Question

Total utility can be thought of as the

a. total satisfaction derived from a bundle of goods.

b. minimum amount of money a consumer is willing to spend on a bundle of goods.

c. additional satisfaction a consumer receives from the marginal unit of a good.

d. willingness to pay for the marginal unit of a good.

____ 32. The marginal utility of a unit of good X

a. is always greater than the total utility of X.

b. is always less than the average utility of X.

c. generally depends on how much X the consumer already has.

d. is always equal to the price of X.

____ 33. Resolving Adam Smith's diamond-water puzzle involves

a. realizing that price is not directly related to total utility.

b. knowing that at optimal purchase, price will tend to equal marginal utility.

c. knowing that, as increasing quantities of a good are consumed, marginal utility diminishes and, conversely, consuming a small quantity of a good produces high marginal utility.

d. All of the above are correct.

____ 34. Market demand curves are found by

a. vertically summing individual demand curves.

b. horizontally summing individual demand curves.

c. summing individual demand curves in a parallel fashion.

d. adding the slopes of individual demand curves.

Figure 5-3

____ 35. Assume the market consists of three consumers with the demand curves in Figure 5-3. At a price of 1, the total market demand is

a. 40.

b. 80.

c. 140.

d. 150.

Answer 1

Question 1

Total utility implies the total satisfaction that a consumer derives from consumption of all units of a good.

So, total utility can be thought of as the total satisfaction derived from a bundle of goods.

Hence, the correct answer is the option (a).

Question 2

There exists an important relationship between marginal utility derived from consumption of an additional unit of a good and average utility derived from the consumption of all units of good upto that point that average utility is always greater than the marginal utility.

In other words, the marginal utility of a unit of good X is always less than the average utility of X.

Hence, the correct answer is the option (b).