Question 1

What is an indifference curve? (Appendix)

Accepted Answer

An indifference curve is a cur

Question 2

How does the principle of rational choice also underlie the law of supply (as it applies to the supply of labor)?

Accepted Answer

The law of supply states that the quanti

Question 3

What is the principle of diminishing marginal utility?

Accepted Answer

The principle of diminishing marginal ut

Question 4

You have $5 to spend on any combination of goods A and B. The price of good A is $2 and the price of good B is $1. You have calculated the following utility values for yourself: $$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Units } & \mathrm { TU } _ { \mathrm { A } } & \mathrm { MU } _ { \mathrm { A } } & \mathrm { MU } _ { \mathrm { A } } / \mathrm { P } _ { \mathrm { A } } & \mathrm { TU } _ { \mathrm { B } } & \mathrm { MU } _ { \mathrm { B } } & \mathrm { MU } _ { \mathrm { B } } / \mathrm { P } _ { \mathrm { B } } \
\hline 0 & 0 & & & 0 & & \
\hline 1 & 16 & & & 30 & & \
\hline 2 & 30 & & & 50 & & \
\hline 3 & 40 & & & 58 & & \
\hline 4 & 46 & & & 64 & & \
\hline
\end{array}$$ (a) Fill in the empty columns of the table.
(b) You have purchased 2 units of good A and 1 unit of good B. Are you maximizing your utility? If so, explain why. If not, what combination of goods should you buy?

Accepted Answer

(a) The completed table: @#IMG-DLM& (b) If you pur

Question 5

You have just spent two hours studying microeconomics and this has made you very hungry. You have $10 to spend on a snack and decide to go to Taco Bell. Putting your newly acquired economics knowledge to use, you have developed the following table to assist with your purchase decision: $$\begin{array} { | c | c | c | c | c | c | c | c | } 
\hline { \text { Double Decker Tacos } } &&&& { \text { Chicken Burrito Supremes } } \
{ ( \mathrm { P } = \$ 1 ) } &&&& { ( \mathrm { P } = \$ 2 ) } \
\hline \text { Q } & \text { TU } & \text { MU } & \text { MU/P } & \text { Q } & \text { TU } & \text { MU } & \text { MU/P } \
\hline 0 & 0 & & & 0 & 0 & & \
\hline 1 & 20 & & & 1 & 28 & & \
\hline 2 & 34 & & & 2 & 46 & & \
\hline 3 & 44 & & & 3 & 54 & & \
\hline 4 & 48 & & & 4 & 56 & & \
\hline 5 & 48 & & & 5 & 56 & & \
\hline 6 & 42 & & & 6 & 52 & & \
\hline
\end{array}$$ (a) Fill in the missing values in the table above.
(b) If you bought 6 tacos and 2 burritos are you maximizing your utility? Explain.

Accepted Answer

(a) The completed table: @#IMG-DLM& (b) By purchas

Question 6

Consider the following table, which gives utility numbers for "Good X." Marginal in this table represents values between levels of total utility. $$\begin{array} { | c | c | c | } 
\hline \text { Units of Good X } & \text { Total Utility } & \text { Marginal Utility } \
\hline 0 & 0 & \
\hline 1 & 10 & \
\hline 2 & & 12 \
\hline 3 & 36 & \
\hline 4 & 52 & \
\hline 5 & & 18 \
\hline 6 & & 20 \
\hline
\end{array}$$ (a) Fill in the blanks of the table.
(b) Draw a picture illustrating the relationship between Units of Good X (horizontal axis) and Marginal Utility (vertical axis).
(c) What does the picture you drew for part (b) say about a consumer's satisfaction when increasing consumption of Good X?
(d) How is this example different than what we typically expect to find?

Accepted Answer

(a) The completed table: @#IMG-DLM& (b) The diagra

Question 7

What does rational behavior mean to an economist?

