Utility Quiz

Suppose Jill's consumption bundle is made up of 2 goods, apples and bottles of juice. If the price of an apple increases, then Jill's budget line would

• shift towards the origin on the apples axis only.

• shift towards the origin on both the apples and bottles of juice axes.

• not change.

• shift away from the origin on the bottles of juice axis only.

A person's consumption possibilities is defined by the budget line because

• all consumers must consume on their budget line.

• it represents the individual's preference for different combinations of goods.

• it marks the boundary between what is affordable and unaffordable.

• it marks the boundary between what can be produced and what is unattainable given the current state of technology and resources.

Utility is best defined as

• the price of a good.

• the satisfaction from consuming a good.

• the practical usefulness of a good.

• the amount one is willing to pay for a good.

The total benefit that a person receives from the consumption of goods and services is called

• total utility.

• marginal cost.

• marginal utility.

• opportunity cost.

Which of the following statements is true?

• No two people have identical utility functions, just as no two people have identical fingerprints.

• As more of a good is consumed, its total utility increases, even if the good is subject to diminishing marginal utility.

• Both A and C above.

• As more of a good is consumed, its total utility increases, unless the good is subject to diminishing marginal utility.

Which of the following is NOT an assumption of marginal utility theory?

• A consumer derives utility from the goods consumed.

• Each additional unit of consumption yields additional utility.

• Consumers maximize their total utility.

• As more of a good is consumed, the decrease in the marginal utility from the good means that the total utility from the good decreases also.

Marginal utility measures the

• additional cost of an additional unit of consumption.

• average utility from an additional unit of consumption.

• additional utility from an additional unit of consumption.

• total utility from consumption.

According to the principle of diminishing marginal utility, as the quantity of a good or service consumed increases, total utility

• is zero.

• increases.

• decreases.

• is unchanging.

The above table gives the total utility that Homer obtains from consuming various quantities of chocolate chip cookies. The marginal utility from the fifth pound of cookies is

• 1.

• 15.

• 2.

• 3.

As consumption increases, total utility increases

• at a constant rate.

• at an increasing rate.

• and marginal utility increases.

• at a decreasing rate.