Question 1

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing, a behavioral economist will explain that Sean is showing

Accepted Answer

A)  the endowment effect. 
B)  bounded rationality. 
C)  bounded self-interest. 
D)  bounded will power. 
A)  the endowment effect. 
B)  bounded rationality. 
C)  bounded self-interest. 
D)  bounded will power.

Question 2

As an individual's consumption of a good increases

Accepted Answer

A)  his or her total utility increases. 
B)  his or her marginal utility increases. 
C)  the price of the good increases. 
D)  All of the above answers are correct. 
A)  his or her total utility increases. 
B)  his or her marginal utility increases. 
C)  the price of the good increases. 
D)  All of the above answers are correct.

Question 3

What is the utility-maximizing rule?

Accepted Answer

The utility-maximizing rule states that

Question 4

With a given income and prices of goods, Marcus will be in a consumer equilibrium if

Accepted Answer

A)  his marginal utility from all goods is the same. 
B)  he purchases the same amounts of all goods. 
C)  he maximizes his total utility. 
D)  his marginal utility from all goods is at its maximum. 
A)  his marginal utility from all goods is the same. 
B)  he purchases the same amounts of all goods. 
C)  he maximizes his total utility. 
D)  his marginal utility from all goods is at its maximum.

Question 5

Tom's consumption possibilities is defined by

Accepted Answer

A)  his income and the prices of the goods that he consumes. 
B)  his preferences for consumption of the goods that he consumes. 
C)  the prices of the goods that he consumes only. 
D)  his income only. 
A)  his income and the prices of the goods that he consumes. 
B)  his preferences for consumption of the goods that he consumes. 
C)  the prices of the goods that he consumes only. 
D)  his income only.

Question 6

Bianca consumes apples and bananas and is in consumer equilibrium. The marginal utility of the last apple is 10 and the marginal utility of the last banana is 20. If the price of an apple is $0.50, then what is the price of a banana?

Accepted Answer

A)  $0.10 
B)  $0.25 
C)  $0.50 
D)  $1.00 
A)  $0.10 
B)  $0.25 
C)  $0.50 
D)  $1.00

Question 7

When Kathryn spends her entire budget and equates marginal utility per dollar across all goods, then Kathryn's total utility is maximized.

Accepted Answer

A) True 
 B)False

Question 8

Marginal Utility
  
-Lily has $10 to spend each week on fish and chicken. Fish costs $2 a serving and chicken costs $3 a serving. The table shows Lily's marginal utilities of fish and chicken. Lily will consume ________ servings of chicken and ________ of fish each week.

Accepted Answer

A)  4; 0 
B)  1; 3 
C)  0; 5 
D)  2; 2 
A)  4; 0 
B)  1; 3 
C)  0; 5 
D)  2; 2

Question 9

A consumer allocates his budget according to rules of utility maximization. What are the rules of utility maximization and how do they explain the paradox of value, which is that diamonds are expensive but useless, while water is inexpensive but essential?

Accepted Answer

The rules of utility maximization are to

Question 10

-Margo buys music CDs and movies on DVDs. The table above shows her total utility from each good.
a) Draw graphs showing Margo's utility from music CDs and from movies on DVDs.
b) Compare the two utility graphs. Describe Margo's preferences.
c) Draw graphs that show Margo's marginal utility from music CDs and from movies on DVDs.
d) What do the two marginal utility graphs tell you about Margo's preferences?

Accepted Answer

@#IMG-DLM& a) The figure with the total utilities

Question 11

If marginal utility is positive but diminishing, then total utility must be ________ as consumption of the good increases.

Accepted Answer

A)  decreasing 
B)  positive and rising at an increasing rate 
C)  positive and rising at a decreasing rate 
D)  positive and rising at any rate 
A)  decreasing 
B)  positive and rising at an increasing rate 
C)  positive and rising at a decreasing rate 
D)  positive and rising at any rate

Question 12

-The table above gives the utility from pens and pencils. If the consumer has an income of $4, pens cost $1, and pencils cost $.20, which of the following combinations maximizes the consumer's utility?

