Exam 7: Consumer Choice: Utility Theory and Insights From Neuroscience

Ceteris paribus,if the prices of the goods a consumer purchases decrease,then the consumer's real income:

-Refer to Figure 7.1.Increasing the number of movies rented from 3 to 4 will cause total utility to:

A consumer's budget set does not include all combinations of goods that a consumer can afford given the consumer's income and the prices of the goods.

What have Neuroscientists been able to measure in terms of cash purchases and credit-card purchases?

Recent work in neuroscience shows that different regions of the brain are involved in the valuation of the benefits and costs of possible actions.

What is the difference between total utility and marginal utility?

Marginal utility is the:

Table 7.5 -Table 7.5 shows how the total utility that Alan derives from watching basketball games changes as he watches more and more games each week.Fill in the table.Do the numbers in the table support the law of diminishing marginal utility? Explain.

Colin spends his income of $100 per week on two goods: pizzas (which cost $8 each)and milk (which costs $1 per gallon).At his current level of consumption,the marginal utility from the last pizza consumed is 32 and the marginal utility from the last gallon of milk is 4.Is Colin maximizing his utility? Why or why not? If not,what should Colin do to achieve a higher level of utility?

If marginal utility is negative consuming an additional unit of a product will cause total utility to decline.

Neuron activity in the insula represents the benefit of buying a product.

Suppose that a consumer is currently spending all of her income on 10 units of good A and 5 units of good B.The price of good A is $4 per unit,the price of good B is $10 per unit,the marginal utility of the last unit of good A consumed is 20,and the marginal utility of the last unit of good B consumed is 60.If the consumer wants to maximize her utility from consuming the two goods she should:

Recall the application about measuring diminishing marginal utility with new techniques,what was shown in the study that the neuroscientists did on subjects and their reaction to varying monetary rewards?

the key regions for cost valuation are the insular cortex (insula for short)and the amygdala.

With respect to the equimarginal rule,a person will maximize utility when the:

What does diminishing marginal utility imply about the shape of a person's demand curve? Explain.

Table 7.1 -Refer to Table 7.1.The total utility of the five cups of coffee per day is:

Recall the application about taxing cigarettes to offset present bias.Accordingly to the study,how would the cigarette tax effect low-income households?

The dopamine rewards for near misses are problematic in truly random environments like gambling.

Maxine has a fixed income per month to spend on goods and services,so in allocating her limited income over a set of goods,she should purchase the goods that: