Chapter 6: Behind Demand

Assuming a good is a normal good, a decrease in price will lead to a substitution effect that does what? A Along with the income effect, increases quantity B Increases quantity while the income effect decreases quantity C Decreases quantity while the income effect increases quantity D Along with the income effect, decreases quantity

A

If David buys more coffee and less ice cream, the ______________ of coffee will ______________ , and the ___ of ice cream will ______________. A Marginal utility; fall; marginal utiity; rise B Marginal utility; rise; marginal utility; fall C Total utility; fall; marginal utility; rise D Marginal utility; rise; total utility; rise

A

If the price of a hot dog is $2 and your willingness to pay is $3, then your consumer surplus is _____. A $1 B $2 C $3 D $5

A

A consumer is maximizing her satisfaction and currently consuming three goods. If her tastes change so that the marginal utility she gains from movies increases, what will happen to her consumption of the other two goods - hamburgers and football games? A Her consumption will increase because the ratio of their marginal utilities to their prices is now greater than the ratio of the marginal utility of movies to the price of a movie. B Her consumption will increase because the ratio of their marginal utilities to their prices is now less than the ratio of the marginal utility of movies to the price of a movie. C Her consumption will decrease because the ratio of their marginal utilities to their prices is now less than the ratio of the marginal utility of movies to the price of a movie. D Her consumption will decrease because the ratio of their marginal utilities to their prices is now greater than the ratio of the marginal utility of movies to the price of a movie

C

If a good is provided for free, it is likely to have a marginal utility that is relatively ______________ and be ______________ the marginal utility that could be gained from producing some other good. A High; less than B High; greater than C Low; less than D Low; greater than E Unknown; equal to

C

If the price of a good changes, why does an income effect exist? A You need income to purchase the good B Diminishing marginal utility exists C The price change causes a change in real income D People prefer larger incomes

C

The marginal utility from drinking one more glass of water is likely to be ______________ the marginal utility from going to one more movie. A The same as B Greater than C Less than D Declining until it is just greater than

C

Assume Anna is consuming two goods, movies and books, and at her current level of consumption, the marginal utility of the last movie is 10 and the marginal utility of the last book is 5. The price of a movie is $12 and the price of a book is $4. In order to maximum her utility, what should Anna do? A Increase her consumption of both movies and books B Decrease her consumption of both movies and books C Do nothing—she's maximizing her utility D Decrease her consumption of movies and increase her consumption of books E Increase her consumption of movies and decrease her consumption of books

D

Assuming a fixed budget, when the price of one good increases, consumers will adjust their consumption patterns in a way that the marginal utilities of all goods will _________. A Increase B Decrease C Not change D Decrease, but the marginal utility of the higher priced good will increase. E Increase, but the marginal utility of the higher priced good will decrease.

D

Grace likes eating pizza and going to the movies. If she has $120 to spend in a month, and pizza and movies each cost $10, she decides to eat 5 pizzas and see 7 movies. If the price of movies increases to $12 what is likely to happen? A Both the substitution and income effects would predict that she will consume fewer of pizzas and movies B Both the substitution and income effects would predict that she will consume more of pizzas and movies C The substitution effect would predict that she consumes fewer pizzas and more movies; and the income effect would predict that she would consume more of both D The substitution effect would predict that she consumes more pizzas and less movies; the income effect would predict that she would consume fewer of both

D

Suppose that the price of a pizza is $10 and the price of a video game is $30. Currently, Aaron is consuming such that the ratio of his marginal utility of pizza to marginal utility of video games is ¼. If he wants to maximize his utility, what should he do? A Buy more pizzas and fewer video games B Buy more pizzas and more video games C Buy fewer pizzas and video games D Buy fewer pizzas and more video games

D

Fred just ate a hamburger and received total utility of 15 from consuming it. If he eats another one, which of the following will be true? A His total utility will likely stay at 15 B His total utility will likely decrease C His total utility will likely increase

c