NOVA Econ 202 Quiz 6

The marginal utility of two goods changes ______________.

with the quantities consumed

In May and June, Tammy spent all her clothing budget on bathing suits and beach bags. Each bathing suit cost $75. At Tammy's optimal choice, her marginal utility from the last bathing suit purchased is 300 and her marginal utility from the last beach bag purchased is 200. This means that each handbag must cost:

$50

Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point?

1 movie, 4 video game rentals

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

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 movies; 3 gym workout sessions

Todd is a cattle rancher. In June and July he spent his clothing budget on jeans and cowboy hats. Each pair of jeans cost $50 and each hat cost $100. At Todd's optimal choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is:

400

Refer to the diagram above. What is the significance of the point at the top of Labor Supply Curve 2 at L3 Hours of Labor Supplied?

as wages increase over this range, the quantity of hours worked actually decreases.

Marginal utility can:

be positive, negative, or zero

Even with wage increases, the supply curve of labor is most often inelastic for which of the following?

full-time workers

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

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

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

is maximizing utility.

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

market demand to shift to the left.

The government distributes food stamps to low-income families that can only be used to acquire food. The budget line graph will show food on the horizontal axis and everything else on the vertical axis. After receiving food stamps, Ted's family is able to consume the same amount of food. The new consumption point for Ted's family will be:

on the new budget line, directly above the old consumption point.

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.

During a severe recession, the government issued food stamps that could only be used to acquire food to a greater number of families. The budget line graph shows food on the horizontal axis and everything else on the vertical axis. The government expects that issuing the food stamps will cause each family's budget constraint line to:

shift to the right.

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

total utility rises, but marginal utility falls.