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Econ 11 Recit, Quiz #2 TRUE/FALSE

UTILITY: A TOOL TO ANALYZE PURCHASE DECISIONS

1. Utility is the pleasure, satisfaction, or enjoyment derived from consumption. (T)
2. Marginal utility is measured by the maximum amount of money a consumer is willing to pay for
one more unit of a commodity. (T)
3. Total utility always decreases when additional amounts of a commodity are consumed. (F)
4. Total utility can be objectively measured in numbers that indicate usefulness or benefit to the
consumer. (F)
5. Marginal utility can fall even as total utility from the consumption of a good is rising. (T)
6. Total utility increases if one more unit of a product is purchased and marginal utility is positive. (T)
7. The law of diminishing marginal utility holds that at some point consumption of additional units of
a commodity adds less to total utility. (T)
8. The law of diminishing marginal utility states that total utility will increase at a decreasing rate as
additional units of a commodity are acquired. (T)
9. As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from
that good. (F)
10. Total utility decreases when diminishing marginal utility is present. (F)
11. As a rule, as a consumer acquires more and more of a good, the marginal utility declines. (T)
12. An optimal purchase is one that maximizes total utility. (T)
13. Consumers should purchase quantities of a good to the point where MU > P. (F)
14. Consumers should purchase a good up to the point where MU = P. (T)
15. Given a typical demand curve and a decline in price, the consumer who wishes to maximize total
utility must increase the quantity purchased of a good to arrive at an optimal MU = P point. (T)
16. If the marginal net utility of beer is a positive number, the consumer should buy more beer in order
to maximize utility. (T)
17. If the marginal net utility of beer is negative, the consumer should buy more beer in order to
increase total utility. (F)
18. The law of diminishing marginal utility is consistent with the consumer behavior that produces a
negatively sloped demand curve. (T)
19. The law of diminishing marginal utility guarantees that demand curves will have positive slopes. (F)

SHORT-RUN VS. LONG-RUN COSTS: WHAT MAKES AN INPUT VARIABLE?

20. The short run is that period during which there are no fixed commitments. (F)
21. The long run is a period long enough so that one of the firm’s commitments ends. (F)
22. In the short run, a firm has fixed costs but never any variable costs. (F)
23. In the short run the firm has at least one fixed input. (T)
24. In the short run the firm has no more than one fixed input. (F)
25. Fixed cost increases when output rises. (F)
26. Variable costs increase when output rises. (T)
27. In the long run, more costs become fixed. (F)

PRODUCTION, INPUT CHOICE, AND COST WITH ONE VARIABLE INPUT

28. In most businesses, there is only one way to produce output. (F)
29. Total physical product shows what happens to the quantity of an output when the firm changes the
quantity of an input. (T)
30. Marginal physical product measures the increase in total output that results from a one-unit increase
in an input. (T)
31. Average physical product measures the output per unit of input. (T)
32. Average physical product measures the increase in total output that results from a one-unit increase
in an input. (F)
33. Total physical product is maximized if marginal physical product is zero. (T)
34. The “law” of diminishing returns asserts that marginal returns will ultimately diminish when the
quantity of one input is increased. (T)
35. Marginal revenue product equals the marginal physical product multiplied by the quantity
demanded. (F)
36. Production technology determines the relationship of total cost to outputs. (T)
37. A total product curve shows the inputs needed to produce any level of output. (T)

COST AND ITS DEPENDENCE ON OUTPUT

38. A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.
(F)
39. The marginal cost curve shows the per-unit cost associated with various levels of output. (F)
40. The average cost curve shows the total cost divided by quantity produced for various levels of
output. (T)
41. Total fixed cost falls as output expands. (F)
42. The average fixed cost curve increases as output increases. (F)
43. The average total cost curve of a firm is U-shaped. (T)
44. The principal determinants of total and average cost curves are the firm’s technology and the prices
of its inputs. (T)
45. The firm’s average cost curve is the result of cost minimization in the use of fixed inputs. (F)
46. For most industries, average costs decrease indefinitely as output expands. (F)
47. Cost curves in the long run differ from cost curves in the short run. (T)
48. The short-run average cost curve shows the lowest possible average cost corresponding to each
output level, assuming that all inputs are variable. (F)