Exam 7: The Analysis of Consumer Choice

Assume that the total utilities corresponding to the first five units of a product consumed are 10, 15, 19, 22, and 24, respectively.The marginal utility of the third unit is:

Assume that as the price of cauliflower falls the income effect causes consumers to buy less cauliflower.We can conclude that cauliflower is:

The change in a consumer's consumption of a good in response to an income-compensated price change is called the:

Assume that a person is consuming the utility-maximizing quantities of pork and chicken.We can conclude that:

A budget line is based on a given level of income and variable prices.

If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

The law of diminishing marginal utility:

A budget line is based on given:

Which of the following statements most fully explains a driver's decision, as discussed in the Case in Point on Changing Lane and Raising Utility, to pay to use a highway express lane?

According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:

Market demand is found by:

If the price of apples falls and the price of oranges remains constant:

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the indifference curves in the exhibit, the highest level of total utility theoretically attainable is associated with point _______ on indifference curve _______ .

If you are willing to give up 10 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Consumers will maximize utility whenever the total benefits of consumption of the good exceed the total cost of the good.

If the price of a good falls, the consumer will increase the quantity demanded.

Using the income and substitution effects, discuss and explain why consumers buy more at lower prices and why they buy less at higher prices.Do this for normal and inferior goods (be sure to define normal and inferior goods).

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point G.Given budget constraint FL, utility can be increased by moving to point:

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 $0.10, while 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:

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 $10 of income to spend on both goods.To maximize utility, you would consume ________ units of X and _______ units of Y.