Question 1 What is key to solving the diamond-water paradox? more water and fewe

Question

Question 1

What is key to solving the diamond-water paradox?

more water and fewer diamonds

marginal utility

total utility

consumer demand

Question 2

The ______________ paradox was described by Adam Smith in 1776.

diamond-carbon

diamond-water

diamond-life

water-utility

Question 3

By choosing to consume at the consumer optimum, consumers will

maximize their total utility.

minimize their total utility.

maximize the amount they spend on each good.

minimize the amount they spend on each good.

Question 4

When solving the diamond-water paradox we notice that the marginal utility of

diamonds is equal to the marginal utility of water.

diamonds is greater than the marginal utility of water.

diamonds is less than the marginal utility of water.

water is equal to its price, and therefore lower than the marginal utility of diamonds.

Question 5

Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?

Dirk and Lee both receive 10 utils from eating pizza.

Dirk and Lee both receive the same level of satisfaction from eating pizza.

Dirk gets more twice as much satisfaction as Lee from eating pizza.

It is difficult to determine because utility is subjective.

Question 6

A consumer is in equilibrium when consuming two goods when which of the following holds?

MUa/ Pa = MUb/ Pb

MUa/ Ph =MUb/ Pa

Pa/ MUa = Pb/ MUb

MUa x Pa = MUbxPb

Question 7

When total utility is maximized, marginal utility will be

positive.

zero.

negative.

none of these.

Question 8

When consumers get the biggest bang for the buck, we say they

used the loudest gun in hunting season.

reached a consumer optimum.

minimized consumer satisfaction.

maximized marginal utility.

Question 9

Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.

consumer happiness

utility

a happiness index

a satisfaction index

Question 10

The consumer surplus for water is

greater than that for diamonds because water is nonessential.

greater than that for diamonds because water is essential.

less than that for diamonds because water is nonessential.

less than that for diamonds because water is essential.

Question 11

For many products, the total utility curve is

strictly increasing because of increasing marginal utility.

strictly decreasing because of diminishing marginal utility.

increasing initially because of increasing marginal utility, but eventually decreases.

increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

Question 12

Sue likes brownies. However, Sue notices that the more brownies she eats the less satisfaction she receives from each extra brownie. We can say that Sue is experiencing ___________________ from each extra brownie.

sugar sickness

total utility

diminishing marginal utility

increasing marginal utility

Question 13

Suppose a consumer consumes only diamonds and water, and the price of diamonds increases. All else being equal, a consumer’s marginal utility for diamonds

decreases, and the marginal utility for water stays the same.

increases, and the marginal utility for water decreases.

decreases, and the marginal utility for water increases.

increases, and the marginal utility for water stays the same.

Question 14

Suppose the price of an iPod decreases and the price of HD TVs remains the same; what noticeable effect(s) occur(s)?

the substitution effect only

the real-income effect only

the substitution effect and real-income effect, if there is a noticeable change in purchasing power

the substitution effect and real-income effect, if there isn’t a noticeable change in purchasing power

Question 15

If the marginal utility of good 1 is 15 and its price is $3, and the marginal utility of good 2 is 12, and its price is $4, then the consumer

has achieved a consumer optimum.

should increase his or her consumption of good 1.

should increase his or her consumption of good 2.

should decrease his or her consumption of good 1.

a.

more water and fewer diamonds

b.

marginal utility

c.

total utility

d.

consumer demand

Explanation / Answer

1. b) Marginal utility

2. b) Diamond-water

3. a) maximize their total utility

4. b) diamonds is greater than the marginal utility of water.

5. d)It is difficult to determine because utility is subjective.

6. a)MUa/ Pa = MUb/ Pb

7. b)zero.

8. b)reached a consumer optimum.

9. b)utility

10. b)greater than that for diamonds because water is essential.

11. d)increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

12. c)diminishing marginal utility

13. c)decreases, and the marginal utility for water increases.

14. c)the substitution effect and real-income effect, if there is a noticeable change in purchasing power

15. b)should increase his or her consumption of good 1.

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