Deck 5: Demand

Question 1

As the price of computers falls,the quantity demanded of computers increases.This is an application of

A) the law of supply
B) production possibility expansion
C) the law of demand
D) needs versus wants

Answer 1

C

Question 2

Shelter for homeless people is an example of

A) a want
B) a need
C) something they can live without
D) something hard to find

Answer 2

B

Question 3

The time one spends researching the performance and fuel economy of new cars on the Internet is an example of a(n)

A) monetary cost.
B) non-monetary cost.
C) information cost.
D) implied cost.

Answer 3

B

Question 4

Rice requires extensive irrigation,therefore water for rice farmers in California is

A) not as important as for farmers in Pennsylvania,where they grow little rice
B) a necessity
C) a need
D) a want

Question 5

According to economists,the satisfaction people get from their consumption activities is called

A) demand
B) utility
C) needs
D) wants

Question 6

Pat just spent a thousand dollars on a painful dental procedure.In this case

A) Pat's resources yielded negative utility.
B) demand for dental procedures is upward sloping.
C) we can assume that having the dental services performed increased Pat's utility.
D) utility is irrelevant to this decision to spend money.

Question 7

Taking a limousine to a five star restaurant in New York is a

A) necessity to Donald Trump but a luxury to Joe Average.
B) necessity to both Joe Average and Donald Trump.
C) want to both Joe Average and Donald Trump.
D) want to Donald Trump and a luxury to Joe Average.

Question 8

During Thanksgiving you participated in a pumpkin-pie eating contest since you love pumpkin pie.You really enjoyed the first two pies,the third one was OK,but as soon as you ate the 4^th one you became ill and lost the contest.
Your total utility _______ with each pie you ate up to the 3^rd pie.

A) increased
B) decreased
C) stayed the same
D) first increased than decreased

Question 9

JoJo is shopping for a new computer.A mail-order computer can be delivered to JoJo's home for $1,200.JoJo could pick up the same computer at the warehouse for $1,000.How should JoJo decide?

A) JoJo should definitely drive to the warehouse because the monetary cost is $200 lower.
B) JoJo should drive to the warehouse if the value of his travel time plus wear and tear on his car is less than $200.
C) JoJo should definitely have the computer delivered,because the $200 saving is less than 20% of the purchase price.
D) JoJo should definitely drive to the warehouse because the $200 saving is more than 10% of the purchase price.

Question 10

In some countries,medical care is provided free to citizens and paid for by the government.In those countries,medical care is

A) not a scarce resource.
B) available at zero opportunity cost.
C) rationed by non-monetary costs.
D) available at no cost to everyone who wants it.

Question 11

The law of demand indicates that as the cost of an activity

A) falls,less of the activity will occur.
B) rises,more of the activity will occur.
C) rises,the level of the activity may or may not increase depending on the individual.
D) falls,more of the activity will occur.

Question 12

The tendency for consumers to purchase more of a good or service as its price falls is called

A) the law of supply.
B) the law of increasing cost.
C) the Low-Hanging Fruit principle.
D) the law of demand.

Question 13

As living standards improve,

A) things that were once luxuries become needs.
B) things that were once wants become needs.
C) needs are eliminated,leaving only wants.
D) needs remain the same,but wants increase.

Question 14

According to the law of demand,when the price of shoes ______ you will consume ________ shoes.

A) rises,more
B) falls,more
C) rises,the same amount
D) falls,the same amount

Question 15

Higher education is a ________ and assigned textbooks are ________.

A) need;needs
B) want;wants
C) need;wants
D) want;needs

Question 16

In most markets scarce goods or services are rationed among competing users,and ______ perform that task.

A) non-monetary prices
B) monetary prices
C) government organizations
D) private organizations

Question 17

Ten years ago you had never even heard of wireless internet.Now you complete assignments for class on a laptop that accesses the Internet using wireless technology.This is evidence that

A) things that were once wants can become needs.
B) needs remain the same,but wants change.
C) needs and wants both increase with increases in technology.
D) needs decrease with technology,but wants increase.

Question 18

Home football games at your college are free for students and most of the students like to go to the game.What is the non-monetary cost for you to go to the game?

