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Consumers aim to maximize a) marginal utility b) total utility
Marginal utility
Total utility

Consumers maximize utility where total utility from each good is equal.
True
False

Why does an individual demand curve for a product slope downwards from left to right?
Buyers’ additional satisfaction declines as consumption rises.
Consumers are faced with choices between competing products.
Sellers are willing to accept lower prices on larger orders.
Average cost of production falls as scale of production increases.

The condition for equilibrium (with two goods, A and B) for the consumer occurs where:
MU(A) = MU(B)
MU(A)*P(A) = MU(B)* P(B)
MU(A)/P(A) = MU(B)/P(B)

As the price of a good falls, the income and substutition effect move in the same direction for
Normal goods
Inferior goods
All types of goods
No type of goods

As the price of a good rises, the income and substutition effect move in the opposite direction for
Inferior goods
Normal goods

A consumer's budget line shifts below from MN (red) to PQ (green). What combination of factors may have caused this to happen? Assume no change in the price of Y.
More income and an increase in the price of X
More income and a fall in the price of X
Less income and an increase in the price of X
Less income and a fall in the price of X

The diagram below shows two budget lines. Peter's budget line shifted from PQ to MN. Assume that the price of X did not change. What could have caused this shift?
Peter's income fell and the price of Y fell
Peter's income rose and the price of Y rose
Peter's income fell and the price of Y rose

Bilal likes chocolate. On the first chocolate bar he consumes, he gets total utility of 20 utils. The second bar he eats gives him 28 utils so his marginal utility is 8 utils. The 3rd bar gives him total utility of 32 so he derives 4 extra utils (MU of third bar is 4 utils). If the marginal utility of money is $1 = 1 util, how many chocolate bars will he buy? Assume that the price of a chocolate bar is $4 (made in Switzerland, yummie!).
Zero chocolate
One chocolate bar
Two chocolate bars
Three chocolate bars

Ahmed consumes tea and coffee. His marginal utility of coffee is 100 and its price is $10. The MU of tea of 60 utils and its price is $6. A medical report comes out indicating the tea has anti-carcinogenic properties. The MU of tea now rises to 120 utiils. How might equilibrium be restored for the Ahmed?I Sellers of tea raise the price to $12.II Seller of tea reduce prices to help beat cancer.III Sellers raise prices to $9 and consumers consume a lot more tea so that, owing to diminishing returns, MU now falls from 120 utils to 90 utils.IV The market will stay in equilibrium as it is.
I only
II only
I and III only
IV only

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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