Exam 3

At her current level of consumption, Jess gets half as much marginal utility from an additional bagel as from an additional muffin. If the price of muffin is $2 each, then Jess is maximizing her utility if the price of a bagel is:

$1.00

(25) Refer to the accompanying figure. At the equilibrium price, total consumer surplus in this market is:

$12,000 per day

(24) Refer to the accompanying figure. At the equilibrium price, total consumer surplus is:

$7.50 per day

(23) The accompanying figure shows the demand curve for a product that can be sold only in whole-number amounts. At a price of $15 per unit, what would be the total consumer surplus in this market each day?

$75

consider the graph. If the price of apples decreases, then which of the following will occur? (1)

* if the price of apple decreases, then the vertical intercept will not change and the horizontal intercept will increase

Consider the graph If price of bananas decreases, then which of the following will occur? (4)

- if the price of bananas decreases, then the horizontal intercept will not change and the vertical intercept will increase

(5) Refer to the accompanying figure. The marginal utility of the 7th pizza is

-5

When Kyle eats 1 donut for breakfast, his total utility is 20, when he eats 2 donuts his total utility is 35, and when he eats 3 donuts his total utility is 40. Thus, his marginal utility of going from 1 to 2 donuts is ______ utils.

15 35-20 ------- = 15 2-1.

given the table below, when Sean consumes 4 popsicles per hour, his total utility is _______ utils per hour Pops Total Utility per hour (utils per hour) __________________________________________ 0. 0 1. 100 2. 150 3. 175 4. 150

150

(14) For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market consists of 50 identical sellers, each with the same opportunity cost as the seller depicted in the figure, then how many units would be supplied in the market at a price of $14 per unit?

17,500

Refer to the accompanying table. If the price of Good A is $5 and the price of Good B is $4, then the rational spending rule is satisfied when the consumer purchases ______ units of Good A and ______ units of Good B. Units. Marginal Utilityof Good A. Marginal Utilityof Good B 1 30 40 2 27 33 3 15 24 4 8 14

1;3

(13) Taylor's marginal utility from watching movies and from eating out (in utils) is shown in the accompanying table. Taylor spends exactly $100 every month on these two forms of entertainment; the price of each movie is $10 and the price of each dinner is $20.

2 movies 4 dinners

Suppose Preeda's income income is $24 per week, all of which she spends on cookies and cupcakes. In addition, supposed cookies cost $3 each and cupcakes cost $6 each. If Preeda's weekly budget constraint is graphed with cupcakes on the horizontal axis and cookies on the vertical axis, the horizontal intercept will be _____________

4 the horizontal intercept is equal to income divided by the price of the good graphed on the horizontal axis, which in this case is $24/$6 = $4, meaning that is Preeda spends all of her income on cupcakes, then she can afford 4 per week.

Consider a market for snowboards in which there are 4 potential buyers. The first has a reservation price of $2000; the second has a reservation price of $300; the third has a reservation price of $400; and the forth has a reservation price of $500. If snowboards sell for $250 and if each potential buyer only wants one snowboard, then total consumer surplus in this market will be _______ dollars

450. $250+150+50= 450

(4) Refer to the accompanying figure. The marginal utility of the 6th pizza is:

5

Suppose Chaiya's income is $60 per month, all of which he spends on hamburgers and cheeseburgers. In addition, suppose hamburgers costs $12 each and cheeseburgers cost $15 each. If Chaiya's monthly budget constraint is graphed with hamburgers on the horizontal axis and cheeseburgers on the vertical axis, the horizontal intercept will be

5 *60/12=5

(21) Refer to the accompanying figures. If Mallory and Rick are the only two consumers in this market and the price of soda is $0.75 per can, then what will be the market demand for soda each month?

50

The figure to the right shows Geoff's monthly demand for soap. If there are 1000 people in the market (including Geoff), each with demand curve like Geoff, then what is the market demand for soap each month when the price of soap is $1 per bar? ________________ (7)

5000

(20) Refer to the accompanying figure. If Laura and Chris are the only two consumers in this market, then at a price of $2.00 per pound, the market demand for hamburger is:

6 pounds per week

Refer to the accompanying table. The marginal utility of the 3rd dinner is: Number of Dinners Out Per Week Total Utility Marginal Utility 1 100 2 75 3 235 4 250

60 235-175=60

Refer to the accompanying table. The law of diminishing marginal returns becomes evident after ______ units of output are produced. Output Per Day Number of Employees Per Day 0 0 33 1 66 2 99 4 132 7 165 11

66

(6) Refer to the accompanying figure. Total utility increases with each additional pizza up to the ______ and then declines, but marginal utility ______ with each additional pizza consumed.

6th pizza; decreases

(19) Fran runs a doughnut shop in a tiny 3-person town. The accompanying table shows the quantity demand by the three townspeople at various prices.

9 doughnuts

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Consider the graph Select the bundle(s) that the consumer equally prefers to A (6)

B

The accompanying graph shows a consumer's budget constraint. From the list below, select the consumption bundle(s) that the consumer cannot afford.

B

consider the applying graph. select the bundle(s) that the consumer prefers to A. (3)

C , D The sonsumer prefers C and D to A since C and D lie above the indifference curve that passes through A

The accompanying graph shows a consumer's budget constraint. From the list below, select the consumption bundle(s) that the consumer can afford.

