Question

1. A good has utility if it

A. takes more and more resources to produce successive units of it.

B. violates the law of demand.

C. satisfies consumer wants. D.

is useful.

2. Total utility may be determined by

A. multiplying the marginal utility of the last unit consumed by the number of units consumed.

B. summing the marginal utilities of each unit consumed.

C. multiplying the marginal utility of the last unit consumed by product price.

D. multiplying the marginal utility of the first unit consumed by the number of units consumed.

3. When marginal utility is zero

A. total utility is falling.

B. total utility is increasing.

C. total utility is zero.

D. none of the above.

4. When average total cost (ATC) is falling

A. marginal cost is falling.

B. marginal cost is increasing.

C. marginal cost is zero.

D. none of the above.

5. Long-run adjustments in purely competitive markets primarily take the formof

A. variations in the cost curves of different firms in the market.

B. entry or exit of firms in the market.

C. evolution of the market from a constant-cost to an increasing-cost industry.

D. product differentiation. Numerical Problems (

Answer 1

1. Utility is the want satisfying capacity of a commodity.

C. Satisfies consumer wants.

2. Total Utility is sum utility derived from the consumption of all units of a commodity. It is the sum of marginal utility. Marginal utility is the additional utility derived from the consumption of an additional unit.

B. summing the marginal utilities of each unit consumed.

3. Total utility is maximum when marginal utility is zero.

D. none of the above.

4. When ATC declines MC declines faster than ATC. When ATC increases MC increase faster than ATC.

A. Marginal cost is falling.

5. In a perfectly competitive market new firms will enter into and exit from the market. These make changes in price and output of the industry.

B. entry and exit of firms in the market.