A) Gas that you will need for your car.
B) Money you paid for body painting and artificial hair.
C) The outrageous price you had to pay for hot dog and soda.
D) The 5 hours you waited in the line to get ticket.

Question 19

After subsistence levels of food,shelter,and clothing are provided,

A) all other goods and services are "needs".
B) many goods and services are "needs".
C) all other goods and services are "wants".
D) all other goods and services are "luxuries".

Question 20

Utility maximization means that people try to allocate their ______ to maximize their ___________.

A) utility,spending
B) resources,satisfaction
C) time,work
D) limited resource,desires

Question 21

During Thanksgiving you participated in a pumpkin-pie eating contest since you love pumpkin pie.You really enjoyed the first two pies,the third one was OK,but as soon as you ate the 4^th one you became ill and lost the contest.
Beyond the 3^rd pie your total utility

A) increases,but by less than for the first three pies
B) decreases
C) stays the same
D) is zero

Question 22

Donald has vast riches and consumes thousands of dollars worth of consumer goods each week,yet he is never satisfied.Why not?

A) Wants are unlimited,but resources are finite.
B) Donald fails to choose rationally.
C) The law of diminishing marginal utility shows that consuming too many material goods leads to lower total utility.
D) Utility is unrelated to the level of consumption.

Question 23

Sven likes to water ski,but can only water ski during the one week that he is on vacation.Therefore,he plans to ski every day,for eight hours a day.The first day,Sven skied for eight hours and enjoyed every hour.The second day,Sven slept in and then skied for seven hours,which was fun but not as much fun as the first day.The third day,Sven skied for six hours,but was starting to get a bit bored by the end.The fourth day,Sven skied for four hours and then took a nap.On the fifth day of Sven's vacation,Sven went blueberry picking all day.
On the fifth day of Sven's vacation,he had decided that another hour of skiing would yield

A) more utility than the day before
B) the same level of utility as the day before
C) less utility than blueberry picking
D) no utility at all

Question 24

The term marginal utility denotes the amount by which ______ changes when consumption changes by _____ unit(s).

A) total utility,1
B) demand,5
C) demand,1
D) total utility,5

Question 25

Moe's parents frequently tell him how it was back in their childhoods.They had a smaller house,fewer toys,only one car and one black-and-white TV,but they were happy.In fact,Moe's parents claim that they were happier than Moe and his friends are today even though Moe and his friends all have much more stuff.Moe concludes that

A) his parents are irrational,because for rational people total utility increases with consumption.
B) Moe's parents are subject to diminishing marginal utility,but Moe and his friends are not.
C) economic models cannot be applied to two different generations.
D) the social forces that influence demand have changed since Moe's parents were young.

Question 26

Pat's total utility after eating 100 Reese's Peanut Butter Cups was less than his total utility after eating his ninety-ninth.Therefore,Pat's marginal utility for the 100^th peanut butter cup was

A) positive,but less than one.
B) positive,but less than Pat's marginal utility for the 99^th peanut butter cup.
C) zero.
D) negative.

Question 27

During Thanksgiving you participated in a pumpkin-pie eating contest since you love pumpkin pie.You really enjoyed the first two pies,the third one was OK,but as soon as you ate the 4^th one you became ill and lost the contest.
You got ______ utility from eating the 1^st pie than eating the 3^rd pie.

A) less
B) more
C) the same amount of
D) marginal

Question 28

The tendency for marginal utility to decline as consumption increases beyond some point is called

A) the law of demand
B) the law of diminishing marginal utility
C) the rational spending rule
D) utility maximization

Question 29

______ is the additional utility gained from consuming an additional unit of a good.

A) Total utility
B) Marginal Utility
C) Utility
D) Utils

Question 30

If the marginal utility of the 3^rd cup of coffee is 23 and the marginal utility of the 4^th cup is 15,then

A) it is optimal for the consumer to have 3 cups of coffee.
B) the price of a cup of coffee must be relatively low.
C) it is optimal for the consumer to have 4 cups of coffee.
D) there is evidence of the law of diminishing marginal utility.

