Econ 4 Micro : Utility

If you consume pasta every day of the week, its marginal utility is bound to ________ at the end of the week, ceteris paribus, and this demonstrates the law of ________. Increase; Diminishing Marginal Utility Decline; Diminishing Marginal Utility Increase; Increasing Marginal Utility Decrease; Total Utility

Decline; Diminishing Marginal Utility

Traditional economists, as opposed to behavioral economists, assume that ________. people think rationally when making decisions people think rationally in some situations but not in other money makes people think irrationally

people think rationally when making decisions

Receiving less and less enjoyment from a second and then a third serving of ice cream is an example of ________. increasing marginal utility the law of diminishing returns the law of excessive returns

the law of diminishing returns

The typical pattern revealed when consumers choose is that as the quantity consumed of some product rises, total utility decreases, but marginal utility rises. marginal utility increases. total utility rises, but marginal utility falls. total utility decreases.

total utility rises, but marginal utility falls.

Which of these statements best fits how a behavioral economist might view a situation? If you lost $20 today but then found $20 later on, you feel neutral because it's as if you never lost anything at all. ​If you find $100 on the street, you will be more likely to spend if freely than you would be to take $100 out of your bank account. Dollars are fungible, or have equal value to the individual, regardless of the situation.

​If you find $100 on the street, you will be more likely to spend if freely than you would be to take $100 out of your bank account.

Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point? Movies / Total Utility / Video Game Rentals / Total Utility 0 / 0 / 0 / 0 1 / 40 / 1 / 30 2 / 75 / 2 / 55 3 / 105 / 3 / 76 4 / 130 / 4 / 96 5 / 160 / 5 / 106 - / - 6 / 114 - / - 7 / 116 1 movie, 4 video game rentals 2 movies, 2 video game rentals 5 movies, 7 video game rentals 0 movies, 6 video game rentals

1 movie, 4 video game rentals

Kim has $23 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What's Kim's total utility maximizing point? That is, what combination of movies and yoga classes will maximize Kim's total utility? Movies /Total Utility / Yoga Classes / Total Utility 0 / 0 / 0 / 0 1 / 40 / 1 / 30 2 / 75 / 2 55 3 / 105 / 3 / 76 4 / 130 / 4 / 92 5 / 160 / 5 / 106 - / - 6 / 114 - / - 7 / 116 - / - 8 / 117 1 movie, 5 yoga classes 2 movies, 2 yoga classes 3 movies, 0 yoga classes

1 movie, 5 yoga classes

According to Daniel Kahneman and Amon Tversky, a $1 loss pains us ________ times more than a $1 gain helps us. 2.25 2 1.5

2.25

Using the following table the marginal utility of the 4th movie is: Movies / Total Utility 0 / 0 1 / 40 2 / 75 3 / 105 4 / 130 5 / 160 130 235 25

25

Select all the reasons why a decrease in the price of a product would lead to an increase in purchases of the product. ​ The substitution effect says that because the product is cheaper relative to other things the consumer purchases, he or she will tend to buy more of the product. The utility effect says that because the product is cheaper, a person can gain more utils of satisfaction through its purchase. The income effect says that after the price decline, the consumer could purchase the same goods as before, and still have money left over to purchase more

The substitution effect says that because the product is cheaper relative to other things the consumer purchases, he or she will tend to buy more of the product. The income effect says that after the price decline, the consumer could purchase the same goods as before, and still have money left over to purchase more

Who determines how much utility an individual will receive from consuming a good? Producers determine utility by averaging the number of utils reported in customer feedback surveys. Utility is determined by one's own preferences. Utility is determined by the supply and demand curves.

Utility is determined by one's own preferences.

Economists believe that: Utility is personal and subjective. Utility is impersonal and objective. Utility can be measured like temperature.

Utility is personal and subjective.

Marginal utility can: increase positively, but not negatively be positive or negative, but not zero decrease, but not become negative be positive, negative, or zero

be positive, negative, or zero

The government wants to make Medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing Medicare budget. The two areas where they are considering cuts are nonessential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on: elective surgery due to its lower marginal utility per dollar of expenditure. neither can be compared by measuring marginal utility. mental health therapy due to its higher marginal utility per dollar of expenditure. both programs, which have the same marginal utility per dollar of expenditure.

elective surgery due to its lower marginal utility per dollar of expenditure.