Chapter 6

Larry attends college and works part-time job in a grocery store. He can work up to 30 hours each week at his job, which pays $9 per hour. The table below shows his utility from different levels of leisure and income. Larry's utility maximizing choice is to work for:

20

Rick eats only french fries and burgers at his office cafeteria. His weekly lunch budget is $48. Each burger costs $6 and each order of fries costs $3. When deciding how much of each good to buy, Rick knows that 2 burgers and 4 orders of french fries will give him a utility of 8. At his utility-maximizing point, Rick's utility is:

32

Jed's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Jed knows that 2 pizzas and 4 burgers will give him a utility of 8. At his utility-maximizing point, Jed's utility is:

8

Refer to the budget line shown in the diagram above. At point U, __________.

P1/P2 = MU1/MU2

Refer to the diagram above. Which of the following is a true statement?

backward-bending supply curves for labor are not typical in the short run

An inferior good is a product:

for which demand decreases as income increases.

The _________________ budget constraint shows the tradeoff between present and future consumption.

intertemporal choice

Garth inherited $25,000. He needs to decide now much to spend now and how much to save for later. If he saves the money, then he can earn 15% interest on the total before he spends it. Using the information about his marginal utility in the table below, Garth should:

spend nothing now and $28,750 in the future

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

the marginal utility per dollar is the same for both goods

During a severe recession, the government issued food stamps that could only be used to acquire food to a greater number of families. The budget line graph shows food on the horizontal axis and everything else on the vertical axis. The government expects that issuing the food stamps will cause each family's budget constraint line to:

shift to the right.