Question 31

Suppose Chris' marginal utility from the first taco Chris eats is 15 and Chris' marginal utility from the second taco is 12.One can infer that Chris

A) has total utility of 2 tacos equal to 27.
B) should eat only one taco.
C) has average utility for 2 tacos of 27.
D) should eat 2 tacos.

Question 32

It is impossible for total utility to be _________ when marginal utility is ___________

A) increasing;increasing.
B) decreasing;positive.
C) positive;negative.
D) increasing;decreasing.

Question 33

The first time Michel tasted coffee,he thought it was bitter and bad-tasting.The second time Michel had coffee,he thought that it was barely tolerable.Eventually,Michel started to enjoy coffee,and within a few months he was drinking several cups a day.In fact,if he did not drink several cups a day,he was miserable.This suggests that,for Michel,

A) demand for coffee has increased.
B) coffee is a need,not a want.
C) diminishing marginal utility does not apply to coffee consumption.
D) economic models cannot be applied to habit-forming substances.

Question 34

If marginal utility is positive as consumption increases,

A) the consumer will not experience diminishing marginal utility.
B) total utility will remain high and constant as consumption increases.
C) total utility will increase as consumption increases.
D) the demand curve will have a positive slope.

Question 35

Sven likes to water ski,but can only water ski during the one week that he is on vacation.Therefore,he plans to ski every day,for eight hours a day.The first day,Sven skied for eight hours and enjoyed every hour.The second day,Sven slept in and then skied for seven hours,which was fun but not as much fun as the first day.The third day,Sven skied for six hours,but was starting to get a bit bored by the end.The fourth day,Sven skied for four hours and then took a nap.On the fifth day of Sven's vacation,Sven went blueberry picking all day.
Sven gets ______ utility from his first hour of skiing than from his tenth hour of skiing.

A) less
B) more
C) the same
D) the same amount,but better quality

Question 36

Laura's total utility from consuming 8,9,and 10 bonbons is 35,42,and 45,respectively.Her marginal utility from the 9^th bonbon is

A) 42
B) 77
C) 7
D) 4.67

Question 37

During Thanksgiving you participated in a pumpkin-pie eating contest since you love pumpkin pie.You really enjoyed the first two pies,the third one was OK,but as soon as you ate the 4^th one you became ill and lost the contest.
You got ______ utility from eating the 4^th pie than eating the 2^nd pie.

A) less
B) more
C) the same amount of
D) marginal

Question 38

Sven likes to water ski,but can only water ski during the one week that he is on vacation.Therefore,he plans to ski every day,for eight hours a day.The first day,Sven skied for eight hours and enjoyed every hour.The second day,Sven slept in and then skied for seven hours,which was fun but not as much fun as the first day.The third day,Sven skied for six hours,but was starting to get a bit bored by the end.The fourth day,Sven skied for four hours and then took a nap.On the fifth day of Sven's vacation,Sven went blueberry picking all day.
Sven's vacation convinced him that

A) even for activities he really enjoys,diminishing marginal utility eventually sets in.
B) blueberry picking yields higher total utility than does water skiing.
C) even for activities he really enjoys,total utility declines each time he engages in it.
D) economic theory applies only to things you buy,not recreation.

Question 39

If Terry gets maximum utility from owning 10 pairs of shoes,then Terry's total utility from owning 7 pairs of shoes is ______ Terry's total utility from owning 8 pairs.

A) greater than
B) equal to
C) less than
D) less than or equal to

Question 40

Sven likes to water ski,but can only water ski during the one week that he is on vacation.Therefore,he plans to ski every day,for eight hours a day.The first day,Sven skied for eight hours and enjoyed every hour.The second day,Sven slept in and then skied for seven hours,which was fun but not as much fun as the first day.The third day,Sven skied for six hours,but was starting to get a bit bored by the end.The fourth day,Sven skied for four hours and then took a nap.On the fifth day of Sven's vacation,Sven went blueberry picking all day.
Sven's total utility _______ with each hour that he skied.

