# Economics Chapter 7

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1. Suppose that MUx/Px for good X exceeds MUy/Py for good Y. To maximise utility, the consumer who is exhausting his/her money income, should buy:
A. Lees of X only if its price rises.
B. More of Y and less of X
C. More of X and less of Y.
D. More of Y only if its price rises
C. More of X and less of Y.
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2. A consumer's demand curve for a product is downward-sloping because:
A. total utility falls below marginal utility as more of a product is consumed.
B. Marginal utility diminishes as more of a product is consumed.
C. Time becomes less valuable as more of a product is consumed.
D. The income and substitution effects precisely offset each other.
B. Marginal utility diminishes as more of a product is consumed.
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3. Total utility may be determined by:
A. multiplying the marginal utility of the first unit consumed by the number of units consumed.
B. multiplying the marginal utility of the last unit consumed by product price.
C. Multiplying the marginal utility of the last unit consumed by the number of units consumed.
D. Summing the marginal utilities of each unit consumed.
D. Summing the marginal utilities of each unit consumed.
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4. 'A fall in the price of a good increases the real income or purchasing power of consumers, so that they are able to buy more of the product.' This statement best describes:
A. The income effect
B. The substitution effect.
C. A complementary good
D. A substitute good
A. The income effect
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5. If the price of normal good X rises, the income effect:
A. will induce the consumer to buy more of X, and the substitution effect will induce him to buy less.
B. and substitution effect will induce the consumer to buy less of X.
C. and substitution effect will induce the consumer to buy more of X.
D. will induce the consumer to buy less of X, and the substitution effect will induce him to buy more.
B. and substitution effect will induce the consumer to buy less of X.
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6. The ‘income effect' indicates that:
A. a rise in money income will cause consumers to buy smaller quantities of normal goods.
B. when the price of a product falls, the lower price will induce the
consumer to buy more of the product, once it is relatively cheaper.
C. consumers should substitute various products until the marginal utility
from the last unit of each product purchased is the same.
D. when the price of a product falls, a consumer will be able to buy more of it with a given money income.
D. when the price of a product falls, a consumer will be able to buy more of it with a given money income.
7. If the price of a product falls, that product becomes cheaper, and people will want to purchase more of it in place of other goods.' This statement best describes:
A. the substitution effect.
B. an inferior good.
C. the income effect
D. a complementary good.
A. the substitution effect.
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8. A product has utility if it:
A. satisfies consumer wants
B. takes more and more resources to produce successive units of it.
C. violates the law of demand.
D. is useful.
A. satisfies consumer wants
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9. The ‘law of diminishing marginal utility' states that:
A. it will take larger and larger amounts of resources, beyond some point, to produce successive units of a product.
B. the price must be lowered, in order to induce firms to supply more of a product.
C. total utility is maximised when consumers obtain the same amount of utility, per unit, of each product consumed.
D. beyond some point, additional units of a given product will yield less and less extra satisfaction to a consumer.
D. beyond some point, additional units of a given product will yield less and less extra satisfaction to a consumer.
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10. The first meat pie yields, for Craig, 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three meat pies is 38 units of utility. The marginal utility of the third meat pie:
A. is 6 units of utility.
B. is 26 units of utility.
C. cannot be determined from the information given.
D. is 8 units of utility.
D. is 8 units of utility.
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 Author: Anonymous ID: 167591 Card Set: Economics Chapter 7 Updated: 2012-08-27 01:55:52 Tags: Utility Folders: Description: Economics chapter 7 quiz questions on utility Show Answers: