Econ test 6 part 1
An item has utility for a consumer if it
generates enjoyment or satisfaction
Marginal utility can be
positive, negative or zero
If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is
5 utility units
If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is
57 utility units
As a consumer consumes more and more of a product in a particular time period, eventually marginal utility
declines
Marginal utility is the
extra satisfaction received from consuming one more unit of a product.
If total utility increases at a decreasing rate as a consumer consumes more of a product, then marginal utility must be
increasing
Total utility
is equal to the sum of the marginal utilities of all units consumed
Consumers have to make tradeoffs in deciding what to consume because
they are limited by a budget constraint
If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the second candy bar is
unknown as more information is needed to determine the answer
If your total satisfaction increases when you consume another unit, your marginal utility must be
positive
Utility is
subjective and is difficult to measure.
The law of diminishing marginal utility states that
the additional satisfaction from consuming a good diminishes as more of a good is consumed in a given period of time
If, when you consume another unit of a good, your marginal utility is zero then
you have maximized your total utility from consuming the good
Over the years, Coca-Cola has used celebrities to advertise its products. Most recently, it hired rapper Shawn "Jay-Z" Carter to appear in television commercials as part of the marketing campaign to re-launch Cherry Coke. What is the rationale for using "expensive" celebrities?
By linking the product to a famous person, Coca Cola hopes to create a positive image of the product in the consumer's mind.
Which of the following is likely to occur as the result of the law of diminishing marginal utility?
Wesley enjoyed his second bottle of iced tea less than his first bottle.
Consumers maximize total utility within their budget constraint by
buying the goods with the largest marginal utility per dollar spent
Economists assume that the goal of consumers is to
make themselves as well off as possible.
Suppose your marginal utility from consuming a third slice of cake is zero, then your total utility from consuming cake is
maximized
If a consumer always buys goods rationally, then
the marginal utility per dollar spent on each good will be equal