A) increased
B) decreased
C) remained constant
D) first increased than decreased

Question 41

Cory gets 18,23,and 25 units worth of total utility from consuming 10,11,and 12 raw oysters,respectively,and the price per oyster is 25 cents.Thus,one can infer that Cory

A) is not utility maximizing.
B) is experiencing diminishing marginal utility.
C) should NOT consume any more oysters.
D) has consumed too many oysters.

Question 42

Casey earns $150 a week and consumes only fish and shrimp.The price of fish is $3 a pound and the price of shrimp is $5 a pound.
If Casey's income rises to $210,the rational spending rule would predict Casey would buy

A) more fish and less shrimp.
B) more fish and more shrimp.
C) less fish and more shrimp.
D) more fish and the same amount of shrimp.

Question 43

The ______ combination of goods is the combination of goods that yields the highest total utility given the consumer's income.

A) affordable
B) economical
C) utility satiating
D) optimal

Question 44

Jamie's marginal utility for consuming muffins and doughnuts in utils are as follows.Jamie spends $4 for breakfast every morning,the price per muffin is $1.00 and the price per doughnut is $0.50. $$\begin{array} { | c | c | c | c | } \hline \text { Muffin/Day } & \begin{array} { c } \text { Marginal Utility } \\\text { per Muffin }\end{array} & \text { Doughnut/Day } & \begin{array} { c } \text { Marginal Utility } \\\text { per Doughnut }\end{array} \\\hline 1 & 45 & 2 & 20 \\\hline 2 & 30 & 4 & 15 \\\hline 3 & 25 & 6 & 10 \\\hline\end{array}$$
If Jamie consumes 3 muffins,Jamie will consume ____ doughnuts,and have ____ marginal utility per dollar from doughnuts.

A) 2;20
B) 4;15
C) 2;30
D) 4;10

Question 45

Assume that Dusty has $30 in income,the price of a loaf of bread is $1.50,and the price of a jar of peanut butter is $3.
Suppose that at the original income of $30 the price of a loaf of bread increased to $3.00 and the price of a jar of peanut butter decreased to $2.Dusty can buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter.

A) 10,15
B) 15,10
C) 20,15
D) 15,20

Question 46

Assume that Dusty has $30 in income,the price of a loaf of bread is $1.50,and the price of a jar of peanut butter is $3.
If Dusty's income rises to $45,Dusty can now buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter.

A) 5;25
B) 10;40
C) 15;30
D) 30;15

Question 47

Casey earns $150 a week and consumes only fish and shrimp.The price of fish is $3 a pound and the price of shrimp is $5 a pound.
Casey can buy a maximum of _____ pounds of fish or a maximum of _____ pounds of shrimp.

A) 30,50
B) 50,30
C) 15,30
D) 30,15

Question 48

Jess gets half as much marginal utility from an additional bagel than from an additional muffin.If the price of muffin is $2.00/each,then Jess is maximizing utility if the price of a bagel is

A) $1.00
B) $1.50
C) $2.00
D) $4.00

Question 49

Assume that Dusty has $30 in income,the price of a loaf of bread is $1.50,and the price of a jar of peanut butter is $3.
Suppose that at the original income of $30 the price of a loaf of bread decreased to $1.00 and the price of a jar of peanut butter increased to $5.Dusty can buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter.

A) 20,5
B) 5,20
C) 30,6
D) 6,30

Question 50

Angel's marginal utility for playing pool is 10 after playing 5 games.Angel's marginal utility for bowling is 6 after 3 games.If both pool and bowling cost $1 a game,to maximize his utility Angel should

A) bowl more and play pool less
B) just go home
C) bowl only
D) bowl less and play pool more

Question 51

According to the law of diminishing marginal utility,

A) if you consume less of something,your total utility from that consumption increases.
B) if you consume less of something,your marginal utility from that consumption increases.
C) you should never consume any more of something after marginal utility has begun to diminish.
D) if total utility is increasing as you consumer more,then marginal utility must be increasing as well.

Question 52

Assume that Dusty has $30 in income,the price of a loaf of bread is $1.50,and the price of a jar of peanut butter is $3.
If Dusty's income rises to $45,the rational spending rule would predict that Dusty will buy

A) more bread and less peanut butter.
B) more bread and more peanut butter.
C) less bread and more peanut butter.
D) more bread and the same amount of peanut butter.

