ECON 2010 Quiz 5

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

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

The marginal utility per dollar is the same for both goods

shows the possible combinations of two goods that are affordable given a consumer's limited income

budget constraint line

the common pattern that each marginal unit of a good consumed 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?

each of the above will cause a variation

a higher price means that, in effect, the buying power of income has been reduced, even though actual income has not changed; always happens simultaneously with a substitution effect

income effect

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 key assumption that accompanies the use of numbers for measuring utility is that:

individuals choose based on their preferences.

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:

is maximizing utility.

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

marginal utility

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.

satisfaction derived from consumer choices

total utility

when a price changes, 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; always happens simultaneously with an income effect

substitution effect

The marginal utility of two goods changes ______________.

with the quantities consumed