Lesson 4.1.2.1
4.1.2.1 Consumer behaviour Quiz: AQA Economics, Unit 1
20 questions
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Lesson 4.1.2.1, Consumer behaviour: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.
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The 20 questions
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Total utility is best defined as:
- the extra satisfaction gained from consuming one more unit of a good, which is the change in satisfaction as consumption rises by one unit.
- the price a consumer is willing to pay for a good, which is measured in money terms and depends on income, tastes and the goods on offer.
- the total satisfaction gained from consuming a given quantity of a good.
- the average satisfaction per unit of income spent on all the goods that the consumer buys in a given period of time.
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Marginal utility is defined as:
- the average satisfaction over all units consumed, found by dividing total satisfaction by the number of units that the consumer has bought.
- the total satisfaction from all units consumed, which is the sum of the satisfaction gained from every unit bought.
- the additional satisfaction gained from consuming one more unit of a good.
- the satisfaction lost when the price of a good rises, which measures how far the consumer must cut back on consumption of that good.
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The hypothesis of diminishing marginal utility states that:
- the price of a good rises when consumption rises, because greater demand always pushes up the market price of the product in the shops.
- total utility always falls as more is consumed, so that the consumer becomes less satisfied with every extra unit eaten or used.
- as more units of a good are consumed, the extra utility from each additional unit tends to fall.
- marginal utility rises as consumption increases, because the satisfaction from each additional unit grows over time for most goods bought.
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Consumer A eats apples. Total utility from 1, 2, 3 and 4 apples is 10, 18, 23 and 25 utils. What is the marginal utility of the third apple?
- 23 utils.
- 3 utils.
- 8 utils.
- 5 utils.
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A consumer's total utility from 1, 2, 3 and 4 apples is 10, 18, 23 and 25 utils. What is the marginal utility of the fourth apple?
- 2 utils.
- 25 utils.
- 4 utils.
- 7 utils.
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Which statement best explains why a consumer's total utility can still rise when marginal utility is falling?
- Because total utility is the average of marginal utility values, so it rises whenever that average increases.
- Because each extra unit still adds positive utility, even though the addition is smaller than before.
- Because marginal utility always rises when total utility rises, so the two measures move together in every case of consumption.
- Because the price of the good falls as consumption increases, which raises the satisfaction each unit gives.
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A consumer maximises utility when:
- the consumer spends all income on one good, because specialising in a single product gives the highest satisfaction in every case.
- total utility is at its lowest point, so that the consumer is spending the smallest possible amount on each good in the basket.
- the marginal utility per pound spent is equal across all goods, given budget constraints.
- marginal utility of each good is zero, so the consumer cannot gain any further satisfaction from buying anything.
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Why does the hypothesis of diminishing marginal utility help explain a downward sloping demand curve?
- Because a lower price is needed to persuade consumers to buy additional units whose marginal utility is falling.
- Because marginal utility is independent of price, so the demand curve for any good is the same whatever the price.
- Because consumers buy more of a good when its marginal utility rises, so demand must increase as the good becomes more satisfying.
- Because demand curves always slope upwards for normal goods, which is why diminishing marginal utility is needed.
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Which of the following best describes the importance of the margin in consumer choice?
- Consumers compare the additional benefit of one more unit with its additional cost.
- Consumers decide based only on total satisfaction, so the value of the last unit bought is ignored in the final choice.
- Consumers choose the good with the highest average utility, because the average is the best guide to extra satisfaction.
- Consumers ignore prices when deciding how much to buy, focusing on the total enjoyment the whole basket will bring.
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A consumer's marginal utility from a chocolate bar is 12 utils and its price is £1. Marginal utility of a magazine is 9 utils and its price is £1. Which action should a utility-maximising consumer take?
- Buy more magazines and fewer chocolate bars.
- Buy more chocolate bars and fewer magazines.
- Stop buying both goods.
- Buy the same amounts because the prices are equal.
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Which statement best describes an assumption of rational consumer behaviour?
- Consumers make decisions at random, which is the main reason why demand curves cannot be drawn with any confidence by economists.
- Consumers never consider how much income they have when deciding what to buy, because spending plans are fixed by the government.
- Consumers always buy the cheapest good available, regardless of quality, brand or the satisfaction that they expect to gain from it.
