Ag Econ 1041
Third Quiz, 30 points
September 8, 2011
Name ___ KEY
8 a.m. Section
The following questions are valued at five points each
1. List the three activities in order of net benefit (like the decision rule). Circle your opportunity
A) computer game
B) bike riding and
C) watching a move
Any order ok. 2 nd in order should be circled
2. Draw a marginal utility function for consumption of a good. On the same graph show where
MU = MC by adding a price or cost line.
MU or u/q
MU = MC
P or MC q
3. Draw a demand curve for toasters. Show what happens, ceteris paribus, if the price of
4. Decisions are made at the ___ margin _______________________.
True/False are valued at one point each
___ F ___ 5. Economics is focused on money and making profits.
___ T ___ 6. Utility is a comprehensive term for benefits, value, satisfaction, preferences and
other terms used to describe what we get from a decision, activity or good.
___ F ___ 7. Decisions about what goods to purchase will be efficient if based on average values
___ T ___ 8. The decision rule states you should make the decision that provides the greatest
marginal utility divided by marginal cost or greatest net marginal utility per dollar.
___ T ___ 9. A person is said to have demand for a good when the person has both the
willingness and ability to buy the good.
___ T ___ 10. The ceteris paribus assumption is that other variables not being examined are not
changing or are held equal.
Multiple choice are valued at two points each
___ b ___ 11. The quantity demanded (not demand as a whole) will increase in response to a) Higher costs of production b) Lower price of the good c) Lower income d) A decrease in the number of buyers e) None of the above
___ d ___ 12. As we eat more of a food, eventually the extra consumption causes the following
to occur. a) The law of diminishing total utility b) The law of supply c) A shift in demand d) The law of diminishing marginal utility e) None of the above