Exam 7: The Analysis of Consumer Choice

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose.As she adjusts to this event, she will consume:

The Case in Point on P.O.W.camps stated that in situations where trade among the prisoners was allowed, in equilibrium the marginal rate of substitution between coffee and tea:

Use the following for questions 61-69. -(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods X and Y is $1 per unit, and you have $4 of income to spend on both goods.To maximize utility, you would consume ______ units of X and _______ units of Y.

When total utility is at a maximum, marginal utility is:

Marginal utility is best computed as the:

Whatever the time period involved, a consumer's spending will be _______ by his or her _______ .

Use the following for questions 23-27. Exhibit: Total Utility and Marginal Utility from Consumption of Good A -(Exhibit: Total Utility and Marginal Utility from Consumption of Good A. If 2 units of A are consumed, the total utility received is _______ , and the marginal utility of the second unit is _______ .

Consumers generally try to obtain:

The slope of a(n) _______ curve shows the rate at which two goods can be exchanged _______ the consumer's ________ .

A decreasing marginal rate of substitution indicates that an indifference curve is:

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) The lowest level of total utility shown in the exhibit is associated with point _______ on curve _______ .

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of M&Ms that you can purchase is ________ bags.

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.

For a consumer to be in equilibrium, the marginal utilities of all goods must be equal.

Use the following for questions 61-69. -(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods is $1 per unit, and you consume 3 units of good X and 3 units of good Y.To maximize utility, assuming that the goods are divisible, you would consume:

Use the following for questions 61-69. -(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $5 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods.To maximize utility, you would consume _______ units of X and _______ units of Y.

If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend and decide to purchase 8 bags of M&Ms, the maximum quantity of Cracker Jacks that you can purchase is ________ boxes.

If, for a particular consumer, the marginal utility of ties is greater than the marginal utility of shirts, this consumer should:

If a consumer purchases a combination of commodities x and y such that MUₓ/Pₓ = 20 and MUᵧ/Pᵧ = 5, to maximize utility, the consumers should buy.