Question 1

In microeconomics, the term 'utility' is best defined as:

Accepted Answer

the satisfaction or pleasure a consumer receives from consuming a good or service.

Question 2

Which of the following statements best describes an important assumption economists make about consumers?

Accepted Answer

Consumers are motivated to maximize their utility.

Question 3

Economists use the term 'marginal utility' to describe the:

Accepted Answer

change in total satisfaction caused by consumption of an additional unit of a good.

Question 4

The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as:

Accepted Answer

the law of diminishing marginal utility.

Question 5

The 'law' of diminishing marginal utility implies that:

Accepted Answer

each additional unit of a good consumed will contribute less to the consumer's satisfaction.

Question 6

Suppose a consumer purchases 3 toffee bars and 4 bags of cashews per week. If the marginal utility of toffee bars and cashews are as shown in the table, what is the consumer's total utility?

Accepted Answer

$54$

Question 7

A consumer maximizes utility when:

Accepted Answer

the marginal utility per dollar spent on each good is equal.

Question 8

The condition required for a consumer to be maximizing utility, for any pair of products $X$ and $Y$, is:

Accepted Answer

$\frac{MU_X}{P_X} = \frac{MU_Y}{P_Y}$

Question 9

If the price of toffee bars is $1 each, bags of cashews are $2 each, and a consumer has $7 per week to spend, how many of each will the consumer purchase to maximize utility (using the table provided)?

Accepted Answer

2 toffee bars and 2 bags of cashews

Question 10

Suppose the price of good $X$ is measured on the horizontal axis and the quantity of good $Y$ on the vertical axis. If the price of $X$ increases, the budget line will:

Accepted Answer

rotate inward about the vertical axis, with the slope becoming steeper.

Question 11

If the income of a consumer increases, holding prices constant, the consumer's budget line will:

Accepted Answer

shift outward parallel to the original budget line.

Question 12

If the price of a normal good falls, the substitution effect and the income effect will:

Accepted Answer

both lead to an increase in the quantity demanded.

Question 13

Refer to the market demand graph for cement. If the price of cement is $60 per cubic metre, what is the market demand (in cubic metres per month)?

Accepted Answer

$3000$

Question 14

Suppose a consumer's indifference curve is tangent to the budget line. This point represents:

Accepted Answer

the consumer's utility-maximizing combination of goods.

Question 15

If the price of a Giffen good increases, the income effect will:

Accepted Answer

reinforce the substitution effect, leading to an increase in quantity demanded.

Question 16

Suppose Chris's income is such that he can buy no more than 10 cappuccinos per week. If Chris is maximizing his utility at this level of income, how many cappuccinos is he consuming per week (refer to the indifference curve and budget constraint diagram)?

Accepted Answer

$5$

Question 17

The slope of the budget line is equal to:

Accepted Answer

the relative price ratio $\left( \frac{P_{cappuccino}}{P_{all\ other\ goods}} \right)$

Question 18

If the price of bread falls, holding income and the price of milk constant, the consumer's budget line will:

Accepted Answer

rotate outward along the bread axis, becoming flatter.

Question 19

If a consumer moves from point X to point Z on an indifference curve diagram, and this move is caused by a decrease in the price of bread, this is an example of:

Accepted Answer

the substitution effect and the income effect both increasing the quantity of bread consumed.

Question 20

If the marginal utility per dollar spent on transportation services is $5, and the marginal utility per dollar spent on all other goods is $20, what should the consumer do to maximize utility?

Accepted Answer

Spend less on transportation services and more on all other goods.

Microeconomics Study Weekly assignment 5 Guide: Utility, Consumer Choice, and Demand

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