- Consumers always act to maximise satisfaction given their income and prices.
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A consumer's total utility from 1 to 5 units of a good is 8, 14, 18, 20, 20 utils. Which unit gives negative marginal utility?
- The fifth unit, because total utility is unchanged at 20 utils, so the consumer must be losing satisfaction at that point.
- The fourth unit, because total utility rises by only 2 utils, so the consumer loses satisfaction from that unit.
- The third unit, because its marginal utility is below that of the second unit, so its satisfaction is negative.
- None of the units gives negative marginal utility.
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Why might diminishing marginal utility be relevant to the price a consumer is willing to pay for a good?
- Because prices are set by utility rather than markets, so a good's satisfaction decides what it costs in each shop.
- Because consumers pay more for goods with lower utility, so cheap goods tend to give the largest satisfaction to buyers.
- Because the price is always equal to total utility, so a consumer with high total satisfaction always pays the most.
- Because the price a consumer will pay for an additional unit depends on the utility it provides at the margin.
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Evaluate the assumption that consumers are rational utility maximisers. Which statement is most appropriate?
- It is always accurate, so behavioural evidence about consumer choices is irrelevant to the analysis of any market or policy question.
- It provides a useful benchmark, but evidence shows that people sometimes make biased or inconsistent decisions.
- It is entirely false because consumers never consider prices, so the model cannot say anything useful about how people choose goods.
- It is useful only in planned economies, where central planners maximise utility on behalf of citizens, and never in market settings.
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Which of the following is the best example of diminishing marginal utility?
- The enjoyment from each additional slice of pizza falls as more slices are eaten.
- The total cost of pizza rises as more slices are made, because the ingredients for each additional slice cost more than the last one.
- The enjoyment from a film increases as more people watch it, because shared viewing makes each individual's experience more enjoyable.
- The price of pizza falls as more slices are sold, which means the value of each additional slice to the seller declines over time.
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A consumer's utility from good X is 40 utils per unit with price £4, and from good Y is 30 utils per unit with price £2. What is the marginal utility per pound for each good?
- X: 4, Y: 2, which are the prices per unit, so that the consumer should buy the good with the lower price first each time.
- X: 40, Y: 30, which are simply the utility figures per unit, and the prices play no part in the calculation of value per pound.
- X: 36, Y: 28, which are the differences between utility and price for each good, found by subtracting the price from the utility.
- X: 10, Y: 15.
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Good X gives 10 utils per pound and good Y gives 15 utils per pound. Which action would increase total utility?
- Buy only X, because its marginal utility per unit is higher, and so the consumer gets more total satisfaction from it in the long run.
- Buy more Y, because it gives more utility per pound.
- Buy neither good, so as to save money, since reducing spending is always the way to increase total utility in every case.
- Buy more X, because it has a higher price and so must be the better quality good for the consumer in every respect.
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Which statement correctly explains the importance of marginal analysis for a firm's pricing decisions?
- Firms compare the extra revenue from one more unit with its extra cost, which is comparable to the margin in consumer choice.
- Firms only compare average revenue with average cost, since the average is the only measure that matters for profit in the market.
- Marginal analysis is irrelevant to pricing, because firms set prices according to the average cost of production in every period.
- Firms set prices at the level that maximises total utility, which is measured for consumers by the satisfaction they gain from the product.
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Why does consumer utility theory focus on the margin rather than on the average?
- Because decisions about buying one more unit depend on the additional satisfaction it brings.
- Because marginal utility is always equal to average utility, which means the two measures can be used interchangeably by the consumer.
- Because average utility cannot be calculated from the data, so economists are forced to use the marginal measure in every analysis.
- Because average utility is always negative, so the margin is the only measure that gives a positive value for a consumer's satisfaction.
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A consumer eats a fifth ice cream and total utility rises from 40 to 43 utils. What is the marginal utility of the fifth ice cream?
- 8.6 utils, found as the average utility of the five ice creams (43 divided by 5), which is the amount of satisfaction per unit.
- 40 utils, the total utility before the fifth ice cream was eaten, which is the satisfaction the consumer gained from the first four units.
- 43 utils, the total utility after the fifth ice cream, which is the satisfaction the consumer now receives from all five units together.
- 3 utils, found as the change in total utility (43 minus 40) from consuming one more ice cream, which is the marginal utility.
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