Ch. 6 Microeconomics

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

In terms of microeconomic analysis, what is the function of "utils"?

a measurement of utility

The most common pattern for marginal utility is ____________________.

diminishing marginal utility

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

Approximately what portion of annual consumption is typically spent by American households on shelter?

one-third

The theoretical model of the intertemporal budget constraint for the U.S. economy as a whole suggests that the most common pattern seems to be that:

the quantity of savings doesn't adjust much to changes in the rate of return

Which of the following occurs simultaneously with an income effect?

substitution effect

Which of the following is most likely to cause variation in American household spending patterns?

~differing levels of family income ~geographical location of households ~each household's personal preferences

Jed's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Jed knows that 2 pizzas and 4 burgers will give him a utility of 8. At his utility-maximizing point, Jed's utility is:

8

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

individuals choose based on their preferences.

The _________________ budget constraint shows the tradeoff between present and future consumption.

intertemporal choice

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

the marginal utility per dollar is the same for both goods