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

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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.

  15. 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.

  16. 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.

  17. 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.

  18. 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.

  19. 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.

  20. 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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