# Quiz 3b 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

cost.

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

MU q

3. Draw a demand curve for toasters. Show what happens, ceteris paribus, if the price of

toasters increases.

P

P

P

1

0

0

D

Q

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

or sizes.

___ 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