micro-economics (2303)

Kim has $24 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 is Kim's total utility maximizing point?

1 movie, 5 yoga classes

Economic theory offers ____________________ about the full range of possible events and responses, which can prevent __________________ about how households will respond to changes in prices or incomes.

a systematic way of thinking; misguided conclusions

The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.

diminishing marginal utility

Which of the following is most likely to cause variation in American household spending patterns?

geographical location of households(wrong)

The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed.

income effect; higher price

When economists attempt to predict the spending patterns of U.S. households, they will typically view the _____________________ as a primary determining factor that influences the individual consumption choices that each will make.

income level of each household

The step-by-step process of finding the choice with highest total utility involves a comparison of the:

marginal utility gained and lost from different choices along the budget constraint.

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,

total utility rises, but marginal utility falls.

Approximately what portion of annual consumption is typically spent by American households on shelter?

one-third

Which of the following occurs simultaneously with an income effect?

substitution effect

The ________________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.

substitution effect

The marginal utility of two goods changes ______________.

with the quantities consumed

In microeconomic terms, the ability of a good or a service to satisfy wants is called:

utility.

The most common pattern for marginal utility is ____________________.

diminishing marginal utility

An inferior good is a product:

for which demand decreases as income increases.

Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future.

intertemporal choice

The _________________ budget constraint shows the tradeoff between present and future consumption.

intertemporal choice

Substitution and income effects of a change in price of a good may be used to explain the:

inverse relationship between price and quantity demanded(wrong)

The term _________________ refers to the additional utility provided by one additional unit of consumption.

marginal utility

A decrease in consumer preference for a product, other things being equal, will cause:

market demand to shift to the left.

Economists are able to determine total utility by:

summing up the marginal utilities of each unit consumed.

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

the marginal utility per dollar is the same for both goods

Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. Bob's utility maximizing point is:

1 movie; 3 gym workout sessions

Marginal utility can:

be positive, negative, or zero

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

one-third

As a general rule, utility-maximizing choices between consumption goods occur where the:

price ratio and marginal utilities ratio of two goods is equal.