3 Written Questions

1. the difference between a buyer's reservation price for a product and the price actually paid
2. the affordable combination that yields the highest total utility
3. the additional utility gained from consuming an additional unit of a good

3 Multiple Choice Questions

1. the tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point
   1. marginal utility
   2. nominal price
   3. law of diminishing marginal utility
   4. law of demand
2. spending should be allocated across goods so that the marginal utility per dollar is the same for each good
   1. nominal price
   2. real price
   3. the rational spending rule
   4. marginal utility
3. the absolute price of a good in dollar terms
   1. marginal utility
   2. law of demand
   3. nominal price
   4. real price

2 True/False Questions

1. law of demand → the dollar price of a good relative to the average dollar price of all other goods

   True        False

2. real price → the absolute price of a good in dollar terms

   True        False