Exam 8: Utility and Demand

For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer.

According to the paradox of value, expensive goods, such as gemstones, provide consumers with

The principle of diminishing marginal utility can be used to explain why

Pizza CDs -Bobby spends $100 per month on pizza and CDs. His utility from these goods is shown in the table above. The price of a pizza is $10 and the price of a CD is $20. If Bobby maximizes utility from these goods, his total utility is ________ units.

-Steve has two goods he can spend his income on, skiing and skating, and his marginal utilities from each are in the table above. The price of each unit of skiing is $10 and the price of each unit of skating is $10. Steve has $40 to spend. What quantities of skiing and ice skating will Steve consume to maximize his utility?

Bags of Popcorn Bottles of soda -Jenny buys sodas and popcorn. Sodas sell for $1 and popcorn sells for $2 a bag. Currently she is in consumer equilibrium, with the marginal utility from her last dollar spent on popcorn equal to 100 units of utility. The marginal utility from her last dollar spent on sodas is

Pants Belts -Tris is shopping for pants and belts. He has a budget of $100. The price of a pair of pants is $20 and the price of a belt is $5. His marginal utility schedules are above. What combination of pants and belts does Tris buy? Explain your answer.

Total utility from -The above table shows Sue's total utility from golf and tennis. If the price of each hour of golf is twice the price of each hour of tennis, and Sue plays four hours of tennis, then Sue plays

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

-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?

Apples Tacos -Sasha derives utility from consuming apples and tacos as shown in the table above. Apples cost $1 each and tacos cost $2 each. If Sasha's income is $8, he will consume

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2.00 for a hamburger, what is the marginal utility per dollar spent on the fifth hamburger?

Jeremiah spends all of his income on oranges and cookies, which are normal goods. If Jeremiah's income decreases, he will buy ________ oranges and ________ cookies. His marginal utility from oranges will ________ and his marginal utility from cookies will ________.

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 $.50 each. What quantity of milkshakes does Tom purchase at his consumer equilibrium?

-The table above gives Sam's marginal utility schedule for bananas and apples. Sam's fruit budget is $10. a) If bananas cost $1 per pound and apples cost $2 per bag, what is Sam's marginal utility per dollar for all quantities of both goods? b) What is the utility maximizing combination of bananas and apples for Sam? c) If the price of bananas increases to $2 per pound, how does Sam's marginal utility per dollar for bananas change? d) At the banana price of $2 per pound, what is the new utility maximizing combination of bananas and apples for Sam? e) List two points on Sam's demand curve for bananas.

When you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily CORRECT?

As the quantity of a good consumed increases, its marginal utility ________ and its total utility ________.

Fred spends all of his income on two goods: DVDs and downloaded music. If Fred's marginal utility per dollar from DVDs is greater than his marginal utility per dollar from downloaded music, Fred can ________ his total utility by buying ________.

Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 100 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. To maximize his utility, Bobby should

Ice cream Romance novels -Ricardo likes to rent DVDs and attend concerts. The DVDs cost $4 and the concerts cost $40. Ricardo's marginal utility from the last DVD is 20 units. Ricardo is maximizing his utility. What is his marginal utility from the last concert he attended?