Chapter 5 Quiz Microeconomics

(Table) The table shows Ms. Gardenia's utility schedule for the consumption of raspberry popsicles. What is the marginal utility of the fourth popsicle?

A. 2

Which event would cause the budget line to shift outward?

A. Income increased.

According to the law of diminishing marginal utility:

A. at some point, the rate at which our total satisfaction increases with the consumption of each additional unit will begin to decline.

(Figure: Bowling and Chinese Buffet) If the price of a Chinese buffet increases, the budget line will rotate:

B. in and become steeper.

The slope of the budget line is:

B. negative, since to purchase more of one good means giving up some of the other good.

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by:

C. 50%.

Economists assume that consumers attempt to maximize:

C. total utility.

Suppose the MU/P for bottled water is greater than the MU/P for bags of chips. To maximize total utility, the consumer should buy:

D. more bottled water and fewer bags of chips.

If Casey receives 50 utils from his first burrito, 13 from the second burrito, and 8 from the third burrito, then:

his total utility is 71 utils.

The key assumption that accompanies the use of numbers for measuring utility is that:

individuals choose based on their preferences.

Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future.

intertemporal choice

(Figure: Bowling and Chinese Buffet) The price of a Chinese buffet dinner is $10 and an evening of bowling costs $20. Bill has $100/month to spend on these two goods. Assuming Bill is a utility-maximizing consumer, if Bill wants to eat at the Chinese buffet six times this month, he can only go bowling _____ time(s) this month.

two

The theoretical model of the intertemporal budget constraint for the U.S. economy as a whole suggests that the most common pattern seems to be that:

the quantity of savings doesn't adjust much to changes in the rate of return.

The ________________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.

substitution effect