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

Suppose there is diminishing, but not negative, marginal utility and no inflation. If the price of labor goes up, a worker will supply more labor. (Hint: The worker measures his marginal costs in terms of hours worked. )

It is common for fashion trends to follow celebrity fashion choices. This is an example of:

Focal point equilibria are consistent with:

Joan is deciding where to spend her spring break. If she goes to Cancún, Mexico, the trip will give her 9,000 units of utility and will cost her $300. If she travels to Florida instead, the trip will give her 8,000 units of utility and will cost her only $200. Joan will do best going to:

Define total utility and marginal utility and explain the relationship between them.Give an example.

The principle of diminishing marginal utility states that marginal utility:

The consumption of an additional unit of a good provides additional satisfaction, which is called:

Refer to the following figure. Geri likes avocados; each additional avocado she consumes adds as much to her total utility as did the previous one. Which of the four graphs best represents Geri's marginal utility curve for avocados?

Suppose that the total utility of consuming the first piece of chewing gum in a packet is 30. This means that marginal utility of consuming the first piece of gum is:

Refer to the graph shown. Assuming each carnival game costs $1 and each Ferris wheel ride costs $2, a consumer with $16 to spend will optimally choose to consume at point:

The theory of bounded rationality, based on rules of thumb such as "the value of a product is indicated by its price," may result in:

Use the principle of rational choice to determine which of the following to choose: (a)buying the latest album by Kanye West for $10.00 that gives you 60 units of utility,or (b)buying the Brady Bunch Greatest Hits for $5.00 that gives you 35 units of utility.

Diminishing marginal utility implies that as an individual consumes more of a good, beyond some point another unit will add:

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.

Mike is maximizing utility by working 10 hours a week and studying 10 hours a week. Mike has only 20 hours to devote to either working or studying. If Mike realizes that another hour of studying will improve his grade on an exam, thus raising the utility of another hour of study, Mike will:

Using indifference curve analysis, you can identify the point at which a consumer maximizes utility where the slope of the:

Given a set amount of money, goods A and B both give the same marginal utility at current levels of consumption but good A costs twice as much as good B. You should:

The use of expensive cars and yachts to impress others rather than just as transportation is an example of what economists call:

The following table describes utility for consuming cans of soda. Fill in the blank spaces and answer the following question: At what point does the law of diminishing marginal utility set in? Cans of Sada Total utility Marginal utility 1 14 2 12 3 36 4 44 5 6

Refer to the graph shown. Between points B and D, marginal utility is: