Econ 1010: Ch 8 Moodle Quizzes

consume more of good b and less of good a

Advise Sarah how to maximize her utility if MUa = 8, MUb = 20, Pa = 4 and Pb = 5

less of good a and more of good b

Let MUa and MUb stand for the marginal utility of goods a and b, respectively. Let Pa and Pb stand for the price of goods a and b. Assume that for a given consumer MUa and MUb are equal to each other, and Pa is greater than Pb. In this case, the consumer is better off if he consumes ___

MUa/MUb = Pa/Pb

Let MUa and MUb stand for the marginal utility of goods a and b, respectively. Let Pa and Pb stand for the price of goods a and b. What is the formula for consumer equilibrium?

>; decreases

Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of Y rises. Immediately after the rise in price MUx/Px ___ MUy/Py, and then Ron ___ his consumption of Y

none of the above

Ron starts out in consumer equilibrium, consuming two goods, X and y. Ron's income rises. At this point, we can definitely conclude that ___

how much income he has to spend and the prices of one litre of gasoline and one cup of coffee

Sam buys gasoline and coffee each week. To draw his budget line for gasoline and coffee, Sam needs to know ___

$0.25

Samir consumes apples and bananas and is in consumer equilibrium. The marginal utility from his last apple is 10 and the marginal utility from his last banana is 5. If the price of an apple is $0.50, then what is the price of a banana?

the marginal utility from the last purchased beer is greater than the marginal utility from the last purchased bubble gum

Sergio is maximizing utility in his consumption of beer and bubble gum. If the price of beer is greater than the price of bubble gum, then we know ___

utility can be increased by increasing the consumption of X and decreasing the consumption of Y

Suppose a consumer spends all his income. His marginal utility per dollar on X is 4 and marginal utility per dollar on Y is 2. We know that ___

the sum of the marginal utilities of each unit consumed

Total utility equals

increasing when marginal utility is positive

Total utility is always ___

bounded self-interest

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying ___

quantity of one good on the vertical axis and the quantity of the second good on the horizontal axis

A budget line is drawn with the ___

5/7

A consumer maximizes his utility by purchasing 2 units of good X at $5 per unit and 3 units of good Y at $7 per unit. What is the ratio of the marginal utility from X to the marginal utility of good Y at $7 per unit.

the endowment effect

According to a behavioural economist, a person who is unwilling to sell the last kilogram of rice he purchased for the same price that he paid for it is displaying ___

increases at a decreasing rate

According to the principle of diminishing marginal utility, as consumption of a god increases, total utility ___

the demand for normal goods decreases

As a consumer's income decreases, marginal utility theory predicts that ___

marginal utility decreases

As more of a good is consumed, its ___

studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behaviour

Behavioural economics ___

the reason why we do not always make rational economic decisions

Behavioural economics and neuroeconomics seek to achieve ___

increases her total utility

Beverly is currently in consumer equilibrium. An increase in her income ___

the marginal utility from candy will be equal to the marginal utility from popcorn

Billy likes candy and popcorn. Candy sells for $0.50 a bag and popcorn sells for $1 per bag. Currently he is in consumer equilibrium. Then the price of candy rises to $1 a bag. ___ is true in the new consumer equilibrium.

100

Billy likes chocolate bars and popcorn. Chocolate bars sell for $1.50 each and popcorn sells for $3 a bag. Currently he is in consumer equilibrium with marginal utility per dollar on popcorn equal to 100. What is the marginal utility per dollar on chocolate bars?

Chuck will have lower marginal utility than Barry for each normal good consumed

Chuck and Barry have identical total utility schedules but Chuck has a much higher income. If each is maximizing his total utility, then ___

can increase her total utility by spending less time golfing and more time playing tennis

Cindy has $70 a month to spend, and she can spend as much time as she likes playing golf and tennis. The price of an hour of golf is $10, and the price of an hour of tennis is $5. If Cindy equalizes the marginal utility per hour form golf and from tennis, she ___

1 hour of windsurfing and 3 hours of snorkeling

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1. Suppose Devon's total income $35. If the price of windsurfing rises $20 per hour, how long does Devon choose to windsurf and to snorkel?

1.5 (cross)

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1. Suppose Devon's total income is $35. If the price of windsurfing rises to $20 per hour, what is Devon's cross elasticity of demand of snorkeling with respect to the price of windsurfing?

