Exam 6: Consumer Choices

As a general rule, utility-maximizing choices between consumption goods occur where the:

-Refer to the budget line shown in the diagram above. At point U, __________.

The most common pattern for marginal utility is ____________________.

The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

Jed's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Jed knows that 2 pizzas and 4 burgers will give him a utility of 8. At his utility-maximizing point, Jed's utility is:

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,

In the U.S., the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. Evidence suggests that, in the economy as a whole, increased savings in these retirement accounts:

Rick eats only french fries and burgers at his office cafeteria. His weekly lunch budget is $48. Each burger costs $6 and each order of fries costs $3. When deciding how much of each good to buy, Rick knows that 2 burgers and 4 orders of french fries will give him a utility of 8. At his utility-maximizing point, Rick's utility is:

Which of the following is most likely to cause variation in American household spending patterns?

Briefly describe the choices a household will choose along a labor-leisure budge constraint and the results of those choices.

-Refer to the above diagram. In this instance:

Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. Bob's utility maximizing point is:

Larry attends college and works part-time job in a grocery store. He can work up to 30 hours each week at his job, which pays $9 per hour. The table below shows his utility from different levels of leisure and income. Larry's utility maximizing choice is to work for:

Briefly explain the relevant portions shown in a backward sloping labor supply curve. How are the various possibilities derived?

Substitution and income effects of a change in price of a good may be used to explain the:

Janie works for an accounting firm. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Before her raise, if Janie decreases her hours of work from 30 to 20 hours per week, the marginal utility gain from having more leisure is:

Briefly discuss the choices typical to households with respect to intertemporal budget constraint.

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:

Saving money is an) ____________________, because it involves less consumption in the present, but the ability to consume more in the future.