Econ 202: Chapter 5 Handout

Figure 6-6 shows the total utility that Jerry receives from consuming different numbers of apples per week. What is his marginal utility from the fourth apple ? a. 20 b. 6 c. 34 d. 14 e. 10

b. 6

If MUx/Px is less than MUy/Py, then the consumer should consume more of X and less of Y. a. True b. False

b. False

Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas, assuming she buys only these two goods. Each hamburger sells for $5 and each pizza sells for $4. What is her marginal utility per dollar spent on the fourth hamburger? a. 15 b. 4 c. 3 d. 20 e. 12

c. 3

If diminishing marginal utility holds, and a person consumes less of a good, then all else being equal a. the price of the good will rise b. total utility will rise c. marginal utility will rise d. expenditure on the good will increase e. marginal utility will decline

c. marginal utility will rise

A family on a trip budgets $800 for sit-down restaurant meals and fast food. The family can buy 16 restaurant meals if they don't buy any fast food. What is the price of a restaurant meal for the family? a. $5 b. $16 c. $20 d. $50 e. it is impossible to tell from the information given

d. $50

Figure 6-6 shows the total utility that Jerry would receive from consuming different numbers of apples per week. What is Jerry's marginal utility from consuming the second apple after he already consumed the first one? a. 0 b. 17 c. 20 d. 14 e. 34

d. 14

If bread costs $1 per pound and meat costs $4 per pound, a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utility only if the marginal utility per pound of bread equals a. 4 utils b. 5 utils c. 10 utils d. 20 utils e. 80 utils

d. 20 utils

Figure 6-6 shows the total utility that Jerry would receive from consuming several different quantities of apples per week. What can be said about Jerry's utility schedule for apples? a. It conforms to the law of supply. b. Marginal utility rises as consumption rises. c. Average utility rises as consumption rises. d. It conforms to the law of diminishing marginal utility. e. The marginal and total utility lines cross at four apples.

d. It conforms to the law of diminishing marginal utility.

If a consumer allocates her income between two goods, x and y, then she will be in equilibrium when a. MUx/Px = MUy/Py and she is below her budget constraint b. MUx = MUy and she has spent all of her income c. MUx/MUy > Px/Py and all of her income is spent d. MUx/Px = MUy/Py and all of her income is spent e. MUx = MUy and she is below her budget constraint

d. MUx/Px = MUy/Py and all of her income is spent

Which of the following most clearly illustrates the law of diminishing marginal utility? a. The total satisfaction from consuming a good falls as more of the good is consumed. b. Marginal utility falls as total utility falls. c. The quantity of a good demanded falls as its price rises. d. The additional satisfaction from consuming a good falls as more of the good is consumed. e. There is a direct relationship between the price of a good and its total utility.

d. The additional satisfaction from consuming a good falls as more of the good is consumed.

A utility-maximizing consumer will choose a collection of goods a. represented by a point below her budget line b. represented by a point above her budget line c. for which the marginal utility from each good is the same d. for which the marginal utility divided by the price is the same or each good e. for which the total utility from each good is the same

d. for which the marginal utility divided by the price is the same or each good

Lin is maximizing total utility while consuming food and clothing. Her marginal utilities of food and clothing are 50 utils and 25 utils, respectively. If clothing is priced at $10 per unit, the price of a unit of food a. must be rising b. must be falling c. must equal $10 as well d. must equal $20 e. cannot be determined without additional information.

d. must equal $20

Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas, assuming she buys only these two goods. Each hamburger sells for $5 and each pizza sells for $4. What is her marginal utility per dollar spent on the second pizza? a. 16 b. 6 c. 3 d. 20 e. 4

e. 4

A family on a trip budgets $800 for restaurant meals and fast food. The family can buy 16 restaurant meals if they don't buy any fast food. What is the price of a fast-food meal for the family? a. $5 b. $16 c. $20 d. $50 e. it is impossible to tell from the information given

e. it is impossible to tell from the information given