Name:    Quiz #5: PRACTICE - micro Consumer Choice Theory

Multiple Choice
Identify the choice that best completes the statement or answers the question. 1.

In Exhibit 0079, the marginal utility of consuming the fourth scone is
 a. 4 b. 7 c. 6 d. 24 e. 2

2.

In Exhibit 0079, the total utility of consuming five scones is
 a. 82 b. 30 c. 34 d. 27 e. 2

3.

Marginal utility is negative only when quantity demanded is negative.
 a. True b. False

4.

When total utility is increasing, marginal utility must be positive.
 a. True b. False

5.

If marginal utility is negative, then the total utility must be
 a. decreasing b. increasing c. constant d. negative e. positive 6.

In Exhibit 0078, marginal utility is _________ until the _________ unit.  After that, diminishing marginal utility occurs.
 a. increasing; third b. increasing; first c. increasing; second d. decreasing; second e. decreasing; third

7.

The law of diminishing marginal utility states that
 a. total utility falls as more of a good is consumed, other things constant b. total utility falls as marginal utility falls, other things constant c. marginal utility falls as less of a good is consumed, other things constant d. marginal utility falls as more of a good is consumed, other things constant

8.

The law of diminishing marginal utility implies that the marginal utility of my fifth waffle is less than the marginal utility of my friend's second waffle, other things constant.
 a. True b. False

9.

A consumer maximizes utility when the marginal utilities of all goods
 a. having positive money prices that are equal to zero b. are equal c. are maximized d. are equal to the opportunity costs for all goods that are considered necessities e. are exactly proportional to their market prices

10.

Consumers maximize utility and therefore
 a. product prices play no role in utility maximization b. how consumers allocate their income to different products is not affected by the prices or income. c. income and product prices are both considered in utility maximization, and a change in either income or prices will likely change the quantities the consumer purchases of different products. d. the marginal utility of each product is zero e. product prices become zero at equlibrium.

11.

When total utility is falling, marginal utility is
 a. increasing b. decreasing c. positive d. negative e. 0

12.

The law of diminishing marginal utility states that as you consume more and more of a good, other things constant,
 a. total utility eventually rises b. marginal utility can become positive c. marginal utility approaches, but never becomes, 0 d. total utility can never become negative e. marginal utility eventually declines

13.

What effect most likely explains why most people rarely see the same movie more than once at a movie theatre?
 a. diminishing marginal utility b. increasing marginal costs c. income effect d. all of the above

14.

The marginal utility of a second copy of today's New York Times is
 a. infinite b. practically 0 c. positive and greater than the marginal utility of the first copy d. equal to the marginal utility of the first copy e. 50 cents

15.

A rational person will undertake an activity (increase the quantity) until the point where
 a. marginal benefit is zero b. marginal cost is zero c. marginal benefit equals marginal cost d. total benefit equals total cost

Ian runs a personal car washing service.  He will come to your home or office and wash your car.  He has six customers and each will hire him at a different price to wash their car, but each will only buy a maximum of one car wash per per customer per week.  The customers and the price each is willing to pay each week is as follows:

Customer      Price
Monica       \$30
Phoebe               5
Rachel            20
Joey            15
Chandler      10
Ross            25

Ian has figured out his costs for providing car washes (he ahs no sunk costs) and they appear in the following table:

# of washes per week            Cost
1                  \$17.50
2                  \$35.00
3                  \$52.50
4                  \$70.00
5                  \$87.50
6                  \$105.00

16.

Ian’s optimal number of car washes is
 a. 5 b. 6 c. 2 d. 3

17.

Ian faces
 a. increasing marginal benefit b. constant marginal benefit c. increasing marginal cost d. constant marginal cost

18.

At the optimal level of car washes, Ian’s net gain from washing cars is
 a. \$13 b. \$22.50 c. \$50 d. \$75

19.

If the government requires all car washers to be licensed and the government requires a \$20 license to paid for the right to wash cars each week, then Ian’s optimal number of car washes will
 a. fall to 1 car wash b. fall to 2 car washes c. fall to 4 car washes d. not change the number of car washes e. increase

Harry has \$50 per week to spend on movie tickets and DVD rentals combined.  The price of each movie ticket is \$10 and each movie rental (DVD) is \$5.

20.

In Situation10.1,  which of the following is one of the consumption bundles can Harry afford?
 a. 10 rentals and 2 tickets b. 5 tickets and no rentals c. 6 rentals and 2 tickets d. all of the above e. only b or c from above

21.

Hugo had been paying \$60 per month for cell phone service to Verizon Wireless.  Recently, the price of his service increased.  Hugo decides to switch to Sprint PCS, which was also offering a \$60 per month rate.  This illustrates what effect?
 a. diminishing marginal utility b. subsitution effect c. income effect d. increasing marginal costs