Homework #4 ECON

A consumer satisfies the condition MUx/Px = MUy/Py when his indifference curve ________ his budget constraint. 1/1 A) is completely above B) is completely below C) is just tangent to D) crosses

C

Geneva is spending her entire income on goods X and Y. Her marginal utility from the last units of X and Y that she consumes is 36. Geneva's utility is only maximized if 1/1 A) the prices of X and Y are the same. B) the price of good X is twice that of good Y. C) the price of good Y is twice that of good X. D) We cannot determine whether Geneva is maximizing her utility.

A

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 1/1 A) marginal utility of a slice of pizza is positive but decreasing. B) marginal utility of a slice of pizza is negative. C) total utility of slices of pizza is declining. D) total utility of slices of pizza is increasing by larger and larger increments.

A

Refer to Figure 2. The ________ is the ratio of the marginal utility of ice cream cones to the marginal utility of ice cream sandwiches. 1/1 A) slope of the indifference curve B) slope of the budget constraint C) maximum number of ice cream cones that can be purchased D) maximum number of ice cream sandwiches that can be purchased

A

Refer to Figure 2. The highest indifference curve depicted is the one on which point D lies. Why is Jason not maximizing his utility at point D? 1/1 A) He cannot afford point D. B) His marginal utility per dollar spent on the last ice cream sandwich is greater than his marginal utility per dollar spent on his last ice cream cone. C) His marginal utility per dollar spent on the last ice cream sandwich is less than his marginal utility per dollar spent on his last ice cream cone. D) He is maximizing his utility at point C.

A

Refer to Figure 6.9. The marginal utility of the second video game rental is A) 8. B) 10. C) 25. D) 40.

A

Refer to Table 6.2. Diminishing marginal utility sets in after the ________ candy bar per day. 1/1 A) first B) second C) third D) fourth

A

A car's real cost is its opportunity cost. Opportunity cost is determined by 1/1 A) the price of the car. B) relative prices. C) wealth. D) the prices of the goods that are compliments to a car.

B

Consider two goods: peanuts and crackers. The slope of the consumer's budget constraint is measured by the a. consumer's income divided by the price of crackers. b. relative price of peanuts and crackers. c. consumer's marginal rate of substitution. d. number of peanuts purchased divided by the number of crackers purchased.

B

Ellie is spending her entire income on goods X and Y. Her marginal utility from the last unit of X is 100 and the marginal utility from the last unit of Y that she consumes is 50. Ellie's utility is only maximized if 1/1 A) the prices of X and Y are the same. B) the price of good X is twice that of good Y. C) the price of good Y is twice that of good X. D) We cannot determine whether Ellie is maximizing her utility.

B

If MUx/Px < MUy/Py, then 1/1 A) spending a dollar less on Y and a dollar more on X increases utility. B) spending a dollar less on X and a dollar more on Y increases utility. C) X is more expensive than Y. D) Y is more expensive than X.

B

Refer to Figure 1. Suppose a consumer has $500 in income, the price of a book is $10, and the value of B is 50. What is the price of a DVD? 1/1 Figure 1. Figure 1. a. $5 b. $10 c. $50 d. $100

B

Refer to Figure 6.9. The marginal utility of the first video game rental is 1/1 A) 0. B) 10. C) 8. D) -10.

B

Refer to Table 6.2. If the price of a candy bar is $1, the price of a hot dog is $2, and Aaron has $6 of income, Aaron's utility-maximizing combination of candy bars and hot dogs per day is 1/1 A) 1 candy bar and 2 hot dogs. B) 4 candy bars and 1 hot dog. C) 2 candy bars and 1.5 hot dogs. D) indeterminate from this information.

B

Ricardo eats 20 pieces of sushi on a Friday night. When he eats the 21st piece, he starts to feel nauseous and realizes he probably should not have eaten the last piece. This suggests that for Ricardo the 1/1 A) marginal utility of the 21st piece of sushi is positive and increasing. B) marginal utility of the 21st piece of sushi is negative. C) total utility of pieces of sushi is increasing. D) total utility of pieces of sushi is increasing by larger and larger increments.

B

The law of diminishing marginal utility is in effect when marginal utility is 1/1 A) positive and increasing. B) positive and decreasing. C) initially zero and then increasing. D) initially zero and then decreasing.

B

The law of diminishing marginal utility refers to 1/1 A) a consumer's decrease in total satisfaction as she consumes more units of a good. B) a consumer's decrease in additional satisfaction as she consumes more and more units of a good. C) the idea that total utility is negative. D) the idea that marginal utility is negative.

B

The marginal utility of the first cup of coffee that Tom drinks in the morning is worth $2.00. The marginal utility of the 9th cup of coffee he drinks is positive while the marginal utility of the 10th cup of coffee he drinks in the morning is worth $0. This implies that at a price of $0, Tom would drink 1/1 A) zero cups of coffee per morning. B) at most 10 cups of coffee per morning. C) more than 10 cups of coffee per morning, but the actual number is indeterminate from this information. D) an infinite number of cups of coffee each morning.

B

A family on a trip to Hawaii budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel? 1/1 a. 1 b. 2 c. 5 d. 8

C

A utility-maximizing consumer buys so as to make ________ for all pairs of goods. 1/1 A) Px(MUx) = Py(MUy) B) TUx/Px = TUy/Py C) MUx/MUy = Px/Py D) MUx = MUy

C

For Matthew, the marginal utility of the 9th soda in a day is positive and the marginal utility of the 10th soda in a day is zero. This 1/1 A) implies that Matthew's demand curve for sodas per day will become upward sloping at 10 sodas per day. B) is impossible because each additional unit of consumption of any good must provide positive marginal utility. C) implies that at a zero price Matthew's demand curve will intersect the quantity axis at 10. D) implies that Matthew maximizes utility by consuming 9 sodas per day.

C

Jon is consuming X and Y so that he is spending his entire income and MUx/Px = 8 and MUy/Py = 4. To maximize utility, he should consume 0/1 A) the same amount of X and Y since he is already maximizing utility. B) less of both X and Y. C) more X and less Y. D) less X and more Y.

C

Refer to Figure 1. Suppose the price of a book is $15, the price of a DVD is $10, the value of A is 5, and the value of B is 7.5. How much income does the consumer have? 1/1 a. $150 b. $100 c. $75 d. $37.50

C

Refer to Figure 2. If the price of an ice cream cone is $2, Jason's income is Figure 2. Figure 2. A) $75. B) $250. C) $300. D) indeterminate because the price of ice cream sandwiches is not given.

C

Refer to Table 6.2. The marginal utility of the second candy bar per day is A) 10. B) 15. C) 35. D) 55.

C

The ratio of the marginal utility of coffee to the marginal utility of donuts is four for an individual maximizing utility. This implies that A) a donut is four times more valuable than a cup of coffee. B) the coffee to donuts price ratio is one to four. C) the coffee to donuts price ratio is four to one. D) this person always eats donuts with coffee.

C

A person maximizes utility when he equalizes the ________ across products. 1/1 A) total utility B) total utility per dollar spent C) marginal utility D) marginal utility per dollar spend

D

Darius has $1,200 a month to spend on clothing (c) and food (f). The price of clothing is $60 and the price of food is $10. What is the equation for Darius's budget constraint, assuming he spends his entire budget? 1/1 A) Clothing + Food < $1,200 B) $60 × Clothing + $10 × Food ≤ $1,200 C) $60 × Clothing + $10 × Food > $1,200 D) $60 × Clothing + $10 × Food = $1,200

D