Question 1

As a consumer moves along a budget constraint:

Accepted Answer

A) prices are held constant, but income changes. 
B) income is held constant, but prices change. 
C) prices and income are held constant, but quantities change. 
D) total utility is held constant, but prices and income change. 
A) prices are held constant, but income changes. 
B) income is held constant, but prices change. 
C) prices and income are held constant, but quantities change. 
D) total utility is held constant, but prices and income change.

Question 2

The utility maximizing rule states that "if MUX/PX = MUY/PY,then you're maximizing utility." Why is that so? How will the ratio of prices compare to the ratio of marginal utilities when you are maximizing your total satisfaction from a given amount of spending?

Accepted Answer

If you were maximizing utility,the margi

Question 3

Which of the following is an example of a focal point equilibrium?

Accepted Answer

A) Purchase of an expensive automobile no one else owns to impress others 
B) Avoidance of cheap computers because low price indicates low quality 
C) Purchase of hip-hugger pants because pop stars wear them 
D) Purchase of fast food because it is cheap and convenient 
A) Purchase of an expensive automobile no one else owns to impress others 
B) Avoidance of cheap computers because low price indicates low quality 
C) Purchase of hip-hugger pants because pop stars wear them 
D) Purchase of fast food because it is cheap and convenient

Question 4

Refer to the graph shown. Given this budget constraint, if bagels cost $1.80 each, croissants must cost:

Accepted Answer

A) $0.90 each. 
B) $1.80 each. 
C) $3.60 each. 
D) It is impossible to know from the information given. 
A) $0.90 each. 
B) $1.80 each. 
C) $3.60 each. 
D) It is impossible to know from the information given.

Question 5

If MUA/PA> MUB /PB, an individual should choose to consume more of good A.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the following table. If Jane's hourly wage rose from $2 per hour to $4 an hour and Jane had 6 hours to work or play, Jane would: $\begin{array}{|c|c|c|c|}
\hline \text { Spending}&\text {  Tatal Utility of spendine(\$) }&\text { Hours of leisure}&\text {  Total utility of leisure }\
\hline \$ 2 & 60 & 1 & 30 \
\hline \$ 4 & 110 & 2 & 54 \
\hline \$ 6 & 148 & 3 & 70 \
\hline \$ 8 & 172 & 4 & 78 \
\hline \$ 10 & 180 & 5 & 78 \
\hline \$ 12 & 186 & 6 & 70 \
\hline
\end{array}$

Accepted Answer

A) work 4 hours and play 2 hours when her wage is $2/hour but then work 3 hours and play 3 hours when her wage is $4 an hour. 
B) work 4 hours and play 2 hours when her wage is $2/hour but then work 6 hours when her wage is $4 an hour. 
C) not work at $2 an hour and not play at $6 an hour. 
D) not play at either wage. 
A) work 4 hours and play 2 hours when her wage is $2/hour but then work 3 hours and play 3 hours when her wage is $4 an hour. 
B) work 4 hours and play 2 hours when her wage is $2/hour but then work 6 hours when her wage is $4 an hour. 
C) not work at $2 an hour and not play at $6 an hour. 
D) not play at either wage.

Question 7

If you sign up for a class and then drop it mid-semester, you must not have been making a rational choice when you were enrolling in classes.

Accepted Answer

A) True 
 B)False

Question 8

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MUA/PA)is .6 and the marginal utility per dollar spent for good B (MUB/PB)is 1. To increase utility with the same amount of money, Paul should:

Accepted Answer

A) increase the number of B consumed and decrease the number of A consumed. 
B) increase the number of A consumed and decrease the number of B consumed. 
C) increase the number of both A and B consumed. 
D) do nothing; he cannot increase total utility. 
A) increase the number of B consumed and decrease the number of A consumed. 
B) increase the number of A consumed and decrease the number of B consumed. 
C) increase the number of both A and B consumed. 
D) do nothing; he cannot increase total utility.

Question 9

Refer to the following graph.   An indifference curve with a constant marginal rate of substitution is shown by:

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 10

To calculate the total utility of consuming N quantity of a product:

Accepted Answer

A) add the additional satisfaction of consuming each product up to N and multiply by its price. 
B) add the total satisfaction of consuming each product up to N. 
C) multiply the additional satisfaction from consuming the Nth product by its price. 
D) multiply total satisfaction from consuming N products by N. 
A) add the additional satisfaction of consuming each product up to N and multiply by its price. 
B) add the total satisfaction of consuming each product up to N. 
C) multiply the additional satisfaction from consuming the Nth product by its price. 
D) multiply total satisfaction from consuming N products by N.

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

As a consumer moves along a budget constraint:

The utility maximizing rule states that "if MUX/PX = MUY/PY,then you're maximizing utility." Why is that so? How will the ratio of prices compare to the ratio of marginal utilities when you are maximizing your total satisfaction from a given amount of spending?

Which of the following is an example of a focal point equilibrium?

Refer to the graph shown. Given this budget constraint, if bagels cost $1.80 each, croissants must cost:

If MUA/PA> MUB /PB, an individual should choose to consume more of good A.

If you sign up for a class and then drop it mid-semester, you must not have been making a rational choice when you were enrolling in classes.

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MUA/PA)is .6 and the marginal utility per dollar spent for good B (MUB/PB)is 1. To increase utility with the same amount of money, Paul should:

Refer to the following graph. An indifference curve with a constant marginal rate of substitution is shown by:

To calculate the total utility of consuming N quantity of a product:

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

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

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 Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

The utility maximizing rule states that "if MU_X/P_X = MU_Y/P_Y,then you're maximizing utility." Why is that so? How will the ratio of prices compare to the ratio of marginal utilities when you are maximizing your total satisfaction from a given amount of spending?

If MU_A/P_A> MU_B /P_B, an individual should choose to consume more of good A.

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MU_A/P_A)is .6 and the marginal utility per dollar spent for good B (MU_B/P_B)is 1. To increase utility with the same amount of money, Paul should: