question

The utility of a good or service:

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is the satisfaction or pleasure one gets from consuming it.

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Marginal utility can be:

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positive, negative, or zero.

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Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is:

answer

negative.

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The ability of a good or service to satisfy wants is called:

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utility.

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A product has utility if it:

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satisfies consumer wants.

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The law of diminishing marginal utility states that:

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beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.

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The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:

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8 units of utility.

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If the price of product X rises, then the resulting decline in the amount purchased will:

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increase the marginal utility of the last unit consumed of this good.

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Marginal utility is the:

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change in total utility obtained by consuming one more unit of a good.

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Utility refers to the:

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satisfaction that a consumer derives from a good or service.

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Total utility may be determined by:

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summing the marginal utilities of each unit consumed.

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Where total utility is at a maximum, marginal utility is:

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zero.

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Which of the following is correct?

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If marginal utility is diminishing and is a positive amount, total utility will increase.

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The law of diminishing marginal utility explains why:

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demand curves slope downward.

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While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice, at the same price. Based on this information we can conclude that:

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Alex may have to lower the price to convince Kara to buy a second slice.

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The theory of consumer behavior assumes that:

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consumers behave rationally, attempting to maximize their satisfaction.

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To maximize utility, a consumer should allocate money income so that the:

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marginal utility obtained from the last dollar spent on each product is the same.

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Suppose that MUx/Px exceeds MUy/Py. To maximize utility, the consumer who is spending all her money income should buy:

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more of X and less of Y.

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Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that:

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Mrs. Arnold should spend more on soda and less on pretzels.

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Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase:

answer

more of B and less of A.

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The marginal utility of the last unit of apples consumed is 12 and the marginal utility of the last unit of bananas consumed is 8. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?

answer

$6 and $4

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Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that:

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their marginal utilities are the same.

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A consumer is maximizing her utility with a particular money income when:

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MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.

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Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4 respectively. The marginal utility of the last units of A and B are 16 and 24 respectively. These data suggest that Ms. Thomson:

answer

should buy less B and more A.

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If a rational consumer is in equilibrium, which of the following conditions will hold true?

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The marginal utility of the last dollar spent on each good purchased will be the same.

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Which of the following best explains the difference between neoclassical economics and behavioral economics?

answer

Neoclassical economics assumes that people are rational in their decision making, while behavioral economics believes people make systematic errors.

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Which of the following assumptions about human behavior is most likely to be accepted by behavioral economists?

answer

People have preferences that are unstable and vary by context.

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Behavioral economists believe that people:

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often succumb to temptation.

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Neoclassical economists generally believe which of the following about human behavior?

answer

When individuals make mistakes in decision making, they adjust to these errors and rarely repeat them.

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Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?

answer

People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior.

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Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a behavioral economist would expect Susie to:

answer

eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future.

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Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassic economist would expect Susie to:

answer

carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat.

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In the financial crisis that precipitated the 2007-2009 recession, people systematically overestimated their prospects for financial gain. Which branch of economics would most likely have expected to predict this?

answer

Behavioral economics.

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Which of the following individuals received a Nobel Prize in economics for his work in behavioral economics?

answer

Daniel Kahneman.

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Which of the following statements best reflects how a behavioral economist views individual decision making?

answer

Balin tries to make good, well-thought-out decisions, but his desire for utility in the present means that he often gives in to costly temptations.

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