MITBch04 - CHAPTER 4 1CONSUMER CHOICE INDIVIDUAL AND MARKET...

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C HAPTER 4 1C ONSUMER C HOICE : I NDIVIDUAL AND M ARKET D EMAND TRUE-FALSE QUESTIONS SCARCITY AND DEMAND 1. Because the consumer’s budget is limited, purchase decisions among available goods must of  necessity be interdependent. ANSWER T, E, A 2. The number of Compact Discs purchased by a consumer depends on the price of the discs as well as  the prices of all other goods purchased. ANSWER T, M, A UTILITY: A TOOL TO ANALYZE PURCHASE DECISIONS 3. Utility is the pleasure, satisfaction, or enjoyment derived from consumption. ANSWER T, E, R 4. Marginal utility is measured by the maximum amount of money a consumer is willing to pay for  one more unit of a commodity. ANSWER T, E, R 5. Total utility always decreases when additional amounts of a commodity are consumed. ANSWER F, M, A 6. Total utility can be objectively measured in numbers that indicate usefulness or benefit to the  consumer. ANSWER F, E, R 7. Marginal utility can fall even as total utility from the consumption of a good is rising. ANSWER T, M, A 8. Total utility increases if one more unit of a product is purchased and marginal utility is positive. ANSWER T, M, A 9. The law of diminishing marginal utility holds that at some point consumption of additional units of  a commodity adds less to total utility. ANSWER T, E, R 121
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122 Chapter 4/Consumer Choice: Individual and Market Demand 10. The law of diminishing marginal utility states that total utility will increase at a decreasing rate as  additional units of a commodity are acquired. ANSWER T, M, R 11. As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from  that good. ANSWER F, M, A 12. Total utility decreases when diminishing marginal utility is present. ANSWER F, M, A 13. As a rule, as a consumer acquires more and more of a good, the marginal utility declines. ANSWER T, E, R 14. An optimal purchase is one that maximizes total utility. ANSWER T, M, A 15. Consumers should purchase quantities of a good to the point where MU > P. ANSWER F, E, A 16. Consumers should purchase a good up to the point where MU = P. ANSWER T, M, A 17. Given a typical demand curve and a decline in price, the consumer who wishes to maximize total  utility must increase the quantity purchased of a good to arrive at an optimal MU = P point. ANSWER T, D, I 18. If the marginal net utility of beer is a positive number, the consumer should buy more beer in order  to maximize utility.
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