Exam 6: Consumer Choice Theory

Assume the price of good Y with its quantity measured on the vertical axis is $100 and the price of good X with its quantity measured on the horizontal axis is $10. If the consumer's budget is $500, then the absolute value of the slope of the budget line is:

Marginal utility measures the increase in total utility you derive from consuming one more unit of a good.

Marginal utility is measured by:

If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should:

If good A has a marginal utility of 30 and a price of $5, and good B has a marginal utility of 10 and a price of $2, then:

The statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the:

Assume the price of Coca-Cola increases. As a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the:

Exhibit 6A-4 Consumer equilibrium ​ -Given the budget line and indifference curves shown in Exhibit 6A-4, assume the consumer is initially at point A. To maximize total utility, the consumer should:

Generally speaking, as more of a particular good is purchased, a consumer's marginal utility ____ and total utility ____.

Marginal utility is always a positive number.

Exhibit 6A-7 Consumer equilibrium ​ -As shown in Exhibit 6A-7, the marginal rate of substitution (MRS) at point B is ____ the marginal rate of substitution at point A.

If utility is not maximized, then:

Marginal utility is the change in:

Exhibit 6A-4 Consumer equilibrium ​ -Given the budge line and indifference curves shown in Exhibit 6A-4, consumer equilibrium occurs at a tangency to which of the following indifference curves?

The budget line is a(n):

Exhibit 6A-7 Consumer equilibrium ​ -As shown in Exhibit 6A-7, the marginal rate of substitution (MRS) at point B is equal to:

Suppose that Fernando allocates his lunch money to pizza and Coke. A Coke costs $1 and a slice of pizza costs $1.50. The marginal utility of the last slice of pizza Fernando ate today was 30, and the marginal utility of his last Coke was 25. Fernando spent all of his lunch money. From this information, we can conclude that:

Indifference curves that are farther from the origin are preferable to ones that are closer to the origin.

Show, using utility theory, why a consumer who is initially maximizing her utility will alter her consumption pattern in response to a change in the price of a good.

Combinations of two goods along the indifference curve yield: