Exam 7: Utility Maximization

Susie buys two goods: rounds of golf and massages.Suppose that the price of a round of golf is $20 and the price of a massage is $30.In a typical week, Susie will play two rounds of golf, getting 20 utils of satisfaction from the second round.She normally buys three massages each week, with the third giving her 30 utils of satisfaction.If she were to buy a fourth massage in a week, it would give her 20 utils of satisfaction.If the price of massages is reduced to $15, which of the following outcomes might we expect to occur?

Betty is maximizing her satisfaction from spending her budget on two items, movie rentals and music downloads.If her marginal utility from the last movie rental is twice that from the last music download, what is the price of a movie rental if the price of a music download is $0.80?

If you purchase a gift worth $25 for your sister, but your sister would be willing to pay only $10 ifshe bought the item for herself, then the

It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.

A parallel shift in a budget line is caused by changes in a consumer's level of satisfaction.

Health insurance often pays 80 percent of health care costs.This situation will encourage the rational consumer to

The goal of a rational consumer is to maximize

Which of the following statements is correct?

Mr.Samuelson's current rates of purchase are such that the marginal utility of slacks is 18 and the marginal utility of ties for him is 5.If slacks and ties are priced at $12 and $2, respectively, it can be concluded that Mr.Samuelson

How did Apple overcome consumers' diminishing marginal utility for iPads?

Marginal utility is total utility divided by the number of units consumed.

The budget line shows all the combinations of two products that the consumer can buy, given money income and product prices.

Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py = 25 and MUz/Pz = 20.To maximize utility, without spending more money, the consumer should

If two combinations of goods X and Y give a consumer equal satisfaction, then these two combinations must both be on the same

A rational consumer will try to achieve the highest indifference curve that his or her income will allow.

Which situation is consistent with the law of diminishing marginal utility?

Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py = 30/2 and MUz/Pz = 45/3.To maximize utility, without spending more money, the consumer should

When the price of a product falls, the income effect induces the consumer to purchase more of it, while the substitution effect prompts her to buy less.

Indifference curves are convex to the origin due to diminishing marginal rates of substitution.

In deciding what to buy, the consumer will choose the good with the