ECO2023- CH5Micro Exam 3 P2

Which of the following statements best captures the concept of consumer surplus?

"I was willing to pay $30 for a dozen roses, but I bought them for $20."

Refer to Figure 19.1. Ben's consumer surplus is equal to

$0 The maximum that Ben is willing to pay for the cell phone is $50, which is below the actual price of $100, so he does not receive any consumer surplus.

See Figure 19.1. Lu's consumer surplus is equal to

$500 An individual's consumer surplus is the difference between the maximum she or he is willing to pay and the actual price. Here Lu's maximum willingness to pay is $600 and the actual price is $100. Her consumer surplus is equal to $600 - $100 = $500.

Refer to Figure 19.1. The total consumer surplus in this market is equal to

$900 The total consumer surplus is the total of the differences between each individual's maximum willingness to pay and the actual price. The total for the three consumers is ($600 - $100) + ($400 - $100) + ($200 - $100) = $900

Refer to Figure 19.2. The total utility of two apples is

11 utils The total utility derived from consuming a product comes from the marginal utilities of each successive unit. The total utility of two apples is 6 + 5 or 11 utils.

In Table 19.3, what is the marginal utility of the fifth unit of cola?

12 Marginal utility is the change in total utility obtained by consuming one additional good or service. Total utility increases from 112 to 124 when the fifth unit is consumed, an increase of 12 utils.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $1, the consumer would maximize utility by consuming

15 units of Y If the price of Y is $1, one can infer that the maximum spendable income is $30 based on the point where the budget constraint crosses the y-axis. If the price of X is $1, the budget constraint farthest from the origin is the limit. Because the optimal consumption combination lies at the point where the budget line is tangent to (just touches) an indifference curve, point C maximizes utility, which is the combination of 15 X and 15 Y.

Refer to Table 19.3. If Michael has $40 to spend on cola and pretzels, what is his maximum utility possible?

174 To maximize utility, the consumer should choose the goods that deliver the most marginal utility per dollar at each step. With $40 Michael would consume three colas and four pretzels, which would bring him a total of 174 utils.

Refer to Figure 19.2. The total utility of five apples is

18 utils The total utility derived from consuming a product comes from the marginal utilities of each successive unit. The total utility of five apples is 6 + 5 + 4 + 2 + 1 or 18 utils.

Most goods can yield

Both positive and negative marginal utility

If a successful advertising campaign increases brand loyalty,

Demand for the advertised good will become less elastic.

If Josh's income increases, then

His entire budget constraint will shift away from the origin.

Assume that Anna buys peanut butter and bread. If the price of peanut butter falls, then

One end of her budget constraint will move away from the origin

Refer to Figure 19.2. Diminishing marginal utility begins after

The first apple

According to the law of demand, ceteris paribus,

The quantity demanded increases at lower prices.

The market demand for a product is

The sum of all of the individual demands for that product.

All of the possible combinations of two goods that lie on one indifference curve

Yield the same level of utility

The ___________ surplus will rise if the price of the good ________.

consumer; falls

Refer to Figure 19.2. With no budget constraint, a rational consumer will consume _________ apple(s).

six As long as marginal utility is positive, total utility must be increasing; but when marginal utility is negative, consumption of one more good will decrease total utility. Therefore total utility is maximized at the consumption level where marginal utility is neither positive nor negative

The _________ of the demand curve corresponds to the idea that the marginal utility for the first few goods is _____________________.

top; higher

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $3, the consumer would maximize utility by consuming

21 units of Y If the price of Y is $1, one can infer that the maximum spendable income is $30 based on the point where the budget constraint crosses the y-axis. If the price of X is $3, the budget constraint closest to the origin is the limit. Because the optimal consumption combination lies at the point where the budget line is tangent to (just touches) an indifference curve, point A maximizes utility, which is the combination of 3 X and 21 Y.

In Table 19.2, the total utility when two units are consumed is

24 The total utility when one unit is consumed is 15 and the second unit adds 9 additional utils, which causes total utility to increase to 24

In Table 19.2, the total utility when four units are consumed is

33 The total utility when three units are consumed is 30, and the fourth unit adds 3 additional utils, which causes total utility to increase to 33.

In Table 19.3 the marginal utility per dollar of the second cola is

4 The marginal utility per dollar is equal to the marginal utility divided by the price of the product. The marginal utility of the second cola is 32, so the marginal utility per dollar is 32/8=4.

The marginal utility per dollar of the third pretzel is

4 The marginal utility per dollar is equal to the marginal utility divided by the price of the product. The marginal utility of the third pretzel is 16 and the price of a unit of pretzel is $4. So 16/4 = 4.