Question 53

Casey earns $150 a week and consumes only fish and shrimp.The price of fish is $3 a pound and the price of shrimp is $5 a pound.
If Casey's income falls to $120,the rational spending rule would predict Casey would buy

A) more fish and less shrimp.
B) more fish and more shrimp.
C) less fish and more shrimp.
D) less fish and less shrimp.

Question 54

Assume that Dusty has $30 in income,the price of a loaf of bread is $1.50,and the price of a jar of peanut butter is $3.
Dusty can buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter.

A) 20;10
B) 15;15
C) 10;20
D) 10;5

Question 55

Assume that Dusty has $30 in income,the price of a loaf of bread is $1.50,and the price of a jar of peanut butter is $3.
If Dusty's income falls to $20,the rational spending rule would predict that Dusty will buy

A) more bread and less peanut butter.
B) less bread and more peanut butter.
C) less bread and less peanut butter.
D) more bread and the same amount of peanut butter.

Question 56

Evan gets twice as much marginal utility from an additional bottle of water than from an additional bottle of soda.If the price of soda is $1.00 per bottle,then Evan is maximizing utility if the price of a bottle of water is

A) $1.00
B) $1.50
C) $2.00
D) $.50

Question 57

Casey earns $150 a week and consumes only fish and shrimp.The price of fish is $3 a pound and the price of shrimp is $5 a pound.
If Casey's income rises to $210 Casey could buy a maximum of _____ pounds of fish or a maximum of _____ pounds of shrimp.

A) 30,24
B) 24,30
C) 70,42
D) 42,70

Question 58

Jamie's marginal utility for consuming muffins and doughnuts in utils are as follows.Jamie spends $4 for breakfast every morning,the price per muffin is $1.00 and the price per doughnut is $0.50. $$\begin{array} { | c | c | c | c | } \hline \text { Muffin/Day } & \begin{array} { c } \text { Marginal Utility } \\\text { per Muffin }\end{array} & \text { Doughnut/Day } & \begin{array} { c } \text { Marginal Utility } \\\text { per Doughnut }\end{array} \\\hline 1 & 45 & 2 & 20 \\\hline 2 & 30 & 4 & 15 \\\hline 3 & 25 & 6 & 10 \\\hline\end{array}$$
If Jamie consumes 3 muffins,what is Jamie's marginal utility per dollar from muffins?

A) 6.25
B) 7.5
C) 25
D) 15

Question 59

At his current consumption level Cameron get 3 times more marginal utility from an additional game of pinball than from an additional game of ping pong.If the price of a ping pong game is $0.50,than he is maximizing utility if the price of a pinball game is

A) $1.00
B) $1.50
C) $2.00
D) $3.00

Question 60

Casey earns $150 a week and consumes only fish and shrimp.The price of fish is $3 a pound and the price of shrimp is $5 a pound.
The price of fish decreased to $1.50 a pound and the price of shrimp remains $5 a pound.At Casey's original income of $150 per week Casey can buy a maximum of _____ pounds fish or a maximum of _____ pounds shrimp.

A) 10,30
B) 30,50
C) 30,100
D) 100,30

Question 61

Taylor's marginal utility from watching movies and marginal utility from eating out each month in utils are represented in the following table.Taylor spends exactly $100 every month on these two forms of entertainment,and the price per movie is $10 and price per dinner is $20. $$\begin{array} { | l | l | l | l | } \hline \text { Movies/month } & \begin{array} { l } \text { Marginal Utility } \\\text { from Movies }\end{array} & \begin{array} { l } \text { Eating } \\\text { Out/month }\end{array} & \begin{array} { l } \text { Marginal Utility } \\\text { from Eating Out }\end{array} \\\hline 1 & 60 & 1 & 150 \\\hline 2 & 50 & 2 & 140 \\\hline 3 & 20 & 3 & 120 \\\hline 4 & 5 & 4 & 100 \\\hline\end{array}$$
If Taylor eats out 3 times a month,Taylor will watch _____ movies,and have marginal utility per dollar of _____ from eating out and _______ from going to the movies.

