ECON- Chapter 10

The assumption that a rational consumer seeks to maximize his or her utility implies that utility is measurable according to some objective scale.

False

Assume that Maia spends all of her income on halvah (H) and pomegranates (P) and is purchasing the optimal consumption bundle. If MUH / MUP = 3 and the price of halvah is $12, then the price of pomegranates is:

$4

Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of paper clips rises. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of staples will _____, and the marginal utility of paper clips will _____.

fall; rise

(Table: The Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. The marginal utility for the sixth roll is:

-5

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The slope of Faruq's budget line is equal to:

-5

The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $5 to spend on both goods. The maximum number of boxes of popcorn that you can purchase is:

10

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The horizontal intercept for Faruq's budget line is _____ tacos.

10

The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $10 to spend. You decide to purchase 8 bags of peanuts. The maximum number of boxes of popcorn that you can purchase is:

16

(Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. If he buys 3 jars of honey and 2 gallons of milk, his total utility will be:

180

(Table: Marginal Utility per Dollar II) Look at the table Marginal Utility per Dollar II. If Manuel has $18 to spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and _____ pounds of potatoes.

1; 6

(Table: Marginal Utility per Dollar of M&Ms) Look at the table Marginal Utility per Dollar of M&Ms. The price of M&Ms is $2 per bag. The marginal utility per dollar of the second bag of M&Ms is:

2

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively. The total utility when two units are consumed is:

350

(Scenario: Tom's Budget Constraint) Read the scenario Tom's Budget Constraint. If we measure music downloads on the horizontal axis and movies on the vertical axis, the horizontal intercept of Tom's budget line is:

50

Abdul spends all of his income on food (F) and shelter (S). His budget line is given by the equation 5F + 20S = 100. Which of the following consumption bundles is part of his consumption possibilities?

8 units of F and 3 units of S

(Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. If he spends all of his income on milk, the most he can buy is _____ gallons, and his total utility will be _____.

8; 144

Which of the following statements is FALSE?

A Giffen good must be such that the substitution effect outweighs the income effect for an inferior good.

(Figure and Table: The Budget Line) Look at the figure and table The Budget Line. _____ in the price of clams would rotate the budget line along the _____ axis _____ the origin.

A decrease; horizontal; away from

(Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which of the charts shows what will happen to her budget line if her income decreases to $10?

C

Suppose Ivy buys only two things, books and coffee, and receives the same satisfaction from the last book bought as she did from the last coffee bought. Books cost twice as much as coffee, and she has spent all of her money. Diminishing marginal utility applies to both goods. If she is trying to maximize her utility:

Ivy should buy more coffee and fewer books

Suzy knows she has maximized her utility because she is on her budget constraint and:

MUCameras / PCameras = MUCoffee / PCoffee

Which of the following statements is TRUE?

Utility maximization requires seeking the most utility from a given budget

Assume that as the price of cauliflower falls, the income effect causes consumers to buy fewer heads of cauliflower. We can conclude that cauliflower is:

an inferior good

An increase in a consumer's income will do all of the following EXCEPT:

change the slope of the budget line

Sally devotes all of her income to the consumption of apples and Reese's Peanut Butter Cups. At her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8. Assume that diminishing marginal utility applies to both apples and Reese's Peanut Butter Cups. Suppose the price of an apple is $0.20 and the price of a Reese's Peanut Butter Cup is $0.25. To maximize her total utility, assuming that the goods are divisible, she would:

consume more Reese's Peanut Butter Cups and fewer apples

(Table: Denise's Consumption of Coffee and Gasoline) Look at the table Denise's Consumption of Coffee and Gasoline. Suppose Denise initially chooses consumption bundle A. She can increase her total utility by:

consuming more gasoline and less coffee

Joe's budget line reflects the _____ available to Joe if he spends _____ of his income.

consumption bundles; all

John consumes pizza and pasta, both normal goods. He is maximizing his utility in consumption of both goods. The price of pasta rises. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of pizza will _____, and the marginal utility of pasta will _____.

fall;rise

If total utility is rising as more salsa is consumed, we can definitely say that marginal utility is:

greater than 0

A consumer is attempting to maximize utility in her consumption of goods A and B. If her income and the price of good A do not change but the marginal utility of good B is constant and the price of good B decreases, this will _____ utility per dollar spent on good B.

increase the marginal

(Table: Alaina's Utility from Consuming Cups of Coffee) Look at the table Alaina's Utility from Consuming Cups of Coffee. Given the information in the table, Alaina's total utility from drinking coffee:

increases at a decreasing rate as she consumes more coffee

The principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably _____ that from the first.

less than

Assuming that diminishing marginal utility applies to both pomegranates and bananas, if Vanessa buys more pomegranates and fewer bananas, the _____ of pomegranates will _____, and the _____ of bananas will _____.

marginal utility; fall; marginal utility; rise

Smedley, a careful utility maximizer, consumes peanut butter and broccoli. Assume that both peanut butter and broccoli are normal goods. He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of broccoli increased. As he adjusted to this event, he consumed _____ peanut butter and _____ broccoli.

more; less

Assume that diminishing marginal utility applies to both coffee and football tickets and that the consumer is spending all of her income. If a consumer purchases a combination of coffee and football tickets such that MUCoffee/ / PCoffee = 20 and MUFootball tickets/ / PFootball tickets = 10, to maximize utility, the consumer should buy _____ coffee and _____ football tickets.

more;fewer

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

negative

Xavier notices that the marginal utility of working with a tutor seems to fall with each hour the tutor helps him study. If Xavier keeps the tutor until his grade actually begins to fall, his marginal utility for the last hour of tutoring will be:

negative

Jie consumes three heads of broccoli and six bowls of rice each week. The price of a head of broccoli is $2 and the price of rice is $4 per bowl. Jie's marginal utility from the last head of broccoli consumed is 4 utils and her marginal utility from her last bowl of rice is 8 utils. If Jie wants to maximize her utility, she should:

not change her consumption of either broccoli or rice

The substitution effect always entails a change in consumption in the _____ direction as (of) the change in _____.

opposite; price

The utility of a good is determined by how much _____ a particular consumer obtains from it.

satisfaction

(Figure and Table: The Budget Line) Look at the figure and table The Budget Line. A decrease in income would:

shift the budget line to the left

(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni and Cheese. Carmen loves macaroni and cheese for Thanksgiving. Carmen's marginal utility from eating macaroni becomes negative at the _____ serving.

sixth

Jenny believes that spending one hour studying for economics will increase her grade by 20 points. Studying for a second hour will increase her grade by 10 points. She also believes that studying for an hour for history will increase her grade by 15 points, but spending a second hour will increase her grade by only 5 points. Jenny has two hours to study. If Jenny wants to maximize her scores, what should she do?

study 1 hour for economics and 1 hour for history

Consumption of more of a good that has become cheaper in place of a good that has become relatively more expensive is the:

substitution effect

Antonio derives more utility from spending an additional dollar on boots than on gloves. We can assume that:

the marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on gloves

Assume that Siri is consuming the utility-maximizing quantities of pork and chicken. We can conclude that:

the ratio of the marginal utility to price is the same for pork as it is for chicken

The relation between an individual's consumption bundle and her satisfaction is called a _____ function.

utility

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

utility

You go to an all-you-can-eat buffet. If you maximize utility, the marginal utility of the last bite that you eat will be:

zero