Exam 10: The Rational Consumer

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups.She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Suppose the price of an apple is $0.20 and the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility, assuming that the goods are divisible, she would: A.consume more Reese's Peanut Butter Cups and fewer apples. B.consume less of both goods. C.consume more apples and fewer Reese's Peanut Butter Cups. D.There is not enough information to justify a change in her current level of consumption.

On a deserted island, high-speed Internet service would have a __ marginal utility than in New York City, while quiet evenings in New York City would carry a ____ marginal utility than on a deserted island. A.lower; higher B.higher; lower C.lower; lower D.higher; higher

For some people, coffee and milk are perfect complements.Their indifference curves are:

As a consumer moves upward along an indifference curve, giving up some of X (on the horizontal axis) to get more of Y (on the vertical axis), his or her marginal rate of substitution of X for Y:

If Paloma is consuming the utility-maximizing quantities of pizza and soda pop, then we can conclude that: A.the price of pizza equals the price of soda pop. B.the marginal utility of pizza is equal to the marginal utility of soda pop. C.the ratio of the marginal utility to price is the same for pizza and for soda pop. D.the total utility of pizza is equal to the total utility of soda pop.

The following bundles can all be on the same indifference curve.Bundle A: 4 enchiladas, 1 burrito; Bundle B: 3 enchiladas, 3 burritos; Bundle C: 2 enchiladas, 2 burritos.True

Jake considers fries and onion rings perfect substitutes.The indifference curve between fries and onion rings must be:

When the price of an inferior good falls, the substitution effect contributes to in the quantity demanded and the income effect ____ the substitution effect. A.a decrease; reinforces B.an increase; reinforces C.an increase; opposes D.a decrease; opposes

Suppose Wolfgang really likes rutabagas and likes broccoli as well.Suppose the prices of each good is $0.60 per pound and Wolfgang is maximizing utility.We can conclude that at the point of maximal utility the marginal utility of: A.the marginal utility of rutabagas and broccoli are the same. B.the marginal utility of rutabagas is greater than the marginal utility of broccoli. C.the marginal utility of broccoli is greater than the marginal utility of rutabagas. D.the marginal utility of both goods is zero.

(Table: Alaina's Utility from Consuming Cups of Coffee) Look at the table Alaina's Utility from Consuming Cups of Coffee.Diminishing marginal utility: A.is not present in Alaina's consumption of coffee, since her total utility keeps increasing. B.is present in Alaina's consumption of coffee, since her total utility increases at a decreasing rate with each cup consumed. C.is equal to zero. D.is not present, since Alaina exhibits increasing marginal utility.

Xavier notices that the marginal utility of working with a tutor seems to fall with each hour the tutor helps him study.If Xavier keeps the tutor until his grade actually begins to fall, his marginal utility will be A.negative. B.positive, but rising more slowly. C.zero. D.immeasurable.

0 A.First B.second C.fourth D.sixth

An indifference curve shows combinations of two goods that yield: A.equal prices. B.equal money income. C.equal satisfaction. D.increasing prices.

Marge has spent her entire budget on milk and cookies.The last glass of milk provided Marge with 10 additional utils and the last cookie provided her with 25 additional utils.The price of a cookie is twice the price of a glass of milk.Given this information, Marge should: A.increase her consumption of milk and decrease her consumption of cookies. B.decrease her consumption of milk and increase her consumption of cookies. C.increase her consumption of milk and increase her consumption of cookies. D.decrease her consumption of milk and decrease her consumption of cookies.

If Ian's indifference curve between guitars and Cadillacs is shaped like a right angle, then he considers the two goods perfect complements.False

Figure: Kristin's Budget Line (Figure: Kristin's Budget Line) Look at the figure Kristin's Budget Line.The price of a cup of cappuccino is $3, and the price of an apple is $1.Kristin's income is equal to:

Ersida purchases both baby food (F) and cloth diapers (C).The price of a jar of baby food is PF and the price of a box of cloth diapers is PC.At any point on an indifference curve, the marginal rate of substitution for food and clothing can be represented by:

In terms of indifference curves, higher total utility is represented by:

Table: MP₃ Music Downloads (Table: MP₃ Music Downloads) Jen spends her daily income of $28 on two goods, MP₃ music downloads and jumbo diet sodas.One MP₃ music download costs $2, and one jumbo diet soda costs $4.The table provided shows three consumption bundles.Identify the bundle that is unaffordable, the one that lies on her budget line, and the one that is affordable but does not use all of her income.

Increases in the price of the good measured on the vertical axis will make the vertical intercept ________ and make the budget line _.