Accepted Answer

Behaving rationally means that

Question 8

What is meant by "utility" and how do the concepts of total utility and marginal utility relate to one another? Use these concepts to explain the principle of diminishing marginal utility and give an example.

Accepted Answer

The economist's term, "utility," refers

Question 9

Susan has $10 to spend on soda and candy bars. Soda costs $1 per bottle and candy bars cost $.50 each. Using the grid below: (Appendix)   (a) Draw Susan's budget constraint.
(b) Draw Susan's best bundle of soda and candy that she can buy for $10.

Accepted Answer

(a) Susan's budget constraint is the lin

Question 10

Using the equilibrium condition of the principle of rational choice, explain why only Point B on the graph below maximizes utility, and that all other points don't. (Appendix)

Accepted Answer

The equilibrium condition of the princip

Question 11

What is the principle of rational choice?

Accepted Answer

The principle of rational choice states

Question 12

What is a consumer's budget constraint? (Appendix)

Accepted Answer

A budget constraint is a curve

Question 13

How does the principle of diminishing marginal utility underlie the law of demand?

Accepted Answer

The principle of diminishing marginal ut

Question 14

What two assumptions underlie economists' theory of rational choice?

Accepted Answer

(1) Decisi

Question 15

Economists' formal analysis requires two pieces of information. What are they?

Accepted Answer

Economists need to know the benefits and

Question 16

Who would be categorized as a conspicuous consumer?

Accepted Answer

A conspicuous consumer is the

What is an indifference curve? (Appendix)

How does the principle of rational choice also underlie the law of supply (as it applies to the supply of labor)?

What is the principle of diminishing marginal utility?

What does rational behavior mean to an economist?

What is meant by "utility" and how do the concepts of total utility and marginal utility relate to one another? Use these concepts to explain the principle of diminishing marginal utility and give an example.

Susan has $10 to spend on soda and candy bars. Soda costs $1 per bottle and candy bars cost $.50 each. Using the grid below: (Appendix) (a) Draw Susan's budget constraint. (b) Draw Susan's best bundle of soda and candy that she can buy for $10.

Using the equilibrium condition of the principle of rational choice, explain why only Point B on the graph below maximizes utility, and that all other points don't. (Appendix)

What is the principle of rational choice?

What is a consumer's budget constraint? (Appendix)

How does the principle of diminishing marginal utility underlie the law of demand?

What two assumptions underlie economists' theory of rational choice?

Economists' formal analysis requires two pieces of information. What are they?

Who would be categorized as a conspicuous consumer?

Economics and Economic Reasoning

The Production Possibility Model, Trade and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy, Comparative Advantage, and Outsourcing

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Exam 19: The Logic of Individual Choice: the Foundation of Supply and Demand

What is an indifference curve? (Appendix)

How does the principle of rational choice also underlie the law of supply (as it applies to the supply of labor)?

What is the principle of diminishing marginal utility?

What does rational behavior mean to an economist?

What is meant by "utility" and how do the concepts of total utility and marginal utility relate to one another? Use these concepts to explain the principle of diminishing marginal utility and give an example.

Susan has $10 to spend on soda and candy bars. Soda costs $1 per bottle and candy bars cost $.50 each. Using the grid below: (Appendix) (a) Draw Susan's budget constraint. (b) Draw Susan's best bundle of soda and candy that she can buy for $10.

Using the equilibrium condition of the principle of rational choice, explain why only Point B on the graph below maximizes utility, and that all other points don't. (Appendix)

What is the principle of rational choice?

What is a consumer's budget constraint? (Appendix)

How does the principle of diminishing marginal utility underlie the law of demand?

What two assumptions underlie economists' theory of rational choice?

Economists' formal analysis requires two pieces of information. What are they?

Who would be categorized as a conspicuous consumer?

Economics and Economic Reasoning

The Production Possibility Model, Trade and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy, Comparative Advantage, and Outsourcing

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters