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QUIZ FOUR
The Consumer Theory
1.According to the principle of
diminishing marginal utility:
• A. The more of a good a consumer consumes
the lower her total utility
• B. The opportunity cost of each additional unit of
a good declines as the consumption of that good
increases
• C. There is a negative relationship between the
price and the utility a consumer drives from
consumption of a good
• D. Ceteris paribus, as the consumer’s
consumption of a good increases each
additional unit adds less to her total utility than
the previous unit.
2. Each point on a budget line corresponds to:
• A. The maximum amount of utility a
consumer can achieve
• B. The highest level of utility a consumer
can achieve with her limited income
• C. A certain quantity combination of two
goods that a consumer can purchase with
her given income
• D. The consumer’s preferred quantity
combination of two goods
3. To maximize her utility a consumer must
• A. equalize her marginal utility across all of
the goods she consumes
• B. equalize her marginal utility per dollar
spent across all of the goods that she
purchases
• C. set her average utility per dollar spent
equal to her marginal utility per dollar
• D. set her total income equal to her total
utility
4. The convexity of an indifference curve
• A. reflects the principle of diminishing
marginal utility
• B. reflects the scarcity of resources
• C. indicates that consumers prefer more to
less
• D. reflect the changing price ratio Px/Py
• E. indicates that if the consumer wishes to
consume more X she has to give up some
Y
5. A firm’s economic profit
• A. can never be equal to its accounting profit
• B. is always equal to zero
• C. is equal to its accounting profit minus its
implicit costs
• D. is equal to its accounting profit minus its
explicit costs
• D. is always greater than its accounting profit
• E. is equal to the difference between its explicit
costs and its implicit costs