ECON ch 5

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. In Figure 19.3, given an income of $30 and a price for good Y of $1, which of the following two points represent optimal consumption?

A when the price of X is $3 and C when the price of X is $1.

Most goods can yield

Both positive and negative marginal utility.

Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips. The marginal utility of the last bottle of soft drink purchased is 12 utils, and each bottle costs $1.20. The marginal utility of the last bag of chips purchased is 8 utils, and each bag costs $1. In order to maximize his utility, Caesar should

Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks.

Airline companies engage in price discrimination by

Charging business customers higher prices than vacation travelers.

If Josh's income increases, then

His entire budget constraint will shift away from the origin.

Price discrimination

Is a way for sellers to exact the maximum willingness to pay from buyers.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. Point D on the graph

Is affordable but does not yield the highest utility possible.

Assume Amanda always maximizes her total utility given her budget constraint. Every morning for breakfast she has two eggs and three sausages. If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each, what can we say about the marginal utility of the last sausage if the price of each sausage is $2?

It must be equal to 20 utils.

The law of diminishing marginal utility suggests that

People are willing to buy additional quantities of a good only if its price falls.

Any point on the budget constraint

Represent a combination of two goods that are affordable.

The total consumer surplus is shown on a graph as

The area under the demand curve and above the actual price.

The marginal utility for a good is computed as

The change in total utility divided by the change in quantity.

If advertising is successful,

The demand curve shifts to the right and becomes steeper.

When sellers price discriminate,

They are attempting to charge a price that is the maximum price each individual is willing to pay.

If marginal utility is negative, then

Total utility will decrease with additional consumption.

Which of the following is not a determinant of demand?

the cost of the factor inputs