Chapter 6 Assignment & Exam

Economic theory offers ____ about the full range of possible events and responses, which can prevent ____ about how households will respond to changes in prices or incomes

A systematic way of thinking; misguided conclusions

In the U.S., the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. Evidence suggests that, in the economy as a whole, increased savings in these retirement accounts:

Are being offset by negative savings or less savings in other kinds of accounts

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

The most common pattern for marginal utility is ____

Diminishing marginal utility

The term ____ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit

Diminishing marginal utility

Which of the following is most likely to cause variation in American household spending patterns?

Each of the above will cause a variation

The term ____ describes a situation where a ____ causes a reduction in the buying power of income, even though actual income has not changed

Income effect; higher price

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

Individuals choose based on their preferences

The ____ budget constraint shows the trade off between present and future consumption

Intertemporal choice

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:

Is maximizing utility

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

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

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

The government distributes food stamps that can only be used to acquire food to low-income families. The budget line graph will show food on the horizontal axis and everything else on the vertical axis. After receiving food stamps, Ted's family is able to consume the same amount of food. The new consumption point for Ted's family will be:

On the new budget line, directly above the old consumption point

Jen and Jay are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

One-third

The marginal utility of two goods changes ____

With the quantities consumed

As a general rule, utility-maximizing choices between consumption goods occurs where the:

Price ratio and marginal utilities ratio of two goods is equal

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,

Total utility rises, but marginal utility falls

Josh's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Josh knows that 2 pizzas and 4 burgers will give him a utility if 8. What is Josh's utility-maximizing point?

2 pizzas; 4 burgers

Even with wage increases, the supply curve of labor is most often inelastic for which of the following?

Full-time workers

The term ____ refers to the additional utility provided by one additional unit of consumption

Marginal utility

The step-by-step process of finding the choice within highest total utility involves a comparison of the:

Marginal utility gained and lost from different choices along the budget constraint

A decrease in consumer preference for a product, other things being equal, will cause:

Market demand to shift to the left