Microeconomics HW

Suppose you have $10 to buy either onions or breath mints. Onions cost $0.50 each and breath mints cost $1.00. On a graph onions are on the y-axis and breath mints are on the x-axis. If the price of breath mints increase while the price of onions and your budget stay the same, what happens to the budgets line?

The horizontal intercept shifts inward, closer to the origin.

Dave bought a pizza which was divided into five slices. After eating the third slice he couldn't eat the fourth slice. Applying the law of diminishing marginal utility to this scenario which of the following statements is true?

The marginal utility derived from the fourth slice is less than the marginal utility derived from the third slice.

Suppose you have $10 to buy either onions or breath mints. Onions cost $0.50 each, and breath mints cost $1.00. On a graph, onions are on the y-axis and breath mints are on the x-axis. If the price of onions decreases while the price of breath mints and your budget stay the same, what happens to the budgets line?

The vertical intercept shifts upward, away from the origin.

____ maximization assumes that consumers attempt to get the maximum total utility possible out of their limited incomes.

Utility

The difference between total utility and marginal utility is that marginal utility is the:

added satisfaction of consuming another unit of the good whereas total utility is the cumulative marginal utilities of all units consumed.

Marginal utility is the:

additional satisfaction or happiness received from the consumption of an additional unit of a good or service.

A curve that shows the combinations of two products that generate the same amount of total utility or satisfaction is called

an indifference curve.

(PA x QA + PB x QB ) describes the ____ constraint.

budget

A ____ line shows the different combinations of two goods that can be purchased with a given budget and at a known set of prices.

budget

Because of diminishing marginal utility indifference curves are

convex to the origin.

Utility maximization helps explain the substitution effect that is noted when explaining the law of ____.

demand

Indifference curves are convex to the origin due to

diminishing marginal utility.

You will be able and willing to consume more units only if they become less expensive than the previous units. This is because you derive less and less additional satisfaction from the consumption of additional units of a good or service according to the law of:

diminishing marginal utility.

Utility maximization implies purchasing goods and services until their marginal utilities per ____ are equal. (Use one word for the blank.)

dollar

Consumers maximize utility when they allocate their limited incomes so that the marginal utility per dollar spent on each of their final choices in a bundle is equal according to the:

equal marginal principle

Diminishing marginal utility means total utility is:

increasing at a decreasing rate as long as marginal utility is positive.

Not every decision consumers make will turn out to be perfect because consumers can never have all the ____ they might need to make the perfect decision.

information, knowledge, data, factors, info, or details

An indifference curve that is farther from the origin

is preferred to one that is closer to the origin.

A combination of goods and services that lies outside the budget line

is unattainable with the current budget at current prices.

A combination of goods is considered unattainable if

it lies outside the budget line.

On a budget line graph, a decrease in income and/or an increase in the prices of both goods will shift the budget line to the ____.

left or down

If you derive less and less additional utility from the consumption of additional units of a good or service you will be able and willing to consume more units only if they become ____ expensive than the previous units.

less

The additional satisfaction or happiness received from the consumption of an additional unit of a good or service is the ____ utility of the good or service.

marginal

The ______ of consuming another slice of pizza at a local sports event is the additional satisfaction you will receive by eating that slice.

marginal utility

The law of diminishing marginal utility states that the:

marginal utility associated with the consumption of a good or service becomes smaller with each extra unit that is consumed in a given time period.

When deciding between purchasing two goods, an individual should purchase the good with the highest:

marginal utility per dollar.

Marginal utility may be decreasing when more units are consumed but as long as marginal utility is ____, total utility will increase when another unit is consumed. (Choose between positive or negative.)

positive

An indifference curve shows

the combinations of two products that generate the same amount of total utility or satisfaction.

A budget line shows

the different combinations of two goods that can be purchased with a given budget and at a known set of prices.

Examining the budget constraint for a household with clothing on the vertical axis and food on the horizontal axis, the vertical intercept of the budget line represents:

the quantity of clothing purchased if all income is spent on clothing.

The sum of marginal utilities equals ____ utility.

total

Total utility is the

total satisfaction or happiness received from the consumption of a good, service, or combination of goods and services.

The total satisfaction or happiness received from the consumption of a good service or combination of goods and services is called

total utility.

In economics, the satisfaction or happiness received from the consumption of goods and services is known as ____.

utility

The _____ maximizing bundle of goods and services occurs where the indifference curve is tangent to the budget line.

utility

The process of obtaining the greatest level of overall satisfaction or happiness from consuming goods and services subject to consumers' preferences incomes and prices is called

utility maximization.

The process of obtaining the greatest level of overall satisfaction or happiness from consuming goods and services subject to consumers' preferences incomes and prices is known as:

utility maximization.

The utility-maximizing bundle of goods and services occurs

where the indifference curve is tangent to the budget line.

Which of the following is not one of the four assumptions about utility maximization?

Consumers are homogeneous.

The total satisfaction or happiness received from the consumption of a good or service or a combination of goods and services is known as ____ utility; whereas the additional satisfaction or happiness received from the consumption of an additional unit of a good or service is known as ____ utility.

Blank 1: total Blank 2: marginal

What is the utility-maximizing consumption bundle if the individual has $25 to spend?

1 movie and 3 books

Below is a list of assumptions about decision making. 1. Consumers are rational. 2. Consumers are selfish. 3. Consumers have limited incomes. 4. Consumers have limited wants. 5. Consumers can rank preferences. 6. Consumers acknowledge prices. What do economists assume when evaluating the utility-maximizing decision-making process?

1, 3, 5, and 6

What is the utility-maximizing consumption bundle if the individual has $4 to spend?

2 apples and 1 orange

Alex is consuming candy bars that cost $1 each. When he purchases the 5th candy bar his total utility increases from 6 utils to 8 utils. What is the marginal utility of the 5th candy bar?

2 utils Total utility (2) / price ($1) = 2 utils

The table below depicts the total utility when consuming cups of coffee. What is the marginal utility of the second cup of coffee?

3 utils

Suppose that a household can purchase fruit for $3 per pound and vegetables for $2 per pound. If the household can contribute $12 a week toward the consumption of these goods which of the following points could be found on the budget line?

4 pounds of fruit and 0 pounds of vegetables.

Which of the following is true of 'information'?

Acquiring information is costly.

Suppose marginal utility is decreasing when more units are consumed. Which of the following statements is true?

As long as marginal utility is positive total utility will increase when another unit is consumed.

The law of diminishing marginal utility states that the (total/marginal) utility associated with the consumption of a good or service becomes (less/more) with each additional unit that is consumed in a given time period. (Choose your answer from the options given in the brackets.)

Blank 1: marginal Blank 2: less or smaller

The total satisfaction or happiness received from the consumption of a good service or combination of goods and services refers to the ___ utility; whereas the additional satisfaction or happiness received from the consumption of an additional unit of a good or service refers to the ____ utility.

Blank 1: total Blank 2: marginal

By always selecting the best option after considering all benefits and costs, you will increase your total ____. (Enter only one word in the blank.)

Blank 1: utility or satisfaction

Assuming John has the income to purchase either good, which statement is true?

John should first purchase a slice of pizza because the marginal utility per dollar is higher than hamburgers.

The budget condition is given by which of the following?

PA x QA + PB x QB

Consumers seek to maximize satisfaction based on:

Preferences, budget, and the prices of the goods and services purchased.

When consumer income increases but the price of each good does not change what happens to the budget line?

The budget line shifts right.

Suppose you have $10 to buy either onions or breath mints. Onions cost $0.50 each and breath mints cost $1.00. On a graph onions are on the y-axis and breath mints are on the x-axis. If the price of onions and the price of breath mints stay the same but your budget increases, what happens to the budgets line?

The entire budget line shifts outward (to the right).

Utility maximization refers to the

greatest level of overall satisfaction from consuming goods and services subject to preferences incomes and prices.

Systematically thinking about the benefits associated with the consumption of goods and services can:

help consumers make better decisions.

Utility maximization assumes that consumers attempt to get the most total utility possible out of their limited ____. (Enter one word in the blank.)

income, budget, incomes, resources, wealth, or money

The marginal utility associated with eating one sub sandwich is 5 utils. The marginal utility of a second sandwich is 3 utils. In this case total utility (increases/decreases) with the consumption of the second sandwich.

increases or increase

A curve that shows the combinations of two products that generate the same amount of total utility or satisfaction is called an ____ curve.

indifference

The additional satisfaction or happiness received from the consumption of an additional unit of a good or service is called

marginal utility

Utility maximization is the process of obtaining the greatest level of:

overall satisfaction or happiness from consuming goods and services, subject to consumers' preferences, incomes, and prices.

On a budget line graph, an increase in income and/or a decrease in the prices of both goods will shift the budget line to the ____.

right or up

Consumers seek to maximize (satisfaction/total revenue) based on their preferences, limited incomes, and the prices of the goods and services available to them. (Choose your answer from the options given in the brackets.)

satisfaction or utility

Utility maximization helps explain the ____ effect that is noted when explaining the law of demand. (Enter one word in the blank.)

substitution

Total utility is equal to the:

sum of marginal utilities

Even though the price per ounce of popcorn is much lower for the largest size at a movie theater not everyone buys the large bucket of popcorn because:

the extra utility from the extra popcorn is less than the extra cost to the buyer.

Economists measure utility with a unit called the ____, which is subjective in nature.

util

By always selecting the best option after considering all benefits and costs, you will increase your total ____.

utility or satisfaction