Refer to Table 19.1. The marginal utility Josh enjoys from the fourth slice of pizza is

5 utils. Marginal utility is the change in total utility as a buyer consumers more units of a good. The change in marginal utility from the third to the fourth slice of pizza is 59 - 54 = 5.

Refer to Table 19.1. What is Josh's total utility from consuming the third slice of pizza?

54 utils Total utility is the sum of all of the marginal utilities. If you add the 15 marginal utility units that Josh received from consuming the third slice of pizza to the total utility units of 39 he enjoyed from the second slice, 39 + 15 = 54.

In Table 19.2, the marginal utility of the third unit is

6 Marginal utility is the change in total utility obtained by consuming one additional good or service. Total utility increases from 24 to 30 when the third unit is consumed, an increase of 6 utils.

Refer to Figure 19.2. Total utility is maximized at

6 apples As long as marginal utility is positive, total utility must be increasing; but when marginal utility is negative, consumption of one more good will decrease total utility. Therefore total utility is maximized at the consumption level where marginal utility is neither positive nor negative.

In Table 19.3, what is the total utility of two units of cola?

72 The total utility when one unit is consumed is 40, and the second unit adds 32 additional utils, which causes total utility to increase to 72.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $3, the consumer would maximize utility at point

A If the price of Y is $1, one can infer that the maximum spendable income is $30 based on the point where the budget constraint crosses the y-axis. If the price of X is $3, the budget constraint closest to the origin is the limit. Because the optimal consumption combination lies at the point where the budget line is tangent to (just touches) an indifference curve, point A maximizes utility.

Which of the following is used to depict all combinations of goods that are affordable with a given income and given prices?

A budget constraint.

If a product has a high marginal utility, then

A consumer is willing to pay a high price for it.

An indifference map shows

A set of indifference curves.

Refer to Table 19.1. For Josh, diminishing marginal utility begins

After the first slice of pizza.

The law of diminishing marginal utility states that

As a consumer enjoys successive units of a good, eventually marginal utility will fall.

In the article "Men vs. Women: How They Spend,"

Both sexes spend more than they earn.

Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips. The marginal utility of the last bottle of soft drink purchased is 12 utils, and each bottle costs $1.20. The marginal utility of the last bag of chips purchased is 8 utils, and each bag costs $1. In order to maximize his utility, Caesar should

Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks

Price discrimination works best when

Buyers do not have perfect information about the price

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $1, the optimal consumption is found at point

C If the price of Y is $1, one can infer that the maximum spendable income is $30 based on the point where the budget constraint crosses the y-axis. If the price of X is $1, the budget constraint farthest from the origin is the limit. Because the optimal consumption combination lies at the point where the budget line is tangent to (just touches) an indifference curve, point C maximizes utility.

When economists refer to the determinants of demand, they are referring to factors that when changed

Cause the demand curve to shift left or right.

Marginal utility is the

Change in total utility obtained by consuming one extra unit of a good or service.

Airline companies engage in price discrimination by

Charging business customers higher prices than vacation travelers

Sellers can gain profits from price discrimination because

Charging different prices based on willingness to pay can increase revenues without increasing costs.

An indifference curve shows the

Combinations of goods giving equal utility to a consumer.

The benefit that consumers get when they buy goods at the equilibrium price but were willing to pay more is called

Consumer surplus

Graphically, as a consumer buys more of a good, the marginal utility line will

Continuously decline if diminishing returns are present

Sociopsychiatric explanations of consumer behavior include the

Desire for ego and status.

Status and ego considerations in consumption are economic explanations of demand.

FALSE

Refer to Table 19.3. If Michael has $48 to spend on cola and pretzels, what combination should he purchase in order to maximize his utility?

Four colas and four pretzels. To maximize utility, the consumer should choose the goods that deliver the most marginal utility per dollar at each step. With $48 Michael would consume four colas and four pretzels.

As compared to sociologists and psychologists, economists accept consumer tastes as given and instead focus on

How price will affect actual consumer purchases.

A successful advertising campaign will

Increase the demand for the advertised good.

As more satisfaction is achieved from consuming a good with diminishing marginal utility, then total utility

Increases at a decreasing rate.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. In Figure 19.3, point E

Is a very high level of utility but not affordable.

Price discrimination

Is a way for sellers to exact the maximum willingness to pay from buyers.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. Point D on the graph

Is affordable but does not yield the highest utility possible.

If an individual demands a good, it means that he or she

Is willing and able to purchase the good at some price.

Assume Amanda always maximizes her total utility given her budget constraint. Every morning for breakfast she has two eggs and three sausages. If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each, what can we say about the marginal utility of the last sausage if the price of each sausage is $2?

It must be equal to 20 utils.

