Household Behavior and Consumer Choice

Assume Sally is initially in equilibrium and that X and Y are normal goods for her. Then the price of X rises. For Sally to move to a new equilibrium point her consumption of A. X must decrease. B. X must increase. C. X must remain​ constant, but her consumption of Y must increase. D. both X and Y must increase.

A. X must decrease.

The law of diminishing marginal utility implies that A. demand curves always slope downward and to the right. B. supply curves always slope upward and to the right. C. total utility will always increase by an increasing amount as consumption increases. D. a consumer will always buy positive amounts of all goods.

A. demand curves always slope downward and to the right.

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. the coffee to donuts price ratio is four to one. B. this person always eats donuts with coffee. C. a donut is four times more valuable than a cup of coffee. D. the coffee to donuts price ratio is one to four.

A. the coffee to donuts price ratio is four to one.

If the price of a soda is​ $2, the price of a hamburger is​ $6, and George has​ $14 of​ income, George's utility maximizing combination of sodas and hamburgers per day is A. 4 sodas and 1 hamburger. Your answer is correct.B. 1 soda and 2 hamburgers. C. 3 sodas and 1.5 hamburgers. D. indeterminate from this information.

A.4 sodas and 1 hamburger. (Diagram)

Adriana is maximizing her utility. Her MUx​/Px​ = 10 and MUy​ = 60. Then the price of Y must be A. ​$1. B. ​$6. C. ​$10. D. ​$60.

B. $6. (Fraction)

The total utility of five hamburgers per day is A. 96. B. 80. C. 76. D. indeterminate from this information.

B. 80. (Diagram)

A price change would have the largest income effect on a A. magazine. B. car. C. piece of clothing. D. tablet computer.

B. car.

Richard is consuming X and Y so that he is spending his entire income and StartFraction MU Subscript Upper X Over Upper P Subscript Upper X EndFraction equals 6 MUX PX=6 and StartFraction MU Subscript Upper Y Over Upper P Subscript Upper Y EndFraction equals 10 MUY PY=10. To maximize​ utility, he should A. consume more X and less Y. B. consume less X and more Y. C. consume less of both X and Y. D. continue to consume the same amount of X and Y since he is already maximizing utility.

B. consume less X and more Y. (Fractions)

If StartFraction MU Subscript Upper X Over Upper P Subscript Upper X EndFraction MUX PX ​< StartFraction MU Subscript Upper Y Over Upper P Subscript Upper Y EndFraction MUY PY​, then 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. Your answer is correct.C. X is more expensive than Y. D. Y is more expensive than X.

B. spending a dollar less on X and a dollar more on Y increases utility. (Fractions)

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

B. spending a dollar less on Y and a dollar more on X increases utility.

Sue is maximizing her utility. Her StartFraction MU Subscript Upper X Over Upper P Subscript Upper X EndFraction MUX PX ​= 10 and MU Subscript Upper YMUY ​= 40. Then the price of Y must be A. ​$10. B. ​$1. C. ​$4. D. ​$40.

C. $4 (Fraction problem)

A​ utility-maximizing consumer buys so as to make​ ________ for all pairs of goods.

C. (Answer are in fractions)

The marginal utility of the third hamburger per day is A. 67. B. 5. C. 15. D. 22.

C. 15 (Diagram)

The marginal utility of the second hamburger per day is A. 52. B. 10. C. 22. D. 15.

C. 22 (Diagram)

Marginal utility is the​ ________ satisfaction gained by consuming​ ________ of a good. A. ​additional; all units B. ​total; one more unit C. ​additional; one more unit D. ​total; all units

C. additional; one more unit

A price change would have the smallest income effect on a A. pair of shoes. B. bicycle. C. pack of chewing gum. D. pickup truck.

C. pack of chewing gum.

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 A. the price of good Y is twice that of good X. B. the prices of X and Y are the same. C. the price of good X is twice that of good Y. D. We cannot determine whether Ellie is maximizing her utility.

C. the price of good X is twice that of good Y.

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

D. a​ consumer's decrease in additional satisfaction as she consumes more and more units of a good.

If the price of a normal good​ rises, the income effect will result in households buying​ ________ of the good and the substitution effect will result in households buying​ ________ of the good. A. ​more; more B. ​more; less C. ​less; more D. ​less; less

D. less; less

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

D. marginal utility of a slice of pizza is positive but decreasing.

A rise in the price of Pepsi that causes a household to shift its purchasing pattern toward Coke and away from Pepsi is the​ ________ effect of a price change. A. diminishing marginal utility B. income C. complementary D. substitution

D. substitution

Kyle would increase his consumption of turkey sandwiches from 7 to 9 per week if their price fell from​ $6 to​ $4. This illustrates the idea of A. ​cross-price elasticity of demand. B. technical efficiency. C. consumer surplus. D. the law of diminishing marginal utility.

D. the law of diminishing marginal utility. (Diagram)

Total utility is A. used to compare different​ people's likes and dislikes. B. the additional satisfaction gained by consuming one more unit of something. C. relatively easy to measure. D. the total amount of satisfaction yielded by the consumption of a good or service.

D. the total amount of satisfaction yielded by the consumption of a good or service.

A negative marginal utility implies negative total utility. True False

False

If MUx​/Px exceeds MUy​/Py​, then a household can increase its utility by spending more on Y and less on X. True False

False

The law of diminishing marginal utility implies that total utility never reaches a maximum. True False

False

When marginal utility is​ zero, total utility is at a minimum. True False

False

The law of diminishing marginal utility implies that as a household consumes more of a​ product, its total utility will increase by smaller amountslong dash—assuming marginal utility remains positive. True False

True

Total utility can be positive even when marginal utility is negative. True False

True

When consumers maximize​ utility, they are equating the ratio of marginal utility to price across all goods consumed. True False

True