Tackle the Test: Multiple-Choice Questions

1. Question

   Generally, each successive unit of a good consumed will cause marginal utility to

   A.

   increase at an increasing rate.

   B.

   increase at a decreasing rate.

   C.

   increase at a constant rate.

   D.

   decrease.

   E.

   either increase or decrease.

   Generally, each successive unit of a good consumed will cause marginal utility to

2. Question

   Assume there are two goods, good X and good Y. Good X costs $5 and good Y costs $10. If your income is $200, which of the following combinations of good X and good Y is on your budget line?

   A.

   0 units of good X and 18 units of good Y

   B.

   0 units of good X and 20 units of good Y

   C.

   20 units of good X and 0 units of good Y

   D.

   10 units of good X and 12 units of good Y

   E.

   all of the above

   Assume there are two goods, good X and good Y. Good X costs $5 and good Y costs $10. If your income is $200, which of the following combinations of good X and good Y is on your budget line?

3. Question

   The optimal consumption rule states that total utility is maximized when all income is spent and

   A.

   MU/P is equal for all goods.

   B.

   MU is equal for all goods.

   C.

   P/MU is equal for all goods.

   D.

   MU is as high as possible for all goods.

   E.

   the amount spent on each good is equal.

   The optimal consumption rule states that total utility is maximized when all income is spent and

4. Question

   A consumer is spending all of her income and receiving 100 utils from the last unit of good A and 80 utils from the last unit of good B. If the price of good A is $2 and the price of good B is $1, to maximize total utility the consumer should buy

   A.

   more of good A.

   B.

   more of good B.

   C.

   less of good B.

   D.

   more of both goods.

   E.

   less of both goods.

   A consumer is spending all of her income and receiving 100 utils from the last unit of good A and 80 utils from the last unit of good B. If the price of good A is $2 and the price of good B is $1, to maximize total utility the consumer should buy

5. Question

   The optimal consumption bundle is always represented by a point

   A.

   inside the consumer’s budget line.

   B.

   outside the consumer’s budget line.

   C.

   at the highest point on the consumer’s budget line.

   D.

   on the consumer’s budget line.

   E.

   at the horizontal intercept of the consumer’s budget line.

   The optimal consumption bundle is always represented by a point