Department of Economics
University of Lethbridge
Econ 1010A
Practice Questions – Chapter 7
1. The principle of diminishing marginal utility says that
A) you don't enjoy consuming more of a good.
B) you enjoy consuming more of a good if it is good.
C) as you consume more of a good, you enjoy the additional units less than you did the
initial units.
D) as you consume more of a good, you enjoy the additional units more than you did
the initial units.
Quantity of Good Y
Use the following to answer question 2:
C
B
A
E
D
F
G
Quantity of Good X
Price of Good Y
Price of Good X
Quantity of Good X
I
H
J
K
Quantity of Good Y
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2. Refer to the graph above. The effect of a decrease in the price of X is shown by
A) the movements from A to B, D to E, or F to G.
B) the movements from A to B, D to F, or E to G.
C) the movements from B to C, D to F, or E to G.
D) the movements from B to C, D to E, or F to G.
3. Popeye cannot eat enough free spinach. With this information, we know that Popeye's
A) marginal utility for spinach never falls.
B) total utility is always rising.
C) total utility for spinach is falling.
D) marginal utility for spinach is falling.
4. The following table describes utility for consuming cans of pop. At what point does
the law of diminishing marginal utility set in?
A)
B)
C)
D)
Cans of Pop
Total Utility
Marginal Utility
1
14
__
2
__
12
3
36
__
4
44
__
5
__
6
6
54
__
7
__
4
8
__
0
9
54
__
Between 8 and 9.
Between 7 and 8.
Marginal utility diminishes everywhere.
Marginal utility never diminishes.
5. As a consumer moves along an income constraint
A) prices are held constant, but income changes.
B) income is held constant, but prices change.
C) prices and income are held constant, but total utility changes.
D) total utility is held constant, but prices and income change.
6. The faster marginal utility declines
A) the greater the elasticity of demand.
B) the smaller the elasticity of demand.
C) the smaller the opportunity cost of the good.
D) The demand curve is unaffected by the decline in marginal utility.
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7. The total utility of consuming the first piece of chewing gum in a packet is 30. This
means that
A) marginal utility of consuming the first piece of gum is zero.
B) marginal utility of consuming the first piece of gum is less than 30.
C) marginal utility of consuming the first piece of gum is 30.
D) marginal utility of consuming the first piece of gum is more than 30.
8. Total utility refers to:
A) the total satisfaction one gets for one's consumption of a product.
B) the satisfaction one gets from the consumption of an additional unit of a product.
C) the maximum satisfaction one can get from the consumption of a good.
D) the satisfaction one gets from the consumption of an additional unit of a product
times its price.
9. Refer to the table below. If the price of one Weight Watcher's frozen dinner is $2 and
the price of one dozen jelly donuts is $1, which of the following would Kent, a utility
maximizing consumer, buy with his $6?
A)
B)
C)
D)
Jelly Donuts
Frozen Dinners
Dozen
Total
Dinners
Total
Consumed
Utility
Consumed
Utility
per Day
(Units of utility)
per day
(Units of utility)
0
0
0
0
1
12
1
16
2
21
2
34
3
27
3
46
4
30
4
46
5
30
5
42
6
28
6
36
3 frozen dinners.
2 frozen dinners and 2 dozen jelly donuts.
1 frozen dinner and 4 dozen jelly donuts.
6 dozen jelly donuts.
10. The law of demand is explained by the law of
A) diminishing marginal utility.
B) diminishing monetary effect.
C) decreasing opportunity cost.
D) decreasing rational choice.
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11. Faced with a bushel of strawberries, the rational individual would
A) eat all of the strawberries.
B) eat strawberries until the satisfaction from the last strawberry is maximized.
C) eat strawberries until the satisfaction from eating strawberries is maximized.
D) eat strawberries until the satisfaction from eating the last strawberry begins to fall.
12. A Big Mac hamburger meal costs $3.00 giving you an additional 5 units of utility; a
meal at the Four Season's Hotel costs $27.00 giving you an additional 45 units of utility.
According to the theory of rational choice
A) you should eat the Big Mac meal.
B) you should eat at the Four Season's Hotel.
C) you would be indifferent between eating the Big Mac and eating at the Four
Season's Hotel.
D) you will decide that eating at the Four Season's Hotel is preferable because though
the marginal utilities of both the meals are the same, the total utility is greater in the
case of the meal at the Four Season's Hotel.
13. An original Jackson Pollack painting can cost $1.2 million while a poster reproduction
of that same painting can cost $15. The reason is that
A) the total utility of Jackson Pollack paintings is greater than the total utility of
Jackson Pollack posters.
B) the marginal utility of Jackson Pollack paintings is greater than the marginal utility
of Jackson Pollack posters.
C) the opportunity cost of Jackson Pollack paintings is greater than the opportunity
cost of Jackson Pollack posters.
D) Jackson Pollack paintings has more substitutes than Jackson Pollack posters.
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14. Refer to the following table to answer the question:
Apple Pies
(P = $1)
Q
TU MU
0
0
1
10
10
2
18
8
3
24
6
Fish Sandwich
(P = $1.50)
Q
TU MU
0
0
1
12
12
2
18
6
3
21
3
Assuming the above tables describe your taste and that you must buy whole pies and
whole sandwiches, how would you spend $3 to maximize utility?
A) Buy three apple pies.
B) Buy two fish sandwiches.
C) Buy one apple pie and one fish sandwich.
D) Buy two apple pies.
Use the following to answer question 15:
15. Refer to the graph above. The budget line (or income constraint) reflects a relative
price of chocolate (in terms of pop) of
A) one-fourth.
B) one-half.
C) one.
D) two.
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16. The average utility of good A is 15; and the average utility of good B is 25; you should
A) consume more of good A and less of good B.
B) consume more of good B and less of good A.
C) keep consuming the current amounts of both good A and good B.
D) realize that you don't have enough information to answer the question.
17. In choosing between two products, a rational consumer will choose the product that
gives her
A) the greatest total utility per dollar.
B) the least marginal utility per dollar.
C) the highest cost per additional unit of utility.
D) the lowest cost per additional unit of utility.
Marginal Utility
Marginal Utility
Use the following to answer question 18:
Avocados per week
(C)
(B)
Avocados per week
Marginal Utility
Marginal Utility
(A)
Avocados per week
(D)
Avocados per week
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18. Refer to the above graph. Jerry likes avocados; each additional avocado he consumes
adds as much to his total utility as did the previous one. Which of the four graphs best
represents Jerry's marginal utility curve for avocados?
A) A.
B) B.
C) C.
D) D.
19. The principle of diminishing marginal utility says that
A) marginal utility is negative.
B) marginal utility is positive.
C) marginal utility is always falling.
D) marginal utility falls after some point.
Total Utility
Use the following to answer question 20:
Quantity
20. Refer to the graph above. The marginal utility curve associated with this total utility
curve is
A) a downward sloping curve.
B) a flat line with a slope of zero.
C) an upward sloping curve.
D) indeterminate.
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21. Jason is faced with two choices: A BMW costs $40,000 giving him an additional 800
units of utility and a laser printer for his computer costing $1000 giving him an
additional 25 units of utility. Rational choice theory would predict that he would
choose
A) to consume the BMW.
B) to consume the laser printer.
C) It is impossible to choose because the goods have different prices.
D) It is impossible to choose because BMW's and laser printers are fundamentally
different goods with different purposes.
Marginal Utility
Use the following to answer question 22:
B
C
A
D
Quantity
22. Refer to the above graph. Total utility is at its maximum at point
A) A.
B) B.
C) C.
D) D.
23. Refer to the table below. What is the total utility of the five cans of pop (soft drink)?
Cans of Pop
1
2
3
4
5
A)
B)
C)
D)
Total Utility
14
__
36
44
__
Marginal Utility
__
12
__
__
6
6.
8.
50.
44.
Page 8
24. Which of the following is an example of the law of diminishing marginal utility?
A) The marginal product of electric utilities tends to increase as more workers are
added to a given amount of machinery.
B) The marginal product of all utilities tends to decrease as more workers are added to
a given amount of machinery.
C) The marginal utility of consuming M&Ms decreases as more M&Ms are consumed
in any given period.
D) The marginal utility of consuming M&Ms increases as more M&Ms are consumed
in any given period.
25. Refer to the table below. What is the marginal utility of the fourth can of pop (soft
drink)?
A)
B)
C)
D)
Cans of Pop
1
2
3
4
5
44 units of utility.
10 units of utility.
8 units of utility.
2 units of utility.
Total Utility
14
__
36
44
__
Marginal Utility
__
12
__
__
6
26. The principle of rational choice specifically states that you choose how to spend
additional income based on what gives you
A) the most total utility per dollar.
B) the most marginal utility per dollar.
C) the most average utility per dollar.
D) the least total utility per dollar.
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Use the following to answer questions 27-28:
27. Refer to the graph above. Given this income constraint, if bagels cost $1.80 each, then
croissants must cost
A) $0.90 each.
B) $1.80 each.
C) $3.60 each.
D) It is impossible to know from the information given.
28. Refer to the graph above. Which price combination is consistent with the income
constraint shown?
A) $3 a bagel, $2 a croissant.
B) $2 a bagel, $2 a croissant.
C) $2 a bagel, $4 a croissant.
D) $6 a bagel, $3 a croissant.
29. A haircut would give Dawn 2000 units of utility and costs her $40, while a set of acrylic
nails costs $25 and yields 1000 units of utility. Most likely Dawn should
A) choose the haircut because each unit of utility will cost her 2 cents as compared
with 2.5 cents for the nails.
B) choose the nails because she will obtain 50 units of utility per dollar as compared
with 40 units of utility per dollar for the haircut.
C) be indifferent between the two choices.
D) choose the haircut because she will receive 50 units of utility per dollar as
compared with 45 units of utility per dollar for the nails.
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Use the following to answer question 30:
30. Refer to the graph above. Assuming a consumer has $5 to spend, if a pop costs $0.50
and a chocolate bar costs $0.50, the consumer would optimally choose to consume
A) at point A.
B) at point B.
C) 10 cans of pop and 0 chocolate bars.
D) 0 cans of pop and 10 chocolate bars.
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