Economics questions

annbyrne

1. According to the law of diminishing marginal utility, the satisfaction that you get from consuming apple pie decreases
(a) as utility increases
(b) with every additional slice of apple pie that you eat
(c) as your income rises and you can substitute more exotic desserts
(d) as you get older
(e) both (a) and (b) above.

2. When economists speak of the utility of a certain good, they are referring to
(a) the demand for the good
(b) the usefulness of the good in consumption
(c) the satisfaction gained from consuming the good
(d) the rate at which consumers are willing to exchange one good for another
(e) the opportunity cost involved.

3. In the market, the consumer achieves an optimal consumption basket when the combinations of goods is chosen which
(a) yields maximum utility to the consumer and just exhausts his income
(b) yields maximum utility and leaves some income for saving
(c) puts the consumer at some point below his budget constraint
(d) yields the highest level of utility without regard to the budget constraint
(e) none of the above.

4.If income is 1000 euro, the price of food is 50 euro and the price of entertainment is 25 euro, the slope of the budget line is
(a) 0.5;
(b) - 0.5;
(c) 1;
(d) - 1;
(e) - 0.25.



True and false
1. The principle of diminishing marginal utility means that as consumption of a good increases, total and marginal utility decline.
2. The water-diamond dilemma was resolved by the proponents of the marginal utility revolution focusing on the demand side of the market.
3. Preferences depend on income and the prices of goods.
4. An increase in the price of the good measured on the horizontal axis will make the budget line steeper.
5. The indifference – preference approach to consume choice theory assumes that satisfaction or utility can be measured.
6. If an individual has preferences that do not match the assumptions of more preferred to less and the diminishing marginal rate of substitution between the goods, the indifference curve can turn out to have quite a different shape than the conventional convex downward sloping curve.

my answers for true and false were
1.true
2. didn't know
3.false
4.false
5.didn't know
6.didn't know