ECON 1311 - EXAM 2 (assignment 6)

An indifference curve that is tangent to the budget constraint

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the point on: - the indifference curve that intersects the horizontal axis - the indifference curve that intersects the vertical axis - an indifference curve that is tangent to the budget constraint - the budget constraint where it intersects one of the axes

Declines

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility: - rises - is constant - declines - fluctuates

Work in the same direction to decrease quantity demanded

Consider a downward-sloping demand curve. When the price of a normal good increases, the income and substitution effects: - work in the same direction to increase quantity demanded - work in the same direction to decrease quantity demanded - work in opposite directions and quantity demanded increases - work in opposite directions and quantity demanded decreases

They are limited by a budget constraint

Consumers have to make tradeoffs in deciding what to consume because: - not all goods give them the same amount of satisfaction - the price of goods vary - they are limited by a budget constraint - there are not enough of all goods produced

Make themselves as well off as possible

Economists assume that the goal of consumers is to: - do as little work as possible to survive - make themselves as well off as possible - spend all their income - consume as much as possible

The income effect would have to be larger than the substitution effect

For a demand curve to be upward sloping, the good would have to be an inferior good, and: - the income effect would have to be larger than the substitution effect - the income effect would have to be smaller than the substitution effect - the income effect would have to be equal to the substitution effect - the income effect and the substitution effect would have to be nonexistent

Giffen goods

Goods with upward sloping demand curves are referred to as: - Marshall goods - Giffen goods - substitute goods - luxury goods

MU/P has increased and Ewan should buy more of this good

If Ewan is consuming his utility maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do? - MU/P has increased and Ewan should buy more of this good - MU/P has increased and Ewan should buy less of this good - MU/P has decreased and Ewan should buy more of this good - MU/P has decreased and Ewan should buy less of this good

Wants to consume more angle socks and fewer bandanas

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she: - is maximizing total utility and does not want to change her consumption of ankle socks or bandanas - wants to consume more ankle socks and fewer bandanas - wants to consume more bandanas and fewer ankle socks - wants to consume less of both ankle sock and bandanas

The marginal utility per dollar spent on all goods will be equal

If a consumer always buys goods rationally, then: - the total utilities of the different goods consumed will be equal - the average utilities of the different goods consumed will be equal - the marginal utility per dollar spent on all goods will be equal - the marginal utility of the different goods consumed will be equal

5 utils

If a consumer receives 20 units of utility from consuming two candy​ bars, and 25 units of utility from consuming three candy​ bars, the marginal utility of the third candy bar is: - 25 utils - 20 utils - 5 utils - unknown as more information is needed to determine the answer

57 utils

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is: - 57 utils - 35 utils - 15 utils - unknown as more information is needed to determine the answer

Do not intersect

If preferences are transitive, indifference curves: - intersect at the equilibrium consumption bundle - intersect at the optimum consumption bundle - intersect where the marginal rate of substitution for each indifference curve is equal - do not intersect

Her total utility from eating chicken wings has fallen

If the marginal utility Ida Mae receives from eating chicken wings is negative then: - her total utility from eating chicken wings has fallen - her total utility from eating chicken wings is negative as well - Ida Mae definitely does not like chicken wings - her total utility has risen, but by less from the last chicken wing than from the next to last chicken wing

The law of diminishing marginal utility

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of: - the law of demand - the law of supply - the law of increasing marginal opportunity cost - the law of diminishing marginal utility

You have maximized your total utility from consuming candy

If, when you consume another piece of candy, your marginal utility is zero, then: - you want more candy - you have maximized your total utility from consuming candy - you have not yet reached the point of diminishing marginal utility - you should consume less candy

Positive, negative, or zero

Marginal utility can be: - negative - zero - positive - positive, negative, or zero

