ch 5 practice problems

Suppose Jamal's marginal utility from the first taco he eats is 15, and his marginal utility from the second taco he eats is 12. One can infer that a. Jamal's total utility from eating two tacos is 27. b. Jamal's should eat one taco. c. Jamal's average utility from eating two tacos is 27. d. Jamal's should eat two tacos.

a. Jamal's total utility from eating two tacos is 27. The total utility from consuming any given number of units of a good can be computed by adding the marginal utilities of all the units consumed.

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. Your total utility ______ with the first three pies you ate. a. increased b. decreased c. stayed the same d. first increased then decreased

a. increased Since you enjoyed the first three pies, they must have added to your total utility.

Suppose Suzanne allocates her spending on apples and bananas according to the rational spending rule. If the price of apples is less than the price of bananas, then at Suzanne's optimal consumption bundle, her marginal utility from apples will be a. less than her marginal utility from bananas. b. greater than her marginal utility from bananas. c. equal to her marginal utility from bananas. d. equal to zero.

a. less than her marginal utility from bananas. According to the rational spending rule, consumers should allocate their spending such that the marginal utility per dollar spent on each item is the same for all items. Therefore, at a consumer's optimal consumption bundle, the lower the price of an item, the lower must be the consumer's marginal utility from consuming that item.

Hector wants to maximize his utility. At his current level of consumption, Hector's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Hector should a. reallocate his spending away from coffee and towards soda. b. reallocate his spending away from soda and towards coffee. c. not change his consumption of either coffee or soda. d. decrease his spending on both coffee and soda.

a. reallocate his spending away from coffee and towards soda. Since Hector's marginal utility per dollar spent on coffee is 15/3 = 5 utils, while his marginal utility per dollar spent on soda is 11/2 = 5.5 utils, Hector's should reallocate his spending away from coffee and towards soda to maximize his utility.

At her current level of consumption, Cameron gets 3 times more marginal utility from an additional game of pinball than from an additional game of ping pong. If the price of a ping pong game is $0.50, then she is maximizing utility if the price of a pinball game is a. $1. b. $1.50. c. $2. d. $3.

b. $1.50. The rational spending rule maintains that consumers should allocate their spending between two goods such that the marginal utility per dollar spent is the same for both goods (that is, MU/P must be the same for both goods). Here, since the marginal utility from an additional game of pinball is three times bigger than the marginal utility from a game of ping pong, Cameron is maximizing her utility of the price of a game of pinball is three times the price of a game of ping pong.

Suppose the price of an apple is $0.75, and the price of a banana is $0.50. If Hugh is maximizing his utility, and his marginal utility from consuming an apple is 24 utils, then his marginal utility from consuming a banana must be a. 12 utils. b. 16 utils. c. 32 utils. d. 36 utils.

b. 16 utils. According to the rational spending rule, Hugh should allocate his spending across apples and bananas such that MUA/PA = MUB/PB. This implies that: 24/0.75 = MUB/0.5, so MUB = 0.5 × (24/0.75) = 16.

Laura's total utility from consuming 8, 9, and 10 bonbons is 35, 42, and 45, respectively. Her marginal utility from the 9th bonbon is _____. a. 77 b. 7 c. 42 d. 4.67

b. 7 Marginal utility is the additional utility gained from consuming an additional unit of a good. Here, total utility increases by 7 units (from 35 to 42) when consumption increases from 8 to 9, so the marginal utility of the 9th bonbon is 7.

It is impossible for total utility to be ______ when marginal utility is ______. a. increasing; increasing b. decreasing; positive c. positive; negative d. increasing; decreasing

b. decreasing positive If marginal utility is positive, that indicates that the last unit of the good consumed added to total utility, so total utility must be increasing.

Sven likes to water ski, but he can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's marginal utility from his first hour of skiing was ______ his marginal utility from his tenth hour of skiing. a. less than b. greater than c. the same as d. more negative

b. greater than The information states that the tenth hour of skiing, which occurred during the second day, was fun but not as much fun as the first day, implying that he received more utility from the first hour of skiing than from the tenth.

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 first pie than from eating the third pie. a. less b. more c. the same amount of d. less variable

b. more The information states that you really enjoyed the first two pies, but the third one was only okay, implying that it provided less utility.

For two goods, coffee and scones, suppose that MUcoffee / Pcoffee = 4 and MUscones / Pscones = 3. To maximize your total utility from these two goods, you should purchase a. less coffee and more scones. b. more coffee and fewer scones. c. less coffee and fewer scones. d. more coffee and more scones.

b. more coffee and fewer scones. Since the ratio of marginal utility to price (i.e., marginal utility per dollar spent) is higher for coffee than for scones, the consumer should buy more coffee and fewer scones. The utility gained from spending an additional dollar on coffee will exceed the utility lost from spending a dollar less on scones; hence, total utility will rise.

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: a. purchase more than 20 units of good X and less than 25 units of Y. b. purchase less than 20 units of good X and more than 25 units of good Y. c. purchase more than 20 units of good X and more than 25 units of good Y. d. continue to purchase 20 units of good X and 25 units of good Y.

b. purchase less than 20 units of good X and more than 25 units of good Y. Since MUX/PX = 18 and MUY/PY = 19, to comply with the rational spending rule, Cathy should reallocate her spending away from good X and towards good Y.

Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3, then Joaquin a. should reallocate his spending towards pumpkin pie and away from pecan pie. b. should reallocate his spending towards pecan pie and away from pumpkin pie. c. is maximizing his utility. d. should spend more on pumpkin pie and more on pecan pie.

b. should reallocate his spending towards pecan pie and away from pumpkin pie. Since Joaquin's marginal utility per dollar spent on pumpkin pie is 4/2.5 = 1.6 utils, while his marginal utility per dollar of pecan pie is 6/3 = 2 utils, Joaquin should reallocate his spending towards pecan pie and away from pumpkin pie to maximize his utility.

At his current level of consumption, Evan gets three times as much marginal utility from an additional bottle of water as that from an additional bottle of soda. If the price of soda is $1.00 per bottle, then Evan is maximizing utility if the price of a bottle of water is: a. $2.00 b. $2.50 c. $3.00 d. $0.33

c. $3.00 The rational spending rule maintains that consumers should allocate their spending between two goods such that the marginal utility per dollar spent is the same for both goods (that is, MU/P must be the same for both goods). Here, since the marginal utility from an additional bottle of water is three times as high as that from an additional soda, Evan is maximizing his utility if the price of water is three times the price of soda.

Assume that Destiny has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. At the original income of $30, if the price of a loaf of bread decreased to $1 and the price of a jar of peanut butter increased to $5, then after the price changes, Destiny could buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter. a. 10 fewer; 4 fewer b. 10 more; 4 more c. 10 more; 4 fewer d. 10 more; 4 more

c. 10 more; 4 fewer If Destiny spent the entire $30 on bread, she could buy 30 loaves at the new price ($30/$1 = 30) but only 20 loaves at the old price ($30/$1.50 = 20), and if she spent the entire $30 on peanut butter, she could now buy only 6 jars at the new price ($30/$5 = 6) compared to 10 jars at the old price ($30/$3 = 10).

When Lorenzo eats 1 slice of pizza for lunch, his total utility is 23, and when he eats 2 slices of pizza for lunch, his total utility is 42. Assuming that Lorenzo's marginal utility from eating pizza is always positive, we can infer that his total utility from eating 3 slices of pizza at lunch is a. greater than 42 and less than 84. b. greater than 42 and less than 46. c. greater than 42 and less than 61. d. greater than 23 and less than 42.

c. greater than 42 and less than 61. According to the law of diminishing marginal utility, the marginal utility of Lorenzo's third slice of pizza must be less than the marginal utility of his second slice. Since the marginal utility of his 2nd slice of pizza is 19, we know that the marginal utility of his third slice must be less than 19, implying that his total must be greater than 42 but less than 61 (= 42 + 19).

Sejal's reservation price for her economics textbook is $100. The week before the semester begins, Sejal finds a copy of her textbook online for $75. Sejal's consumer surplus from buying the textbook online is a. $125. b. $100. c. $75. d. $25.

d. $25. Consumer surplus is the difference between a buyer's reservation price for a product and the price actually paid, which in this case is $25 ($100 − $75).

Suppose that at a price of 25 cents per orange, 750 consumers each demand 3 oranges, and at a price of 20 cents per orange, 1,000 consumers each demand 6 oranges. Therefore, the market demand for oranges is ______ at a price of 25 cents per orange and ______ at a price of 20 cents per orange. a. 3; 6 b. 750; 1,000 c. 1,500; 2,250 d. 2,250; 6,000

d. 2,250; 6,000 A price of 25 cents per orange, the quantity of oranges demanded in the market is 2,250 (= 750 × 3), and at a price of 20 cents per orange, the quantity of oranges demanded in the market is 6,000 (= 1,000 × 6).

Angela is currently playing five games of pool and bowling three games. At this level of consumption, her marginal utility from a game of pool is 10 and her marginal utility from bowling a game is 6. If both pool and bowling cost $1 a game, Angela should a. bowl more and play pool less. b. just go home. c. bowl only. d. bowl less and play pool more.

d. bowl less and play pool more. Angela's marginal utility per dollar spent on pool (10) is greater than her marginal utility per dollar spent on bowling (6). Thus, according to the rational spending rule, she should reallocate her spending away from bowling and towards pool.

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good. a. rises; more b. falls; more c. rises; less d. falls; less

d. falls; less If the price of a good rises, then the ratio (MU/P) falls, and since the consumer is receiving less marginal utility per dollar spent on that good, this will induce the consumer to purchase less of it.