Accepted Answer

A)  4 pens and 0 pencils 
B)  3 pens and 5 pencils 
C)  3 pens and 6 pencils 
D)  no combination shown 
A)  4 pens and 0 pencils 
B)  3 pens and 5 pencils 
C)  3 pens and 6 pencils 
D)  no combination shown

Question 13

The state Department of Agriculture raised the minimum price for a gallon of milk in the city on Tuesday to $4.37. "If you've got two or three kids and you're living on a fixed income and you're paying half your income on rent," Gioia said, "then you're really in a bind and you're making choices you should never have to make." If even after this price increase Gioia's marginal utility per dollar is higher for milk than for other goods, what should Gioia do?

Accepted Answer

A)  increase her consumption of milk 
B)  decrease her consumption of milk 
C)  not change her consumption of milk 
D)  increase her consumption of milk only if her income increases 
A)  increase her consumption of milk 
B)  decrease her consumption of milk 
C)  not change her consumption of milk 
D)  increase her consumption of milk only if her income increases

Question 14

Why does gold, which is a relatively nonessential item, have a higher price than water, which is essential to life?

Accepted Answer

Gold has a high price and a high margina

Question 15

-In the table above, which of the following is TRUE?

Accepted Answer

A)  Jim and Sally have increasing marginal utility. 
B)  Jim has increasing marginal utility and Sally has diminishing marginal utility. 
C)  Jim has diminishing marginal utility and Sally has increasing marginal utility. 
D)  Jim and Sally have diminishing marginal utility. 
A)  Jim and Sally have increasing marginal utility. 
B)  Jim has increasing marginal utility and Sally has diminishing marginal utility. 
C)  Jim has diminishing marginal utility and Sally has increasing marginal utility. 
D)  Jim and Sally have diminishing marginal utility.

Question 16

Sergio consumes only beef and snails and is maximizing his utility. If the price of beef is less than the price of snails, then we definitely know that

Accepted Answer

A)  Sergio buys more beef than snails. 
B)  Sergio buys more snails than beef. 
C)  the marginal utility from the last pound of beef purchased is greater than the marginal utility from the last pound of snails purchased. 
D)  the marginal utility from the last pound of snails purchased is greater than the marginal utility from the last pound of beef purchased. 
A)  Sergio buys more beef than snails. 
B)  Sergio buys more snails than beef. 
C)  the marginal utility from the last pound of beef purchased is greater than the marginal utility from the last pound of snails purchased. 
D)  the marginal utility from the last pound of snails purchased is greater than the marginal utility from the last pound of beef purchased.

Question 17

Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer.

Accepted Answer

Jenny should buy more chips and fewer fi

Question 18

Milkshakes Sodas
  
-The table above shows Tom's total utility from milkshakes and sodas. What is the marginal utility of the eighth soda?

Accepted Answer

A)  32 units 
B)  20 units 
C)  10 units 
D)  8 units 
A)  32 units 
B)  20 units 
C)  10 units 
D)  8 units

Question 19

Milkshakes Sodas
  
-The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of sodas does Tom purchase at his consumer equilibrium?

Accepted Answer

A)  five 
B)  six 
C)  seven 
D)  eight 
A)  five 
B)  six 
C)  seven 
D)  eight

Question 20

Shaniq buys only soda and pizza and is buying the amounts that maximize her utility. The marginal utility from a soda is 30 and the price of a soda is $2. The marginal utility from a slice of pizza is also 30. The price of a slice of pizza must be

Accepted Answer

A)  $30. 
B)  $2. 
C)  $1. 
D)  some amount that cannot be calculated without more information. 
A)  $30. 
B)  $2. 
C)  $1. 
D)  some amount that cannot be calculated without more information.

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing, a behavioral economist will explain that Sean is showing

As an individual's consumption of a good increases

What is the utility-maximizing rule?