Extra satisfaction received from consuming one more unit of a product

Marginal utility is the: - total satisfaction received from consuming a given number of units of a product - average satisfaction received from consuming a product - extra satisfaction received from consuming one more unit of a product - satisfaction achieved when a consumer has had enough of a product

The marginal utility per dollar spent on the less expensive car is higher than that spent of luxury cars

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because: - car buyers are irrational - the total utility of less expensive cars is greater than that of luxury cars - the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars - luxury cars cost a lot more than non-luxury cars

Laurel enjoys romantic comedies more than Hardy

Refer to Figure 10-4. Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences? - They have identical movie preferences - Laurel enjoys romantic comedies more than Hardy - Laurel enjoys science fiction movies more than Hardy - The diagrams do not provide any information about relative preferences

1/2 of a cookie

Refer to Figure 10-5. What is the marginal rate of substitution for one bar of chocolate between *g* and *h*? - 1/3 of a cookie - 1/2 of a cookie - 2 cookies - 3 cookies

Budget constraint moves inward toward the origin on the pizza axis while the hamburger intercept remains the same

Refer to Figure 10-6. Suppose the price of pizza increases while the price of hamburger remains constant. Then, the consumer's: - indifference curve becomes more concave away from the origin - indifference curve becomes straighter - budget constraint moves inward toward the origin on the pizza axis while the hamburger intercept remains the same - budget constraint moves outward away from the origin on the pizza axis while the hamburger intercept remains the same

s, v, t, and u

Refer to Figure 10-6. The consumer can afford consumption bundles: - r, s, t, and u - r, s, v, and u - s, v, and u only - s, v, t, and u

Panel B

Refer to Figure 10-7. A change in income is shown in: - Panel A - Panel B - Panel C - none of the above panels

Panel C

Refer to Figure 10-7. A change in the price of candy only is shown in: - Panel A - Panel B - Panel C - none of the above panels

The movement from d to e in Panel A

Refer to Figure 10-7. Which diagram demonstrates an increase in total utility following a decrease in the price of popcorn? - the movement from d to e in Panel A - the movement from f to g in Panel B - the movement from h to k in Panel C - none of the above

D to C

Refer to Figure 10-8. Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged. The income effect of this price change is represented by the movement from: - A to B - B to C - D to B - D to C

A to D

Refer to Figure 10-8. Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged. The substitution effect of this price change is represented by the movement from: - A to B - A to C - A to D - D to B

Bundle C

Refer to Figure 10-8. Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged. What is her new optimal bundle? - still remains at bundle A - bundle B - bundle C - bundle D

6 glasses

Refer to Table 10-1. If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume? - 4 glasses - 5 glasses - 6 glasses - he would consume an infinite amount of bubble tea if it is free

3 pita wraps and 4 bubble teas

Refer to Table 10-1. What is Keegan's optimal consumption bundle? - 3 pita wraps and 3 bubble teas - 3 pita wraps and 4 bubble teas - 4 pita wraps and 2 bubble teas - 5 pita wraps and 0 bubble teas

Both soup and sandwiches are normal goods

Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23, her utility maximizing bundle changed. Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches? - Soup is an inferior good and sandwiches are a normal good - Soup is a normal good and sandwiches are an inferior good - Both soup and sandwiches are normal goods - Both soup and sandwiches are inferior goods

3 cups of soup and 4 sandwiches

Refer to Table 10-2. If Keira maximizes her utility, how many units of each good should she buy? - 1 cup of soup and 5 sandwiches - 3 cups of soup and 4 sandwiches - 6 cups of soup and 2 sandwiches - 4 cups of soup and 3.5 sandwiches

4 cups of soup and 5 sandwiches

Refer to Table 10-2. Suppose Keira's income increases from $18 to $23 but prices have not changed. What is her utility maximizing bundle now? - 6 cups of soup and 5 sandwiches - 4 cups of soup and 5 sandwiches - 5 cups of soup and 4 sandwiches - 5 cups of soup and 5 sandwiches