The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of the

Law of diminishing marginal utility

The slope of the budget constraint, when a consumer has reached optimal consumption of two goods, is equal to the

Marginal rate of substitution.

The slope of the indifference curve is equal to the

Marginal rate of substitution.

Total utility is maximized when

Marginal utility is zero

Maximum utility is achieved when

Marginal utility is zero.

A consumer maximizes total utility from a given amount of income when the

Marginal utility obtained from the last dollar spent on each good is the same.

The mix of consumer purchases that maximizes the utility attainable from available income is called the

Optimal consumption.

The law of diminishing marginal utility suggests that

People are willing to buy additional quantities of a good only if its price falls.

The four determinants of demand that are held constant when we consider a movement along a demand curve include all of the following except

Price. A movement along a demand curve corresponds to a change in price only, holding income, tastes, and the availability of substitutes constant

Economic explanations of consumer behavior take into consideration

Prices and income.

Any point on the budget constraint

Represent a combination of two goods that are affordable.

The point where the budget constraint and an indifference curve are tangent

Represents the optimal consumption point.

Utility refers to the

Satisfaction obtained from a good or service.

Which of these examples is an example of price discrimination?

Seniors pay one price at the movie theater and adults pay more

Which industry here is unlikely to exhibit price discrimination?

Supermarkets Products that are purchased regularly, and that consumers have more information about, tend not to exhibit price discrimination. Airlines, new car sales, and colleges engage in price discrimination

Economists focus on the effect of changes in income and prices in influencing actual consumer purchases.

TRUE

Marginal utility represents the additional satisfaction obtained from one more unit of a good or service.

TRUE

Psychology and sociology focus on what creates desires for goods, but economics focuses on what consumers actually purchase.

TRUE

Marginal utility is

The additional utility a consumer enjoys from the consumption of one more unit of a good.

The total consumer surplus is shown on a graph as

The area under the demand curve and above the actual price

12. The marginal utility for a good is computed as

The change in total utility divided by the change in quantity.

When sellers price discriminate

They are attempting to charge a price that is the maximum price each individual is willing to pay.

Refer to Table 19.3. If Michael has $28 dollars to spend, why will three colas and four pretzels not be optimal?

This combination is not affordable

The law of diminishing marginal utility gives us a deeper understanding of the downward-sloping demand curve because

When marginal utility is high, we are willing to pay a higher price.

In Table 19.2, diminishing marginal utility occurs

With all units after the first.

Price discrimination is ________ in the United States and ________ practiced.

legal; often

Refer to Table 19.3. Suppose Michael has $28 to spend on cola and pretzels. What combination should he purchase in order to maximize his utility?

two colas and three pretzels. To maximize utility, the consumer should choose the goods that deliver the most marginal utility per dollar. The first pretzel has a MU per dollar of 7.5, the second pretzel and first cola have a MU per dollar of 5, and the third pretzel and the second coke have a MU per dollar of 4. Once Michael buys three pretzels and two colas, he will have spent his $28 and maximized his utility.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. In Figure 19.3, given an income of $30 and a price for good Y of $1, which of the following two points represent optimal consumption?

A when the price of X is $3 and C when the price of X is $1.

Rosa is willing to pay $200 for the iPhone, but the actual price is $400. This means

Rosa will not buy an iPhone.

Price discrimination occurs when

Sellers charge two separate prices for the same product to two different groups.

Car dealers can easily price discriminate because

Sellers negotiate a separate price agreement with each individual buyer.

Evaluating a supply and a demand curve independently, if the equilibrium price rises,

The consumer surplus will fall.

Which of the following is not a determinant of demand?

The cost of the factor inputs.

If advertising is successful

The demand curve shifts to the right and becomes steeper.

Consumer surplus measures

The difference between the maximum price a consumer is willing to pay and the price actually paid.

If a good had a zero price (i.e., the good was free), a rational person would consume

The good until the marginal utility of the last unit was zero.

Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because

The marginal utility of the fourth plate would be zero or even negative

When choosing among products, consumers look at

The marginal utility per dollar and their budget constraint.

Which of the following is not held constant when considering a shift in the demand for pizza?

The price of pizza.

10. Total utility is

The sum of the marginal utilities from the consumption of good.

If marginal utility is negative, then

Total utility will decrease with additional consumption.

76. The In the News article titled "Men vs. Women: How They Spend" differentiates the spending habits of women and men: "Men spend almost twice as much as women do on electronic equipment ... young women spend twice as much money on clothing, personal care items, and their pets." Which determinant of demand is most likely involved?

tastes Even though young men have a little more after-tax income than do young women, the spending habits of women and men reflect differences in tastes where men enjoy entertainment items and women enjoy personal items