C,A,D

consider the accompanying graph. Suppose Haruto and Hana are each currently consuming 4 pounds of apples and 6 pounds of oranges each year. Relatively speaking, which one has the strongest preference for apples?

Hana

Irina's current marginal utility from consuming tofu is 200 utils per pound, and her marginal utility from consuming chicken is 3000 utils per pound. If tofu costs are good $2 per pound and chicken costs $2.50 per pound, then

Irina should buy more chicken and less tofu. -Irina gets 100 utils per dollar spent on tofu and 120 per dollar for chicken. So, she should buy more chicken and less tofu.

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

A parallel shift inward in the budget constraint is consistent with

a decrease in income

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable.

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

The figure on the right shows the relationship between the number of hours of TV that Mike watches each day and his total utility. When Mike watches 1 hour of TV per day, his total utility is _______. (5)

about 3.5 utils per day

The law of diminishing marginal utility captures the tendency for the _____ gained from consuming an additional unit of good to diminish as consumption increases beyond some point.

additional utility

According to the law of diminishing marginal utility:

as you consume less of something, your marginal utility from consuming that good will increase.

A _________ of goods is the term used to describe a particular combination of goods

bundle

When Kim drinks 1 cup of coffee per day her total utility is 10, when she drinks 2 cups her total utility is 14, and when she drinks 3 cups her total utility is 16. Thus, her marginal utility from consuming coffee is ________.

decreasing, her marginal utility of going from 2 to 3 cups a day is only 2, while her marginal utility of going from 1 to 2 is 4

The law of _______ states that people do less of what they want to do as the cost of doing it rises.

demand

(10) Refer to the accompanying figure. For Jeff, the consumption of movies reflects the law of:

diminishing marginal utility.

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

experiencing diminishing returns.

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good.

falls; less

Refer to the accompanying table. Total utility ______ as additional apples are consumed, but marginal utility ______ with each additional apple consumed. Number of Apples TotalUtility 1 20 2 35 3 45 4 50 5 45

first increases then decreases; decreases

Given the figure to the right, if strawberries sell for $3 per pound, consumer surplus is $ _________ dollars per day

if price is $3, consumer surplus is 5-3 x 20,000 2=20,000

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

if the firm increases its price above the market price, it will earn zero revenue.

(6-2) For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ______.

increase

suppose that when you eat chocolate cake, you enjoy every bite, but each is never quite as good as the one before. Thus, with each bite of chocolate cake, your total utility ________ while your marginal utility _______.

increases, decreases

A variable factor of production:

is variable in both the short run and the long run.

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the fourth pie than from eating the second pie.

less

If two points lie on the same indifference curve, then we know the consumer

likes both bundles equally well

If a consumer in indifferent between two different consumption bundles, then this implies that the consumer

likes the two bundles equally well

The additional utility gained from consuming an additional unit of good is ________.

marginal utility

The primary objective of most private firms is to:

maximize profit

The rational spending rule is derived from the consumer's desire to:

maximize utility

For two goods, coffee and scones, suppose that MU(coffee)/P(coffee) = 4 and MU(scones)/P(scones) = 3. To maximize your total utility from these two goods, you should purchase:

more coffee and fewer scones.

The number written on a price tag is a good's _________.

nominal price

a consumer's best affordable bundle will typically lie:

on the consumer's budget constraint

The affordable combination of goods that yields the highest total utility for a consumer is known as the _________ combination of goods

optimal

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

purchase less than 20 units of good X and more than 25 units of good Y.

According to the _______ spending rule, spending should be allocated across goods so that the marginal utility per dollar is the same for each good.

rational spending rule

The dollar price of a good relative to the average dollar price of all other goods is the good's:

real price

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

resources; satisfaction

given the table below, Sean's marginal utility of going from 2 to 3 popsicles per hour is _________ utils per popsicle

since sean's total utility increases from 150 to 175 utils per hour when he goes from consuming 2 to 3 popsicles per hour, his marginal utility is 25 utils per popsicle

The difference between a buyer's reservation price for a product and the price the buyer actually paid is known as consumer

surplus

When the price of a good or service goes up, consumers will tend to

switch to less expensive substitutes

A consumer's optimal combination of goods is

the affordable combination that yields the highest total utility

Marginal cost is calculated as:

the change in total cost divided by the change in output.

Suppose that in response to an increase in the price of sugar, people buy less sugar because they can afford less of everything. This is an example of __________ of a price change.

the income effect

(22) The accompanying figure shows a single consumer's demand for ice cream at the student union. An increase in the number of students on this campus would cause:

the market demand curve for ice cream from the student union to shift to the right.

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:

the market for vegetables is perfectly competitive.

The shift from the "original" to the "new" budget constraint in the accompanying graph would occur if

the price of apples decreased

a budget constraint describes

the set of all bundles a consumer can purchase given the customer's income and prices

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

total utility;1

Individual supply curves generally slope ______ because ______.

upward; of increasing opportunity costs.

Economists use the term _________ to refer to the satisfaction that people derive from all of their consumption activities.

utility

The process whereby people allocate their income between different goods and services in order to maximize their total satisfaction is known as

utility maximization

Provided people have *achieved bare subsistence levels of consumption*, economists speak mainly in terms of people's

wants

if a bundle lies outside a consumer's budget triangle, then the consumer:

will not purchase the bundle because they can't afford it