1. Suppose that MU x / Px exceeds MU y / Py . To maximize utility the consumer w
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Question
1. Suppose that MUx/Px exceeds MUy/Py . To maximize utility the consumer who is spending all her money income should buy:
A. Less of X only if its price rises.
B. More of Y only if its price rises.
C. More of Y and less of X.
D. More of X and less of Y.
2. Julio Garbanzo normally orders two tacos, but on seeing they are on sale, decides to buy three. Julio's decision illustrates the:
A. Law of increasing opportunity costs.
B. "Hunger and cheap food" principle of consumption.
C. Principle of comparative advantage.
D. Principle of utility maximization.
E. None of the above
3. To the economist total cost includes:
A. Explicit and implicit costs, including a normal profit.
B. Neither implicit nor explicit costs.
C. Implicit, but not explicit, costs.
D. Explicit, but not implicit, costs.
E. None of the above
4. The law of diminishing returns indicates that:
A. As extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
B. Because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.
C. The demand for goods produced by purely competitive industries is down sloping.
D. Beyond some point the extra utility from additional units of a product will yield the consumer a lower satisfaction.
E. None of the above
5. Economies of scale are indicated by:
A. The rising segment of the average variable cost curve.
B. The declining segment of the long-run average total cost curve.
C. The difference between total revenue and total cost.
D. A rising marginal cost curve.
E. None of the above
6. Diseconomies of scale:
A. Pertain to the long run.
B. Pertain to the short run.
C. Are synonymous with diminishing returns.
D. Are synonymous with increasing returns.
E. None of the above
Explanation / Answer
1. Suppose that MUx/Px exceeds MUy/Py . To maximize utility the consumer who is spending all her money income should buy:
A. Less of X only if its price rises.
B. More of Y only if its price rises.
C. More of Y and less of X.
D. More of X and less of Y.
2. Julio Garbanzo normally orders two tacos, but on seeing they are on sale, decides to buy three. Julio's decision illustrates the:
A. Law of increasing opportunity costs.
B. "Hunger and cheap food" principle of consumption.
C. Principle of comparative advantage.
D. Principle of utility maximization.
E. None of the above
3. To the economist total cost includes:
A. Explicit and implicit costs, including a normal profit.
B. Neither implicit nor explicit costs.
C. Implicit, but not explicit, costs.
D. Explicit, but not implicit, costs.
E. None of the above
4. The law of diminishing returns indicates that:
A. As extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
B. Because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.
C. The demand for goods produced by purely competitive industries is down sloping.
D. Beyond some point the extra utility from additional units of a product will yield the consumer a lower satisfaction.
E. None of the above
5. Economies of scale are indicated by:
A. The rising segment of the average variable cost curve.
B. The declining segment of the long-run average total cost curve.
C. The difference between total revenue and total cost.
D. A rising marginal cost curve.
E. None of the above
6. Diseconomies of scale:
A. Pertain to the long run.
B. Pertain to the short run.
C. Are synonymous with diminishing returns.
D. Are synonymous with increasing returns.
E. None of the above
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