With a given income and prices of goods, Marcus will be in a consumer equilibrium if

Tom's consumption possibilities is defined by

Bianca consumes apples and bananas and is in consumer equilibrium. The marginal utility of the last apple is 10 and the marginal utility of the last banana is 20. If the price of an apple is $0.50, then what is the price of a banana?

When Kathryn spends her entire budget and equates marginal utility per dollar across all goods, then Kathryn's total utility is maximized.

Marginal Utility -Lily has $10 to spend each week on fish and chicken. Fish costs $2 a serving and chicken costs $3 a serving. The table shows Lily's marginal utilities of fish and chicken. Lily will consume servings of chicken and of fish each week.

A consumer allocates his budget according to rules of utility maximization. What are the rules of utility maximization and how do they explain the paradox of value, which is that diamonds are expensive but useless, while water is inexpensive but essential?

If marginal utility is positive but diminishing, then total utility must be ________ as consumption of the good increases.

-The table above gives the utility from pens and pencils. If the consumer has an income of $4, pens cost $1, and pencils cost $.20, which of the following combinations maximizes the consumer's utility?

Why does gold, which is a relatively nonessential item, have a higher price than water, which is essential to life?

-In the table above, which of the following is TRUE?

Sergio consumes only beef and snails and is maximizing his utility. If the price of beef is less than the price of snails, then we definitely know that

Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer.

Milkshakes Sodas -The table above shows Tom's total utility from milkshakes and sodas. What is the marginal utility of the eighth soda?

Milkshakes Sodas -The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of sodas does Tom purchase at his consumer equilibrium?

Shaniq buys only soda and pizza and is buying the amounts that maximize her utility. The marginal utility from a soda is 30 and the price of a soda is $2. The marginal utility from a slice of pizza is also 30. The price of a slice of pizza must be

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 8: Utility and Demand

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing, a behavioral economist will explain that Sean is showing

As an individual's consumption of a good increases

What is the utility-maximizing rule?

With a given income and prices of goods, Marcus will be in a consumer equilibrium if

Tom's consumption possibilities is defined by

Bianca consumes apples and bananas and is in consumer equilibrium. The marginal utility of the last apple is 10 and the marginal utility of the last banana is 20. If the price of an apple is $0.50, then what is the price of a banana?

When Kathryn spends her entire budget and equates marginal utility per dollar across all goods, then Kathryn's total utility is maximized.

Marginal Utility -Lily has $10 to spend each week on fish and chicken. Fish costs $2 a serving and chicken costs $3 a serving. The table shows Lily's marginal utilities of fish and chicken. Lily will consume ________ servings of chicken and ________ of fish each week.

A consumer allocates his budget according to rules of utility maximization. What are the rules of utility maximization and how do they explain the paradox of value, which is that diamonds are expensive but useless, while water is inexpensive but essential?

If marginal utility is positive but diminishing, then total utility must be ________ as consumption of the good increases.

-The table above gives the utility from pens and pencils. If the consumer has an income of $4, pens cost $1, and pencils cost $.20, which of the following combinations maximizes the consumer's utility?

Why does gold, which is a relatively nonessential item, have a higher price than water, which is essential to life?

-In the table above, which of the following is TRUE?

Sergio consumes only beef and snails and is maximizing his utility. If the price of beef is less than the price of snails, then we definitely know that

Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer.

Milkshakes Sodas -The table above shows Tom's total utility from milkshakes and sodas. What is the marginal utility of the eighth soda?

Milkshakes Sodas -The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of sodas does Tom purchase at his consumer equilibrium?

Shaniq buys only soda and pizza and is buying the amounts that maximize her utility. The marginal utility from a soda is 30 and the price of a soda is $2. The marginal utility from a slice of pizza is also 30. The price of a slice of pizza must be

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Marginal Utility -Lily has $10 to spend each week on fish and chicken. Fish costs $2 a serving and chicken costs $3 a serving. The table shows Lily's marginal utilities of fish and chicken. Lily will consume servings of chicken and of fish each week.