1.5 (demand)

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1. Suppose Devon's total income is $35. If the price of windsurfing rises to $20 per hour, what is Devon's price elasticity of demand for windsurfing?

0.64

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1. Suppose that Devon's total income rises from $35 to $55, ceteris paribus. Given that Devon changes his choice of windsurfing and snorkeling, what is his income elasticity for windsurfing?

4 hours of windsurfing and 3 hours of snorkeling

Consider Devon's utility from snorkeling and windsurfing in Table 8.3.1. Devon has $55 to spend. What are devon's choices for time spent on the two activities?

3 hours windsurfing and 1 hour snorkeling

Devon enjoys windsurfing and snorkeling. His total utility from each activity is summarized in table 8.3.1. Devon has $35 to spend. How long will Devon choose to windsurf and to snorkel?

the marginal utility per dollar from all goods and services consumed must be equal

For a consumer to maximize utility from a given income,

bounded willpower

Gene plays another hour of computer games rather than study for the hour even though he knows that the next day when he takes his test he will regret his decision. Gene is showing ___

consumption of oranges decreases; consumption of apples could either increase or decrease

Harold can consume apples and oranges. He likes them equally well and currently is in consumer equilibrium. Then the price of oranges rises, while his income remains the same. What will happen to his consumption?

by consuming more pens and fewer milkshakes

Harold can consume either pens or milkshakes. The price of a pen is $1, and the price of a milkshake is $1. Harold knows that when his income is spent, his marginal utility from pens will be 10 and his marginal utility from milkshakes will be 8. Harold is better off ___

her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility, then

MUa/Pa = MUb/Pb

If Ms. Peterson is maximizing her utility in the consumption of goods a and b, what is the formula?

bounded rationality

If Sean thinks that the choice between gong to Olive Garden or Red Lobster is simply too confusing, a behavioural economist will explain that Sean is showing ___

is paying the same price for each good

If Soula is maximizing her utility and consuming two goods that have the same marginal utility, she ___

total utility is maximized

If a consumer spends all his income and his marginal utility per dollar is equal for all goods, then ___

the quantity bought of each good increases

If a consumer's income increases and if all goods are normal goods, ___

the marginal utility form normal goods increases

If income falls, then in the new consumer equilibrium ___

the marginal utility from normal goods decreases and the marginal utility from inferior goods increases

If income rises, then in the new consumer equilibrium

may possibly be in equilibrium

If the marginal utilities from two goods are not equal, then the consumer ___

maximized given the consumer's income and the prices of goods

In consumer equilibrium, total utility ___

Both will consume the same amount of all goods

John and Sally have identical preferences except Sally's utility units are exactly 10 times that of John's. Both have the same income and face the same prices. What is their consumption?

oranges decreases

John likes to eat apples, oranges, and pears. If John increases his consumption of oranges, ceteris paribus, marginal utility theory tells us that John's marginal utility from ___

Lucy's demand curve for CDs shifts leftward, Lucy's demand curve for magazines shifts leftward, and Lucy buys fewer magazines and fewer CDs

Lucy buys only magazines and CDs. Both are normal goods. Lucy's income decreases, but the prices of magazines and CDs do not change. Marginal utility theory predicts that ___

the slope of the total utility curve

Marginal utility equals

marginal utility increases

Marginal utility theory assumes that when Kelly decreases the number of hockey games that she attends each week from 3 to 2, her ___

a downward-sloping demand curve

Marginal utility theory derives ___

buys fewer normal goods

Marginal utility theory predicts that when a consumer's income decreases, the consumer ___

choose to consume the same set of goods

Martha and Sarah have the same preference, face the same prices, and have the same income. Sarah's utility is measured in units while Martha's is measured in units squared. Martha and Sarah will ___

can increase his total utility by spending less time windsurfing and more time snorkeling

Max has $35 a day to spend, and he can spend as much time as he likes on his leisure pursuits. Windsurfing equipment rents for $10 an hour, and snorkeling equipment rents for $5 an hour. If Max equalizes the marginal utility per hour from windsurfing and from snorkeling, he ___

the possibilities frontier

Neuroeconomics does not study ___

decreases the consumer surplus

Other things remaining the same, marginal utility theory implies that a rise in the price of a good ___

4 units of X and 5 units of Y

Refer to 8.2.3. If income is $13, then utility is maximized when consumption is ___