A) 4;6;2
B) 3;2;6
C) 4;6;1/2
D) 3;4;4

Question 62

Taylor's marginal utility from watching movies and marginal utility from eating out each month in utils are represented in the following table.Taylor spends exactly $100 every month on these two forms of entertainment,and the price per movie is $10 and price per dinner is $20. $$\begin{array} { | l | l | l | l | } \hline \text { Movies/month } & \begin{array} { l } \text { Marginal Utility } \\\text { from Movies }\end{array} & \begin{array} { l } \text { Eating } \\\text { Out/month }\end{array} & \begin{array} { l } \text { Marginal Utility } \\\text { from Eating Out }\end{array} \\\hline 1 & 60 & 1 & 150 \\\hline 2 & 50 & 2 & 140 \\\hline 3 & 20 & 3 & 120 \\\hline 4 & 5 & 4 & 100 \\\hline\end{array}$$
Taylor's optimal combination of movies and eating out is

A) 3 movies and 3 dinners.
B) 4 movies and 3 dinners.
C) 3 movies and 4 dinners.
D) 2 movies and 4 dinners.

Question 63

According to the rational spending rule,for a rational consumer the relationship between the price of an item and the utility gained by consuming that item is

A) the lower the price,the greater the total utility.
B) the lower the price,the greater the marginal utility.
C) the lower the price,the lower the marginal utility.
D) the higher the price,the lower the marginal utility.

Question 64

If the marginal utility per dollar is not the same for each good,the consumer could _____ her utility by spending ______ on goods for which the marginal utility per dollar is lower.

A) decrease,less
B) increase,more
C) maximize,more
D) increase,less

Question 65

Jamie's marginal utility for consuming muffins and doughnuts in utils are as follows.Jamie spends $4 for breakfast every morning,the price per muffin is $1.00 and the price per doughnut is $0.50. $$\begin{array} { | c | c | c | c | } \hline \text { Muffin/Day } & \begin{array} { c } \text { Marginal Utility } \\\text { per Muffin }\end{array} & \text { Doughnut/Day } & \begin{array} { c } \text { Marginal Utility } \\\text { per Doughnut }\end{array} \\\hline 1 & 45 & 2 & 20 \\\hline 2 & 30 & 4 & 15 \\\hline 3 & 25 & 6 & 10 \\\hline\end{array}$$
What is Jamie's optimal combination of muffins and doughnuts?

A) 1 muffin,6 doughnuts
B) 2 muffins,4 doughnuts
C) 3 muffins,2 doughnuts
D) 4 muffins,zero doughnuts

Question 66

For two goods,A and B,the rational spending rule is expressed as

A) MU_A = MU_B.
B) MU_A * MU_B = P_A * P_B.
C) (MU_A/P_B)= (MU_B/P_A).
D) (MU_A/P_A)= (MU_B/P_B).

Question 67

When the price of a good rises,the ratio of the marginal utility of that good divided by its price _______ and as a result,consumers purchase _______ of that good.

A) rises;more
B) falls;more
C) rises;less
D) falls;less

Question 68

Suppose you want to make rational dining choices at an all-you-can-eat buffet.How do you apply the rational spending rule?

A) you can't because the fixed price is a sunk cost that should not be taken into consideration.
B) you can't because once you have paid the sunk cost the price of each serving is zero,and since you can't divide by zero you cannot apply the rational choice formula.
C) you should continue to eat every item until your marginal utility from consuming each item equals the fixed price of the buffet.
D) you should continue to eat until your marginal utility from consuming each item exactly equals zero plus your non-monetary costs of staying at the buffet.

Question 69

The rational spending rule is derived from the consumer's efforts to

A) maximize utility.
B) minimize expenditures.
C) obtain the lowest possible price.
D) maximize the number of units purchased.

Question 70

Assume the consumer is correctly applying the rational spending rule for goods jeans and t-shirts.If the price of jeans falls,purchases of jeans and t-shirts rise because

A) the marginal utility of jeans increases.
B) the marginal utility of t-shirts increases.
C) the marginal utility of jeans decreases.
D) combinations of jeans and t-shirts that could not be considered before now become available.

