CHAPTER 4 (CLO1, CLO2): THEORY Section Z

OF CONSUMER BEHAVIOR
4. Which diagram shows a change in the
price of good G only?
A. Section X
SECTION A
B. Section Y
C. Section Z
1. The amount of added utility that a D. None of the above
consumer gains from the consumption
of one unit of a good is called 5. Which diagram shows a change
A. incremental utility income?
B. total utility
A. Section X
C. diminishing utility
D. marginal utility B. Section Y
C. Section Z
2. An indifference curve is ________. D. None of the above
A. a straight line sloping downwards.
B. parallel to the X-axis 6. An increase in total utility due to a
C. convex to the origin drop in the price of good E is shown
D. None of the above by ________.
A. movement from A to B in section
3. Which of the following statements is X
possible? B. movement from C to D in section
A. Total utility decreases when Y
marginal utility is zero. C. movement from E to F in section
B. Total utility increases when Z
marginal utility is positive. D. None of the above
C. Total utility decreases when
marginal utility is positive. 7. The price of X is RM5, and the price
D. Total utility increases when of Y is RM4. Which of the following
marginal utility is negative. (X, Y) bundles is affordable, if your
income is RM25?
Refer to the diagrams below, answer A. (0, 7)
questions 4, 5 and 6 B. (3, 3)
C. (3, 2)
G G D. (2, 4)

Refer to the diagrams below, answer

questions 8, 9 and 10
B
A C D Good Y

H 12 A
H
Section X Section Y
8 B
G
` 5 C
3 D
F
1 E
E

H 1 2 3 4 Good X

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 C. Safi’s budget line unchanged.
8. The Marginal Rate of substitution from D. Safi’s budget on Adidas t-shirt
A to B is ______. and Nike fitness pant.
A. ½ units of Y
B. ¼ units of Y 13. Which of the following is TRUE
C. 4 units of Y about consumer equilibrium who
D. 2 units of Y buys a combination of two goods, X
and Y
9. The optimal combination is ______.
A. 12 units of Y and 1 unit of X A. MUX MUX
B. 8 units of Y and 2 units of X =
C. 3 units of Y and 4 units of X PX PY
D. None of the above MUX MUY
B. =
10. Suppose Siti has RM10 per month the PX PY
she spends on “nasi lemak” and fried MUY MUY
noodles. If the price of “nasi lemak” is C. =
RM2 per pack and the price of fried PX PY
noodles is RM1 per pack, which of the
following represents a point on Siti’s MUX MUY
budget line? D. =
A. 4 packs nasi lemak and 1 pack PY PY
fried noodles.
B. 1 packs nasi lemak and 8 packs 14. In a graph below, AA is the initial
fried noodles budget line and BB is the new
C. 3 packs nasi lemak and 1 pack budget line. Which of the following
fried noodles. changes might have occurred?
D. 5 packs nasi lemak and 10 packs
fried noodles. Good Y
11. Suppose that Julia likes “apam balik” A
and “satay”. If her marginal utility per
ringgit spent on “apam balik” is 6 and
on “satay” is 5, Julia
B
A. is maximizing her total utility.
B. could increase her total utility by
buying more “satay” and less
“apam balik”.
C. could increase her total utility by A B
buying more “apam balik” and less Good X
“satay”.
D. is maximizing her marginal utility. A. Px decreased, PY is constant,
income increased.
B. Px increased, PY decreased.
12. Safi buys two things, Adidas t-shirt
which have a price of RM30 each and income is constant.
Nike fitness pant, which have a price C. Px decreased, PY increased,
of RM40 each. Safi’s income is income is constant.
RM120. If the price of Nike fitness D. Px constant, PY increased,
pant falls to RM20, then income decreased.
A. Safi’s budget line rotates inward
and becomes steeper
B. Safi’s budget line rotates
outward and becomes flatter.

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 SECTION B 10 2 0 4
1. Based on the table, answer the a. Calculate the marginal utility per
following questions ringgit of good A, B and C
b. What is the combination of goods
that yields maximum satisfaction
Ice cream Total Marginal to the consumer?
(cup) Utility Utility
3. Azura has RM25 to spend. Suppose
1 8
the price of good J and K are RM8
2 14 and RM4 respectly.

3 18 Quantity TUJ
TUK
4 20
1 56 32
5 20
2 104 60
6 18 3 136 84

4 160 104
a. Calculate the marginal utility at
every cup of ice cream 5 170 116
b. Illustrate the total utilty and
6 176 126
marginal utility.
c. At which cup of ice cream will the 7 178 134
point of satisfaction?

2. The following table shows the a. Calculate the marginal utility for
marginal utility of good A, B and C. each good.
The prices of good A, B and C are b. How many units of goods J and K
RM4, RM3 and RM2 respectively. The should Azura buy to maximize
consumer income is RM30 her utility with the income of
RM52?
c. What is the total utility received
Quantit by Azura at equilibrium?
MUA MUB
y MUC d. If Azura’s incomes decreased to
RM28, what quantities of good J
1 45 80 22
and K should she purchase to
2 40 70 20 maximize her utility?
3 25 60 18 e. What is Azura’s new total utility at
equilibrium?
4 20 50 16
5 16 40 14
SECTION C
6 12 30 12
7 9 20 10 1. Explain the law of diminishing
marginal utility.
8 6 10 8 2. Explain the equilibrium of a consumer
9 4 0 6 with the help of the cardinal utility
approach.

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