47

Refer to Table 8.1.1. The value of B is ___

3

Refer to Table 8.1.1. The value of C is

more time sailing than skiing

Refer to Table 8.2.1 Consider Sam's utility from sailing and skiing. If the price of sailing is $10 per hour and the price of skiing is $20 per hour, Sam will choose to spend

4 hours and ski for 2 hours

Refer to Table 8.2.1. Consider Sam's utility from sailing and skiing. The price of sailing is $10 per hour and the price of skiing is $20 per hour; Sam's income to spend on these activities is $80. In consumer equilibrium, Sam will sail for ___

4/3

Refer to Table 8.2.2. Henry is maximizing his utility by consuming 3 bags of popcorn and 3 bottles of pop. What is the ratio of the price of popcorn to the price of pop?

490

Refer to Table 8.2.2. What is the total utility if 3 bags of popcorn and 2 bottles of pop are consumed?

5 units of X and 6 units of Y

Refer to Table 8.2.4. Suppose the price of X is $1 and the price of Y is #1. How much of each should you purchase to maximize utility from a total expenditure of $11?

decreases; decreases

Refer to Table 8.2.5. Cindy enjoys golf and tennis. The table shows the marginal utility she gets from each activity. Cindy has $70 a month to spend, and she can spend as much time as she likes on her leisure pursuits. The price of an hour of golf is $10, and the price of an hour of tennis is $5. Cindy decides to golf for 5 hours a month and play tennis for 4 hours a month. If Cindy spends a dollar more on golf and a dollar less on tennis, her total utility ___. If Cindy spends a dollar less on golf and a dollar more on tennis, her total utility ___.

<; decreases

Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of X rises. Immediately after the rise in price MUx/Px ___ MUy/Py, and then Ron ___ his consumption of X

the marginal utilities from hot dogs and Cokes must be equal

Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility form the meal for your entire budget of $12. The price of a hot dog is #2 and the price of a Coke is $2. You can conclude that ___

receive the same marginal utility from the third unit consumed

Table 8.1.2 gives total utilities for Jim and Sally. Jim and Sally ___

the limits to household's consumption choices

The budget line shows ___

are affordable and those that are unaffordable

The budget line shows the boundary between those combinations of goods and services that ___

diminishing marginal utility

The fact that your fourth slice of pizza does not generate as much satisfaction as your third slice is an example of ___

8 units

The first can of Coke gives 15 units of utility to Witney, while the second can of Coke increases her total utility to 23. What is the marginal utility of the second can of Coke?

34

The first can of Sprite Jack drinks give him 22 units and the second can gives him an additional 12 units of utility. How many units of utility do the two cans of sprite give jack?

the marginal utility from diamonds is greater than the marginal utility from water

The high price of diamonds relative to the price of water reflects the fact that, at typical levels of consumption, ___

more pizza and less pop

The marginal utility per dollar from pizza is greater than the marginal utility per dollar from pop. To maximize utility, a consumer buys ___

is resolved by an appeal to the difference between marginal utility and total utility

The paradox of value ___

the price of water is low and the price of a diamond is high, but water is essential to life while diamonds are not

The paradox of value asks why ___

consume less beer and more bacon

The relative price of beer to bacon is 2:1. If Bob's current consumption is at a level where MUbeer/MUbacon is 1:2, then to maximize total utility Bob must ___

bounded rationality, bounded willpower, and bounded self-interest

The three limitations of human rationality that behavioural economics emphasizes are ___

total utility, while price relates to marginal utility

The value of a good relates to ___

prices, income, and marginal utility

To determine consumer equilibrium, we need to know only ___

False (marginal utility)

True or False: If the price of a good rises, then in the new consumer equilibrium that marginal utility from the good equals its new higher price

True (marginal utility)

True or False: if the marginal utility per dollar from good X is less than the marginal utility per dollar from good Y, then the consumer should shift some spending from X to Y

True (law of demand)

True or False: it is possible to derive the law of demand-that a higher price decreases the quantity demanded-using marginal utility theory

the benefit or satisfaction from consuming goods and services

Utility is ___

both have units of measurement that are arbitrary

Utility is similar to temperature because ___

utility can be measured

What is not an assumption of marginal utility theory?

is either increasing or decreasing

When total utility is increasing, marginal utility

has a lower marginal utility

With respect to water and diamonds, water ___

decreases

if the price of a good increases, everything else remaining the same, then the consumer's total utility ___