Question 71

Curly loves pizza,and often has supper at an all-you-can eat pizza buffet.Curly eats more pizza there than at the Buy-By-the-Slice pizza stand in the student union because

A) Curly is irrational and has no will-power.
B) Curly does not experience diminishing marginal utility for pizza.
C) Curly is setting his Marginal Utility for pizza per dollar equal at each place.
D) Curly is setting his Marginal Utility for pizza equal at each place.

Question 72

For two goods,coffee and scones,MU(coffee)/P(coffee)= 4 and MU(scones)/P(scones)= 3.The consumer should

A) purchase less coffee and more scones.
B) purchase more coffee and fewer scones.
C) purchase less coffee and fewer scones.
D) purchase more coffee and more scones.

Question 73

For the two good case,the rational spending rule requires that

A) total expenditures on the two goods be equal.
B) total utility from the two good be equal.
C) average utility from the two goods be equal.
D) the ratio of marginal utility to price be equal for the two goods.

Question 74

Suppose you are a government analyst and you think beans are particularly nourishing.You decide to subsidize beans in order to encourage people to eat more of them.(By subsidizing an item,consumers pay a lower price. )After you successfully lower bean prices,you notice that consumption of beans has fallen.What went wrong?

A) The substitution effect caused people to substitute ramen noodles and rice for beans.
B) The income effect caused people's real income to fall so they could no longer afford as much food.
C) The income effect caused people's real income to rise so they purchased less of what they considered to be inferior goods.
D) Demand for beans is price inelastic.

Question 75

Purchasing goods such that the ratio of marginal utility to price is equal across all goods results in the

A) greatest total utility.
B) lowest expenditure on goods.
C) greatest marginal utility for the lower.
D) expenditures for all goods being the same.

Question 76

You are trying to decide how to spend your last lunch dollar.You should use that dollar to buy more of

A) the item that costs the least.
B) the item that you have already consumed the most of.
C) the item that will give you the greatest marginal utility per dollar spent.
D) the item from which you have gained the greatest total utility already.

Question 77

Taylor's marginal utility from watching movies and marginal utility from eating out each month in utils are represented in the following table.Taylor spends exactly $100 every month on these two forms of entertainment,and the price per movie is $10 and price per dinner is $20. $$\begin{array} { | l | l | l | l | } \hline \text { Movies/month } & \begin{array} { l } \text { Marginal Utility } \\\text { from Movies }\end{array} & \begin{array} { l } \text { Eating } \\\text { Out/month }\end{array} & \begin{array} { l } \text { Marginal Utility } \\\text { from Eating Out }\end{array} \\\hline 1 & 60 & 1 & 150 \\\hline 2 & 50 & 2 & 140 \\\hline 3 & 20 & 3 & 120 \\\hline 4 & 5 & 4 & 100 \\\hline\end{array}$$
If Taylor watches 2 movies a month,Taylor will eat out _____ times per month,and have marginal utility per dollar of _____ from movies and _______ from eating out.

A) 3;5;6
B) 2;5;7
C) 4;5;5
D) 4;4;6

Question 78

Pat applies the rational spending rule and purchases 5 units of potato chips and 3 units of lemonade Suppose the price of lemonade increases.One can predict that Pat will

A) cease purchasing lemonade.
B) reduce purchases of lemonade and increase purchases of potato chips.
C) continue to make the same purchases.
D) reduce purchases of potato chips.

Question 79

When the price of a good falls,the ratio of the marginal utility of that good divided by its price _______ and as a result,consumers purchase _______ of that good.

A) rises;more
B) falls;more
C) rises;less
D) falls;less

Question 80

Suppose you want to equalize your marginal utility per dollar across all the goods that you consume.If your marginal utility per dollar is higher for one of those items than for any others,you should

A) consume less of it to reduce your marginal utility.
B) consume more of it to reduce your marginal utility.
C) consume more of the other goods to equalize your marginal utilities per dollar.
D) consume more of all goods in equal proportions.