microeconomics chapter 6

In May and June, Tammy spent all her clothing budget on bathing suits and beach bags. Each bathing suit cost $75. At Tammy's optimal choice, her marginal utility from the last bathing suit purchased is 300 and her marginal utility from the last beach bag purchased is 200. This means that each handbag must cost:

$50

For lunch, Wendy eats only salads or fruit & yogurt smoothies. Her weekly food budget is $48. Each salad costs $6 and each smoothie costs $3. When deciding how much of each good to buy, Wendy knows that 2 salads and 4 smoothies will give her a utility of 8. What is Wendy's utility-maximizing point?

4 salads, 8 smoothies

Todd is a cattle rancher. In June and July he spent his clothing budget on jeans and cowboy hats. Each pair of jeans cost $50 and each hat cost $100. At Todd's optimal choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is:

400

economic theory offers ___________ about the full range of possible events and responses, which can prevent ____________ about how households will respond to changes in price or incomes

a systematic way of thinking; misguided conclusions

in the US, the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. evidence suggests that, in the economy as a whole, increased savings in these retirement accounts

are being offset by negative savings or less savings in other kinds of accounts.

marginal utility can

be positive, negative, or zero

an inferior good is a product

for which demand decreases as income increases.

which of the following is most likely to cause variation in american household spending patterns

geographical location of households differing levels of income each households personal preferences

the term _________ describes a situation where a __________ causes a reduction in the buying power of income, even though actual income has not changed

income effect; higher price

The key assumption that accompanies the use of numbers for measuring utility is that:

individuals choose based on their preferences.

saving money is an ___________ because it involves less consumption in the present, but the ability to consume more in the future

intertemporal choice

the __________ budget constraint shows the trade off between present and future consumption

intertemporal choice

the term _________ refers to the additional utility provided by one additional unit of consumption

marginal utility

the typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,

total utility rises, but marginal utility falls.

In microeconomic terms, the ability of a good or a service to satisfy wants is called:

utility

The government distributes food stamps that can only be used to acquire food to low-income families. The budget line graph will show food on the horizontal axis and everything else on the vertical axis. After receiving food stamps, Ted's family is able to consume the same amount of food. The new consumption point for Ted's family will be:

on the new budget line, directly above the old consumption point.

approximately what portion of annual consumption is typically spent by american households on shelter

one third

which of the following occurs simultaneously with an income effect

substitution effect

joshes weekly budget for lunch is $24. he eats only pizza and burgers. each pizza costs $6 and each burger costs $3. josh knows that 2 pizzas and 4 burgers will give him a utility of 8. what is joshes utility maximizing point

2 pizzas 4 burgers

Even with wage increases, the supply curve of labor is most often inelastic for which of the following?

Full time workers

the marginal utility of two goods changes

with the quantities consumed

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

the most common pattern for marginal utility is

diminishing marginal utility

the term __________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit

diminishing marginal utility

when economists attempt to predict the spending patterns of the US households, they will typically view the _________ as a primary determining factor that influences the individual consumption choices that each will make

income level of each household

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:

is maximizing utility.

the step by step process of finding the choice with the highest total utility involves a comparison of the

marginal utility gained and lost from different choices along the budget constraint.

A decrease in consumer preference for a product, other things being equal, will cause:

market demand to shift to the left

as a general rule, utility maximizing choices between consumption goods occur where the

price ratio and marginal utilities ratio of two goods is equal.

the _________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price

substitution effect

Economists are able to determine total utility by:

summing up the marginal utilities of each unit consumed.

which of the following is considered to be a tell tale signal that the point with the highest total utility has been found

the marginal utility per dollar is the same for both goods

the theoretical model of the intertemporal budget constraint for the US economy as a whole suggests that the most common pattern seems to be that

the quantity of savings doesn't adjust much to changes in the rate of return.