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Chapter 21: Consumer Behavior and Utility Maximization
Extra Multiple Choice Questions for Review
1. When the price of a product falls for a normal good, the:
A) income and substitution effects will encourage consumers to purchase more of the
product.
B) income and substitution effects will encourage consumers to purchase less of the
product.
C) substitution effect will encourage consumers to purchase less of the product and
the income effect will encourage them to purchase more.
D) substitution effect will encourage consumers to purchase more of the product and
the income effect will encourage them to purchase less.
2. The reason the substitution effect works to encourage a consumer to buy less of a
product when its price increases is:
A) the real income of the consumer has been increased.
B) the real income of the consumer has been decreased.
C) the product is now relatively more expensive than it was before.
D) other products are now relatively more expensive than they were before.
3. George consumes only two goods, pizza and compact discs. Both are normal goods
for George. Suppose the price of pizza decreases. George's consumption of compact
discs will:
A) increase due to the income effect.
B) increase due to the substitution effect.
C) increase due to a negative income elasticity.
D) remain unchanged, since the income elasticity of pizza is greater than 0.
4. The total utility of a product is calculated by:
A) summing the marginal utility from the first unit of a product that is consumed and
the last unit of a product that is consumed.
B) multiplying the marginal utility of a unit of the product consumed times the
average quantity consumed.
C) summing the marginal utilities for each successive unit of the product that is
consumed.
D) multiplying price times quantity and dividing by the marginal utility.
5. Which of the following defines marginal utility?
A) the change in total utility divided by the price of a product
B) the maximum amount of satisfaction from consuming a product
C) the total satisfaction received from consuming as much of the product that is
available for consumption
D) the additional satisfaction received from consuming one more unit of a product
