ECON QUIZ 6

A payment for the use of any resource over and above its opportunity cost is called __________

economic rent

Refer to the Figure above: The marginal utility of the first movie rental is

15

Refer to the Table above. The marginal utility of the third hamburger per day is

15

Refer to the Table above: Assume that a store is giving hamburgers and sodas away for free. Consumers can have as many sodas and hamburgers as they want, but the food has to be consumed one unit at a time. If George has already had one soda and two hamburgers, then George should

be indifferent between consuming the second soda or the third hamburger.

Refer to the Table above: Diminishing marginal utility sets in after the ________ soda per day.

first

Kathy eats five slices of pizza on a Saturday night but admits each slice of pizza doesn't taste as good as the previous one. This suggests that for Kathy the

marginal utility of a slice of pizza is positive but decreasing.

Refer to the Figure above: The marginal utility of the fourth movie rental is

0

When the price of going to a movie rises 5 percent, the quantity of DVDs demanded increases 10 percent. The cross-price elasticity of demand is equal to ______.

2.0

Refer to the Table above: The marginal utility of the first hamburger is

30

Refer to the Table above: If the price of a soda is $2, the price of a hamburger is $6, and George has $14 of income, George's utility maximizing combination of sodas and hamburgers per day is

4 sodas and 1 hamburger.

Refer to the Table above: The total utility of five hamburgers per day is

80

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. The clothing and food pairs in Jane's choice set include ________ units of clothing and ________ units of food.

8; 30

A utility-maximizing consumer buys so as to make ________ for all pairs of goods.

MUx/MUy = Px/Py

The law of diminishing marginal utility refers to

a consumer's decrease in additional satisfaction as she consumes more and more units of a good.

Marginal utility is the ________ satisfaction gained by consuming ________ of a good.

additional; one more unit

A product that has a negative income elasticity of demand is ________ good.

an inferior

You own a small store. Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue. The cashier thinks the price elasticity of demand is ________ and the customer believes the price elasticity of demand is ________.

inelastic; elastic

Products X, Y, and Z have (absolute values of) price elasticities of 3.0, 0.80, and 1.0 respectively. Total revenue decreases if the price of

product Y falls.

A dedicated teacher loves being in the classroom and would teach for $40,000 per year, but he is actually paid $55,000 per year. This individual

receives economic rent of $15,000.

Total revenue increases if the price of the good

rises and demand is inelastic.