6 utils

Refer to Table 10-2. What is Keira's marginal utility per dollar spent on the third cup of soap? - 72 utils - 36 utils - 12 utils - 6 utils

We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is

Refer to Table 10-3. The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda. The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1. Use this information to select the correct statement: - We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is - To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda - We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity - If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda

We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility

Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches. Which of the following statements is false? - The price of steak and cheese sandwiches is $4. The price of grilled chicken sandwiches is $2 - If Mabel maximizes her utility she will buy three grilled chicken sandwiches - If Mabel maximizes her utility she will buy two steak and cheese sandwiches - We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility

If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich

Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches. Which of the following statements is true? - If Mabel maximizes her utility she will buy three steak and cheese sandwiches and two grilled chicken sandwiches - If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich - Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches - To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches

5 burgers

Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will he consume? - 7 burgers - 6 burgers - 5 burgers - 3 burgers

2 burgers and 3 cans of Pepsi

Refer to Table 10-6. What is Jay's optimal consumption bundle? - 1 burger and 2 cans of Pepsi - 2 burgers and 3 cans of Pepsi - 3 burgers and 1 can of Pepsi - 3 burgers and 2 cans of Pepsi

80 units of utility

Suppose Joe is maximizing total utility within his budget constraint. If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20, then, using the rule of equal marginal utility per dollar spent, the extra satisfaction received from the last shirt must be: - 2,000 units of utility - 500 units of utility - 100 units of utility - 80 units of utility

The price of good on the horizontal axis divided by the price of the good on the vertical axis

The absolute value of the slope of the budget constraint is equal to: - the marginal rate of substitution between the two goods in question - the price of good on the vertical axis divided by the price of the good on the horizontal axis - the price of good on the horizontal axis divided by the price of the good on the vertical axis - the quantity of the good on the vertical axis divided by the quantity of the good on the horizontal axis

Consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy

The economic model of consumer behavior predicts that - consumers will try to earn as much income as they can over their lifetimes - consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy - consumers will try to accumulate as many goods and services as they can before they die - consumers divide their time between consumption and leisure activities in order to maximize social welfare

Refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant

The income effect of an increase in the price of salmon: - is the change in the demand for salmon when income increases - refers to the relative price effect—salmon is more expensive compared to other types of fish—which causes the consumer to buy less salmon - refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant - is the change in the demand for other types of fish, say trout, that results from a decrease in purchasing power

Measures the marginal rate of substitution between the two goods in question

The slope of an indifference curve: - is calculated by dividing the price of good on the vertical axis by price of the good on the horizontal axis - measures total utility - measures the marginal rate of substitution between the two goods in question - is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis

The fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran

The substitution effect of an increase in the price of Raisin Bran refers to: - the decrease in the demand for Raisin Bran when its price rises - the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left - the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant - the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran

Subjective and difficult to measure

Utility is: - easily measured in units called utils - subjective and difficult to measure - the consumption of a quasi-public good like electricity or natural gas - the production of a quasi-public good like electricity or natural gas

By adding horizontally the individual demand curves of each gold earring consumer

We can derive the market demand curve for gold earrings: - only if the tastes of all gold earring consumers are similar - by adding horizontally the individual demand curves of each gold earring consumer - by adding vertically the quantity demanded of each gold earring consumed at each price - by adding the prices each gold earring consumer is willing to pay for each quantity

It is a curve that shows the combinations of consumption bundles that give the consumer the same utility

What is an indifference curve? - It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods - It is a curve that shows the combinations of consumption bundles that give the consumer the same utility - It is a curve that ranks a consumer's preference for various consumption bundles - It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles

The rate at which the consumer is willing to trade one god for another without any loss in utility

What is the marginal rate of substitution? - the price ratio - the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market - the rate at which the consumer is willing to trade one good for another so that she increases her utility - the rate at which the consumer is willing to trade one good for another without any loss in utility