Question

[9] When trying to maximize economic well-being from choosing among the purchase of different goods, the individual must consider:

A) the prices of the goods.

B) his or her limited income.

C) the utility received from the different goods.

D) all of the above.

[10] The goal of an individual in making a spending decision is to purchase the combination of goods and services that:

A) is the least expensive.

B) allows the greatest amount of saving.

C) requires the smallest amount of time to obtain.

D) gives maximum satisfaction within the limits of his/her income.

[11] Unlimited liability is a risk faced by:

A) a sole proprietor.

B) a bondholder in a corporation.

C) a stockholder in a corporation.

D) all of the above.

[12] To maximize satisfaction from purchasing several different goods and services, expenditures must be allocated so that:

A) the cost of the purchases is minimized.

B) only the items that have the highest utility numbers are selected.

C) the percentage of expenditures going to durable goods is maximized.

D) the items that give the most utility for the purchaser's money are selected.

[13] A proprietorship is a:

A) legal entity with limited liability.

B) single-owner business with limited liability.

C) single-owner business with unlimited liability.

D) multiple-owner business with unlimited liability.

[14] Which of the following costs and benefits should always be ruled out when determining the well-being from holding a job?

A) The personal satisfaction from holding the job.

B) The financial costs, such as travel costs, of holding the job.

C) The nonmonetary costs, such as long hours, of holding the job.

D) None of the above should be ruled out.

[15] In order to operate, a business must be legally organized as a:

A) corporation.

B) partnership.

C) proprietorship.

D) any of the above.

[16] Opportunity costs:

A) are incurred in every activity an individual carries out.

B) apply only to individuals' spending and earning decisions.

C) are associated only with decisions involving money outlays.

D) cannot be evaluated since they are costs of alternatives that have been forgone, and therefore, no costs have actually been incurred.

[17] The change in total satisfaction from consuming each additional unit of a good, service, or activity is:

A) total utility.

B) average utility.

C) adjusted utility.

D) marginal utility.

[18] The satisfaction received from consuming a specified number of units of a good, service, or activity is:

A) net utility.

B) end utility.

C) total utility.

D) marginal utility.

Answer 1

9. D

The utility of good is important. At the same time price of good is important. For example, a good with high utility may have a very high price. In that case, one may opt for a different good with slightly lower utility but very less price.

Not just the price and utility of goods matter. The budget of the customer also matter. One can only keep buying within his budget.

10. D

The aim is to bring in maximum satisfaction (utility) with whatever money one has. Cheapest goods may not give any satisfaction. At the same time, goal is not to save, but rather to increase the overall satisfaction.

11. A

Unlimited liability means one is responsible for all the business debts of the company. In case of a sole proprietorship, the proprietor is responsible for all the losses and debts incurred to the firm. This means, his assets may be taken over by the debtors in case company goes broke.

On the other hand, the bond holder's and stock owner's maximum loss is the money they have spent for purchasing the bond or stock. No bank or debtor can take the personal assets of stock holder or bond holder in lieu of company debts.

12. D

In order to maximise the utility, as discussed in question 9, we look at both the good's utility and the price of good. Whatever good gives the best utility for money spent, has to be purchased.

13. C

Proprietorship is a single owner. And his liabilities are unlimited. (as discussed above in question 11)

14. D

At the end of the day, we aim at maximising our utility or our satisfaction. All the mentioned monetary and non-monetary components has a role to play in the final utility. Hence, none of the mentioned factors may be ruled out.

15. D

A business may be organised as a proprietorship (if only a single owner is running it) or a partnership (if multiple individuals join together to run it) or a corporation.