1 / 29

Theory of Consumer Choice Practice Questions

Theory of Consumer Choice Practice Questions. Scenario 1. Budget Constraint. Tom is trying to decide how to allocate his $50 budget for CD purchases and DVD rentals when the price of a CD is $10 and the price of a DVD rental is $5 .

mrinal
Download Presentation

Theory of Consumer Choice Practice Questions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Theory of Consumer Choice Practice Questions

  2. Scenario 1. Budget Constraint. Tom is trying to decide how to allocate his $50 budget for CD purchases and DVD rentals when the price of a CD is $10 and the price of a DVD rental is $5. • Which of the following combinations of CD purchases and DVD rentals lies inside Tom’s budget line? • 5 CDs and 10 DVDs • 5 CDs and 0 DVDs • 0 CDs and 5 DVDs • 10 CDs and 5 DVDs • 2 CDs and 7 DVDs

  3. Scenario 1. Budget Constraint. Tom is trying to decide how to allocate his $50 budget for CD purchases and DVD rentals when the price of a CD is $10 and the price of a DVD rental is $5. • Which of the following combinations of CD purchases and DVD rentals lies inside Tom’s budget line? • 5 CDs and 10 DVDs • 5 CDs and 0 DVDs • 0 CDs and 5 DVDs • 10 CDs and 5 DVDs • 2 CDs and 7 DVDs

  4. Assume that the price of both goods is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of both X and Y. • more of both X and Y. • less of X and more of Y. • more of X and less of Y. • the current quantity of both goods.

  5. Assume that the price of both goods is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of both X and Y. • more of both X and Y. • less of X and more of Y. • more of X and less of Y. • the current quantity of both goods.

  6. Assume that the price of both goods is $1 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of X and more of Y. • more of both X and Y. • less of both X and Y. • more of X and less of Y. • the current quantity of both goods.

  7. Assume that the price of both goods is $1 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of X and more of Y. • more of both X and Y. • less of both X and Y. • more of X and less of Y. • the current quantity of both goods.

  8. Assume that the price of Good X is $2 per unit and the price of Good Y is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of both X and Y. • more of both X and Y. • less of X and more of Y. • more of X and less of Y. • the current quantity of both goods.

  9. Assume that the price of Good X is $2 per unit and the price of Good Y is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of both X and Y. • more of both X and Y. • less of X and more of Y. • more of X and less of Y. • the current quantity of both goods.

  10. Assume that the price of Good X is $1 per unit and the price of Good Y is $2 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of both X and Y. • more of both X and Y. • less of X and more of Y. • more of X and less of Y. • the current quantity of both goods.

  11. Assume that the price of Good X is $1 per unit and the price of Good Y is $2 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: • less of both X and Y. • more of both X and Y. • less of X and more of Y. • more of X and less of Y. • the current quantity of both goods.

  12. David’s marginal utilities for milkshakes and burgers are given in the accompanying table. The price of milkshakes is $2, and the price of burgers is $5. If Max’s income is $10, how many milkshakes and how many burgers does he buy to maximize his utility? • 1 shake and 1 burger • 0 shakes and 2 burgers • 5 shakes and 0 burgers • 2 shakes and 1 burger • 6 shakes and 2 burgers.

  13. David’s marginal utilities for milkshakes and burgers are given in the accompanying table. The price of milkshakes is $2, and the price of burgers is $5. If Max’s income is $10, how many milkshakes and how many burgers does he buy to maximize his utility? • 1 shake and 1 burger • 0 shakes and 2 burgers • 5 shakes and 0 burgers • 2 shakes and 1 burger • 6 shakes and 2 burgers.

  14. If a consumer buys more of Good X and less of Good Y, the _____ of Good X will _____, and the ______ of Good Y will _____. • marginal utility; fall; marginal utility; rise • marginal utility; rise; marginal utility; fall • total utility; fall; marginal utility; rise • marginal utility; rise; total utility; rise • total utility; rise; total utility; rise

  15. If a consumer buys more of Good X and less of Good Y, the _____ of Good X will _____, and the ______ of Good Y will _____. • marginal utility; fall; marginal utility; rise • marginal utility; rise; marginal utility; fall • total utility; fall; marginal utility; rise • marginal utility; rise; total utility; rise • total utility; rise; total utility; rise

  16. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

  17. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

  18. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 100 and MUb/Pb = 80, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

  19. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 100 and MUb/Pb = 80, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

  20. Generally, each successive unit of a good consumed will cause marginal utility to • increase at an increasing rate. • increase at a decreasing rate. • increase at a constant rate. • decrease. • either increase or decrease.

  21. Generally, each successive unit of a good consumed will cause marginal utility to • increase at an increasing rate. • increase at a decreasing rate. • increase at a constant rate. • decrease. • either increase or decrease.

  22. 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? • 0 units of good X and 18 units of good Y • 0 units of good X and 20 units of good Y • 20 units of good X and 0 units of good Y • 10 units of good X and 12 units of good Y • all of the above.

  23. 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? • 0 units of good X and 18 units of good Y • 0 units of good X and 20 units of good Y • 20 units of good X and 0 units of good Y • 10 units of good X and 12 units of good Y • all of the above.

  24. The optimal consumption rule states that total utility is maximized when all income is spent and • MU/P is equal for all goods. • MU is equal for all goods. • P/MU is equal for all goods. • MU is as high as possible for all goods. • The amount spent on each good is equal.

  25. The optimal consumption rule states that total utility is maximized when all income is spent and • MU/P is equal for all goods. • MU is equal for all goods. • P/MU is equal for all goods. • MU is as high as possible for all goods. • The amount spent on each good is equal.

  26. 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 • more of good A. • more of good B. • less of good B. • more of both goods. • less of both goods.

  27. 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 • more of good A. • more of good B. • less of good B. • more of both goods. • less of both goods.

  28. The optimal consumption bundle is always represented by a point • inside the consumer’s budget line. • outside the consumer’s budget line. • at the highest point on the consumer’s budget line. • on the consumer’s budget line. • at the horizontal intercept of the consumer’s budget line.

  29. The optimal consumption bundle is always represented by a point • inside the consumer’s budget line. • outside the consumer’s budget line. • at the highest point on the consumer’s budget line. • on the consumer’s budget line. • at the horizontal intercept of the consumer’s budget line.

More Related