.3.7) If we look at the changes in the consumption of beverages during the 1990s in the United States, we see that the consumption of
A) bottled water has increased because its price has risen.
B) beer has increased because its price has fallen.
C) coffee has increased because its price has risen.
D) bottled water has increased because its price has fallen.
E) bottled water has increased because its price has risen.