micro exam 1
Consumer equilibrium exists when
the MU/P ratio for all goods is the same.
Saying "the marginal costs are greater than the marginal benefits" is the same as saying
the additional costs are greater than the additional benefits
The theory of consumer choice assumes that consumers attempt to maximize
total utility
Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 146, respectively. The marginal utility of the seventh wing is __________ utils.
10 utils
Jack receives 30 utils from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is __________ utils and that Jack's __________utility rises as his __________ declines.
10; total; marginal
Suppose that the total utility from consuming one unit of good Z is 220 utils, the total utility from consuming two units of good Z is 320 utils, and the total utility from consuming three units of good Z is 400 utils. The marginal utility received from consuming the third unit of good Z is
80 utils
Which of the following statements is true?
If a consumer is in equilibrium, it necessarily follows that he or she is also achieving the greatest total utility
Which of the following statements is false?
If total utility rises, so must marginal utility If marginal utility falls, so must total utility. a and c
Which of the following is true?
It is possible for total utility to rise as marginal utility falls.
Suppose a consumer is purchasing Coke (c) and pretzels (p) in quantities such that he is achieving consumer equilibrium. Then the price of Coke increases. Which of the following will be true?
MUC/PC < MUP/PP
Which of the following is most likely to be an unintended effect of placing safety caps on medicines?
People leave their medicine containers open more often, which ends up making it easier for children to get into the medicine
How are changes in opportunity cost predicted to affect behavior?
The higher the opportunity cost of doing X, the less likely X will be done. The lower the opportunity cost of doing X, the more likely X will be done. b and c
Don receives 100 utils from consuming two oranges. The utility he derives from consuming the second orange equals 30 utils. Which of the following conclusions is derived from the law of diminishing marginal utility?
The marginal utility Don receives from consuming the third orange will be less than 30 utils.
What does it mean if a person makes a "decision at the margin"?
The person compares additional benefits and additional costs when deciding what to do.
In most societies, dollar price acts as the main rationing device. If dollar price weren't the main rationing device, would there still be a need for some rationing device to take its place?
Yes, because there is a need for a rationing device as long as scarcity exists.
Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ari consuming the correct quantities of these two goods to be in consumer equilibrium?
Yes, so there is no need to change her eating habits
A country has a (an) __________ in the production of a good it produces at lower opportunity cost than another country.
absolute advantage specialization disadvantage tariff-efficient advantage infant-industry advantage none of the above
If the MU/P ratio for good X is less than the MU/P ratio for good Y, this means that
an individual is receiving more utility per dollar from good Y than good X
A person is in consumer equilibrium, and then the price rises for one of the goods she purchases. If she wants to restore herself to consumer equilibrium, she will (most likely)
buy less of the good whose price has risen and more of the relatively lower priced goods.
Positive economics is concerned with
cause-effect relationships.
The ability to produce a good at a lower opportunity cost than others is called a(n) __________ advantage.
comparative
When economists speak of scarcity, they are referring to the
condition in which people's wants outstrip the limited resources available to satisfy those wants.
Economists usually assume that money has __________ marginal utility.
decreasing
According to the traditional theory of marginal utility as presented in the textbook, as more units of a good are acquired, the consumer's marginal utility
diminishes
At the optimal or efficient level of an activity, the activity's marginal benefit must
equal the marginal cost of the activity. be greater than zero
The MU/P ratio for good X is greater than the MU/P ratio for good Y. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. If the law of diminishing marginal utility holds, the marginal utility of good X __________ and the marginal utility of good Y __________.
falls, rises
Economists assume that the goal of consumers is to maximize marginal utility.
false
If someone gives you a free ticket to the movies, then there is no opportunity cost involved with going to the movies.
false
If total utility is a positive number, marginal utility must also be a positive number.
false
In a situation where two goods can be produced by two different people, it is possible for one person to have a comparative advantage in the production of both goods and the other person to have the comparative advantage in the production of neither good
false
Marginal utility is computed by dividing total utility by the quantity consumed of a good
false
The branch of economics that studies the decisions made by individuals and firms is called macroeconomics.
false
When countries engage in specialization and international trade, every individual person in those countries will gain.
false
the higher the opportunity cost of doing something, the more likely it will be done.
false
Economists believe that people's wants are
infinite
If a person's income falls, his or her budget constraint moves
inward toward the origin, and its slope remains the same.
The __________ the opportunity cost of doing something, the __________ likely a person will do that something.
lower; less lower; more higher; more higher; less b and d
Consumer equilibrium exists when the
marginal rate of substitution equals the slope of the budget constraint. slope of the indifference curve equals the slope of the budget constraint. c and d
Efficiency is consistent with
maximizing net benefits. equating marginal benefits and marginal costs. a and b
Jones buys two goods, A and B. Currently, Jones receives marginal utility of 24 utils from good A and pays a price of $1.50 per unit. Jones receives a marginal utility of 43 utils from good B and pays a price of $1.99 per unit. Jones receives __________ per dollar from good B as he does from good A.
more marginal utility
If the absolute price of a computer is $500 and the relative price of a dining room table is 3 computers, it follows that the absolute price of a dining room table is
none of the above
The need to make choices is most closely related to the economic concept of
opportunity cost
Countries tend to specialize in the production of goods in which they have a comparative advantage because
people want to make a profit
The absence of value judgments is the essence of
positive economics
The MU/P ratio for good X is greater than the MU/P ratio for good Y as a result of a fall in the price of good X. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. In the process, she
puts downward pressure on prices maximizes total utility b and c
A util is an artificial construct used as a means of measuring the
satisfaction one receives from the consumption of a good
An indifference curve shows
the bundles of two goods that give an individual equal total utility
Assuming only two goods X and Y, if MUX/PX = MUY/PY, then
the consumer is in equilibrium. the consumer cannot be made better off by redirecting his purchases. the consumer is deriving the same marginal utility per dollar spent on both goods. a, b, and c
Which of the following issues is most unlikely to be addressed by an economist practicing positive economics?
the desirability of a minimum wage increase
Marginal utility is
the extra satisfaction derived from consuming an additional unit of a good. the change in total satisfaction as an additional unit of a good is consumed. a and d
Given two goods, X and Y, their prices, PX and PY, a consumer is in equilibrium when the last dollar spent on X yields
the same marginal utility as the last dollar spent on Y.
When an economist talks about utility, she is talking about
the satisfaction that results from the consumption of a good
If the MU/P ratio for two goods is the same, then
the slope of the budget constraint between the two goods is equal to the marginal rate of substitution (MRS) between the two goods.
It is possible for total utility to rise as marginal utility falls
true
Scarcity means
wants are greater than the limited resources available to satisfy these wants.
If you hadn't gone to dinner with your friends, you would have stayed home and watched television." It follows that
watching television is the opportunity cost of having dinner with your friends.