Exam 21: Consumer Choice: Maximizing Utility and Behavioral Economics

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price.Then the price of good X falls to $0.It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.

Exhibit 21-5 -Refer to Exhibit 21-5. What value goes in blank (A)?

If the MU/P ratio for two goods is the same,then

If a person is receiving greater marginal utility per dollar from consuming one good than another,it follows that he or she is

An indifference curve shows all the combinations of bundles of two goods a person can purchase given a fixed amount of income.

Exhibit 21-4 -Refer to Exhibit 21-4. What value goes in blank (B)?

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful.Is this necessarily good?

When people treat some dollars differently than others,they are said to be compartmentalizing.

According to the traditional theory of marginal utility as presented in the textbook,as more units of a good are acquired,the consumer's marginal utility

The MU/P ratio for good X is the same as for good Y: 12 utils per dollar.If the price of good X rises to $2 from $1,a consumer who seeks (consumer)equilibrium will buy more of good __________ until the marginal utility of good __________ falls to __________ utils.

The theory of consumer choice assumes that consumers attempt to maximize

Suppose Valerie is consuming lipstick (L)and eye shadow (E)and nothing else.MUL = 24 and MUE = 40.The price of eye shadow is $5,and the price of lipstick is $4.What should Valerie do?

Suppose Will receives 150 utils from consuming one banana and 250 utils from consuming two bananas.What is the marginal utility of the second banana?

Exhibit 21-2 -Refer to Exhibit 21-2.Total utility for the first three oranges is

Smith says she gets 5 utils from consuming the fifth unit of a good whereas Jones says he gets 10 utils from consuming the fifth unit of a good.It follows that

Indifference curves are convex to the origin if

The law of diminishing marginal utility can be stated as follows:

A person is said to be in consumer equilibrium if she

Exhibit 21-6 -Refer to Exhibit 21-6.I₁,I₂ and I₃ are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should

No matter what the price of a given item of food,a person will eat the same amount of that food.This is __________ with the idea of __________.