ECON CHAPTER 6

Suppose Gail is willing to pay $89 for a new pair of shoes and Karen is willing to pay $60. What is the gain in total consumer surplus if the price of the shoes falls from $70 to $50? A. $10 B. $19 C. $29 D. $30

d. $30

Suppose that the price of a pizza is $10 and the price of a video game is $30. Currently, Aaron is consuming such that the ratio of his marginal utility of pizza to marginal utility of video games is ¼. If he wants to maximize his utility, what should he do? A. Buy more pizzas and fewer video games B. Buy more pizzas and more video games C. Buy fewer pizzas and video games D. Buy fewer pizzas and more video games

d. Buy fewer pizzas and more video games

Assume Anna is consuming two goods, movies and books, and at her current level of consumption, the marginal utility of the last movie is 60 and the marginal utility of the last book is 30. The price of a movie is $12 and the price of a book is $4. In order to maximize her utility, what should Anna do? A. Increase her consumption of both movies and books B. Decrease her consumption of both movies and books C. Do nothing—she's maximizing her utility D. Decrease her consumption of movies and increase her consumption of books E. Increase her consumption of movies and decrease her consumption of books

d. Decrease her consumption of movies and increase her consumption of books

Assume that Jill is consuming at the utility-maximizing point. If the utility from the last soda she consumes is 40 and its price is $2, and the utility from the last bucket of popcorn is 20, then we know that the price of the bucket of popcorn is ____. A. $1 B. $2 C. $4 D. $5

a. $1

If the price of a hot dog is $2 and your willingness to pay is $3, then your consumer surplus is _____. A. $1 B. $2 C. $3 D. $5

a. $1

Assume you spend all of your income on two goods: peanuts and chips. Also assume that you are consuming the combination of peanuts and chips that maximize your utility. Which of the following statements is true? A. If the price of peanuts is equal to the price of chips, then the marginal utilities must also be equal. B. If the price of peanuts is more than the price of chips, then the marginal utility of peanuts is less than the marginal utility of chips. C. If the price of peanuts is less than the price of chips, then the marginal utility of peanuts is more than the marginal utility of chips. D. The marginal utilities of the two goods and their prices are not related.

a. If the price of peanuts is equal to the price of chips, then the marginal utilities must also be equal

If a consumer is currently maximizing her satisfaction, what will happen to the marginal utility of a good when its price increases and the consumer adjusts consumption accordingly? The marginal utility will __________. A. Increase, because the consumer will decrease her consumption of the good. B. Decrease, because the consumer will increase her consumption of the good. C. Decrease, because a consumer will decrease her consumption of the good. D. Increase, because the consumer will increase her consumption of the good.

a. Increase, because the consumer will decrease her consumption of the good

If David buys more coffee and less ice cream, the ______________ of coffee will ______________ , and the ___ of ice cream will ______________. A. Marginal utility; fall; marginal utility; rise B. Marginal utility; rise; marginal utility; fall C. Total utility; fall; marginal utility; rise D. Marginal utility; rise; total utility; rise

a. Marginal utility; fall; marginal utility; rise

Assume that Jill is NOT consuming at the utility-maximizing level. The marginal utility of soda is 40 and its price is $2, but the marginal utility of popcorn is now 30, and its price is $1. What should Jill do to maximize her utility? A. Consume less soda and more popcorn B. Consume more soda and less popcorn C. Consume more of both D. Consume less of both

a. consume less soda and more popcorn

If the price of a normal good decreases, the substitution effect ______________ the quantity demanded of that good. A. Increases B. Decreases

a. increases

When Jane's income doubles, she increases her consumption. For all normal goods that Jane consumes, what is true? A. Her marginal utility per dollar will increase B. Her marginal utility per dollar will decrease C. Her marginal utility per dollar will not change D. Her total utility will decrease

b. Her marginal utility per dollar will decrease

Suppose Frank chooses to buy hot dogs at their current price. When the price of hot dogs increases, Frank's consumer surplus ________. A. Increases B. Decreases C. Doesn't change D. Cannot be determined unless the size of the price increases is known

b. decreases

A consumer is maximizing her satisfaction and currently consuming three goods. If her tastes change so that the marginal utility she gains from movies increases, what will happen to her consumption of the other two goods - hamburgers and football games? A. Her consumption will increase because the ratio of their marginal utilities to their prices is now greater than the ratio of the marginal utility of movies to the price of a movie. B. Her consumption will increase because the ratio of their marginal utilities to their prices is now less than the ratio of the marginal utility of movies to the price of a movie. C. Her consumption will decrease because the ratio of their marginal utilities to their prices is now less than the ratio of the marginal utility of movies to the price of a movie. D. Her consumption will decrease because the ratio of their marginal utilities to their prices is now greater than the ratio of the marginal utility of movies to the price of a movie.

c. Her consumption will decrease because the ratio of their marginal utilities to their prices is now less than the ratio of the marginal utility of movies to the price of a movie.

Fred just ate a hamburger and received total utility of 15 from consuming it. If he eats another one, which of the following will be true? A. His total utility will likely stay at 15 B. His total utility will likely decrease C. His total utility will likely increase

c. His total utility will likely increase

If a good is provided for free, it is likely to have a marginal utility that is relatively ______________ and be ______________ the marginal utility that could be gained from consuming some other good which must be paid for. A. High; less than B. High; greater than C. Low; less than D. Low; greater than E. Unknown; equal to

c. Low; less than

If the price of a good changes, why does an income effect exist? A. You need income to purchase the good B. Diminishing marginal utility exists C. The price change causes a change in real income D. People prefer larger incomes

c. The price change causes a change in real income

Assuming a fixed budget, when the price good X increases, consumers will adjust their consumption patterns in a way that the marginal utilities of all other goods will _________. A. Increase B. Decrease C. Not change D. Decrease, but the marginal utility of good X will increase. E. Increase, but the marginal utility of the higher priced good will decrease.

d. Decrease, but the marginal utility of good X will increase