Chapter 6: Consumer Choice Theory (Multiple Choice)

A util represents a unit of measurement for the:
A. Dollars a consumer spends on a good.
B. Way a consumer will respond to change in price.
C. Profit a firm makes from producing a good.
D. Way a producer will respond to change in price.
E. Happiness a person obtains form consuming a good.

Utility refers to the:
A. Satisfaction a consumer expects to recive from a good or service.
B. Ability of a good or service to have value in the marketplace.
C. Relationship of demand to the supply of a product.
D. Usefulness of the product consumed.
E. Satisfaction a consumer experiences after a good or service is purchased.

Consumers tend to maximize:
A. Marginal utility per dollar.
B. Money holdings.
C. Marginal utility.
D. Consumer surplus.
E. Total utility.

Marginal utility (MU) equals:
A. Q/TU.
B. PQ/TU.
C. P/Q.
D. TU/P.
E. TU/Q.

Marginal utility is the cange in:
A. Marginal utility when an extra unity of output is produced.
B. Marginal utility when an extra unit of output is consumed.
C. Total utility when an extra unity of output is consumed.
D. Average utility when an extra unity of output is consumed.
E. Total utility when an extra unit of output is produced.

Utility theory assumes that marginal utility:
A. Is constant as long as the individual derives utility from the product.
B. Increases as an individual consumes more of a product.
C. Decreases as an individual consumes more of a product.
D. Is zero as long as the individual derives utility form the product.
E. Is constant as long as the individual derives satisfaction from the product.

If total utility is falling, marginal utility is:
A. Zero.
B. Positive, but declining.
C. Positive.
D. Negative.
E. Either positive or negative.

Marginal utility is defined as:
A. The number of hours a consumer would be willing to work to receive a certin product.
B. The total level of satisfaction a consumer receives upon the consuption of a certain number of goods.
C. The extra satisfaction a person derives from consuming an additional unity of a good.
D. The extra satisfaction the consumer receives form an extra $1 of income.
E. A comparison of the utility a good provides with the price of that good.

As consumption of a good increases, the extra satisfaction received from consuming an additional unit of the good decreases. This statement is known as the law of:
A. Diminishing marginal utility.
B. Increasing costs.
C. Total utility.
D. Demand.
E. Diminishing marginal returns.

If the price of a product rises, consumers buy less of the good because the:
A. MU/P of the good falls below the MU/P of other goods.
B. MU/P of the good rises above the MU/P of other goods.
C. Marginal utility of the good diminishes.
D. Total utility of the good diminishes.
E. Marginal utility of the good rises.

According to the law of diminishing marginal utility, the marginal utility curve is _______.
A. flat.
B. downward sloping.
C. upward slopint.
D. vertical flat.

Consumers should continue to rearrange their consumption of two goods until:
A. The prices of the two goods are equal for the last dollar spent on each good.
B. The marginal utility per dollar's worth of the two goods is the same for the last dollar spent on each good.
C. Marginal utility is the same for each good for the last dollar spend on each good.
D. The same amount of each is purchased.

According to the utility model of consumer demand, the demand curve is downward-sloping because of the law of:
A. Diminishing consumer equilibrium.
B. Diminishing utility maximization.
C. Consumer equilibrium.
D. Diminishing marginal utility.

Suppose a consumer wants to obtain the highest possible satisfaction from goods purchased on a fixed budget. Which of the following must be equal for all goods?
A. Marginal utility.
B. Total utility.
C. Average utility.
D. Marginal utility per dollar.

If a good A has a marginal utility of 30 and a price of $5, and good B has a marginal utility of 10 and a price of $2, then:
A. Good A is a better buy than good B.
B. Good B is a better buy than good A.
C. Goods A and B are of equal value to this consumer.
D. Neither good A nor B is worth the money.
E. Goods A and B should both be purchased.

If a consumer is spending all of his/her income in a manner where MUa/Pa = MUb/Pb, then the consumer:
A. Should increase the consumption of A and decrease the consumption of B.
B. Is maximizing his/her utility.
C. Should increase the consumption of B and decrease the consumption of A.
D. Should increase the consumption of both A and B.

If a consumer is spending all of his/her income in a manner where MUa/Pa is greater than MUb/Pb, then the consumer:
A. Should increase the purchases of A and decrease the purchases of B.
B. Is maximizing his/her utility.
C. Should spend less money on both goods.
D. Should spend more money on both goods.
E. Shold increase his/her purchases of B and decrease the purchases of A.

When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. This statement describes the:
A. Income effect.
B. Consumer equilibrium effect.
C. Substitution effect.
D. Price effect.

The income effect refers to a change in:
A . Income because of changes in the CPI.
B. The quantity demanded of a good because of a change in the buyer's real income.
C. The quantity demanded of a good because of a change in the buyer's money income.
D. None of the above.

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the:
A. Substitution effect.
B. Consumer equilibrium effect.
C. Price effect.
D. Income effect.