ECON 203 Study Guide - Quiz Guide: Economic Surplus, Demand Curve, Multiple ChoiceExam
Course CodeECON 203
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Econ 201 Tutorial #6
Date: Week 8
Coverage: Chapter 6.1-6.3 Individual Choice
Part I: Multiple choice questions
1. What does the law of diminishing marginal utility state?
A) That the amount of additional utility increases as successive units of a product are
B) That the amount of total utility decreases at an increasing rate.
C) That the amount of total utility decreases at a decreasing rate.
D) That the amount of additional utility decreases as successive units of a product are
2. Assume that George is allocating his budget optimally between two products. If the MU of product X is
40 and its price is $8, what must be the price of product Y if its MU is 60?
3. A demand curve slope downward because:
A) since the marginal utility increases with increased consumption, people will be eager to buy
more at lower prices.
B) since the marginal utility decreases with increased consumption, the price must fall in
order to induce people to buy more.
C) since total utility increases with increased consumption, a lower price is necessary to
encourage increased production.
D) lower prices mean a lower consumer surplus which will encourage increased consumption.
4. What will happen if MUA/PA>MUB/PB?
A) The price of A will be forced to drop.
B) The price of B will be forced to drop.
C) The consumer should reallocate income so as to purchase more of good A.
D) The consumer should reallocate income so as to purchase more of good B.
5. When is total utility at a maximum?
A) When marginal utility is at a maximum.
B) When marginal utility is zero.
C) When marginal utility is equal to total utility.
D) When marginal utility is greater than total utility.
6. The budget line is constructed by:
A) plotting the individual's consumption budget over a five year period.
B) plotting alternative consumption baskets that the consumer can buy, and that exhausts
C) plotting alternative consumption baskets when all prices continually change.
D) plotting alternative consumption baskets at different levels of income and prices.
Part II: Short Question
1. A Consumer’s Budget Line
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