Economics -- Chp 7 (pg. 88-91)
List three things that the U.S. Department of Education can do to collect on your student debt.
• Keep your tax refund, if you have one. • Garnish your paycheck without obtaining a court judgment. • Withhold money from any federal disability payments you are receiving.
Utility is the benefit or satisfaction a person receives from consuming a good or service.
T
Which best expresses the law of diminishing marginal utility?
(b) The more a person consumes of a product, the smaller becomes the additional utility that she receives as a result of consuming an additional unit of the product.
"If the student loan-buildup means there will be a collapse, that is, loan recipients will just refuse to pay, the implications are serious." Why?
Because, student loans are offered or controlled by the federal government. Any collapse in that loan market would mean that the taxpayers would be "on hook." Given the amount of red ink that continues to flow on the federal government's books, the last thing cash-strapped taxpayers can afford is yet more government spending, this time to bail out students.
In the last three decades, what has happened to the "earnings premium" for a college degree over a high school degree?
In the last three decades, what has happened to the "earnings premium" for a college degree over a high school degree?
Explain why the expansion of student loans encourages colleges to engage in an academic "arms race."
• The growing availability of college loans has made it easier for students to finance their education, and thus increased the demand for a college education. Just as happens anytime that demand for a commodity increases, the price has risen.
By how much has the price of a college degree increased over the last 30 years?
• The price of a college degree after correcting for inflation has more than tripled.
An increase in the real income of a consumer will result from an increase in the price of a product the consumer is buying.
F
Because utility cannot actually be measured, the marginal-utility theory cannot really explain how consumers will behave.
F
If a consumer can earn $10 an hour and it takes 2 hours to consume a product, the value of the time required for the consumption of the product is $5.
F
If the marginal utility per dollar spent on product A is greater than the marginal utility per dollar spent on product B, then to maximize utility, the consumer should purchase less of A and more of B.
F
Noncash gifts add more to total utility than cash gifts.
F
The diamond-water paradox is explained by the fact that the total utility derived from water is low while the total utility derived from diamonds is high.
F
The marginal utility of product X is 15 and its price is $5, while the marginal utility of product Y is 10 and its price is $2. The utility-maximizing rule suggests that there should be LESS consumption of product Y.
F
The theory of consumer behavior assumes that consumers attempt to maximize marginal utility.
F
When consumers are maximizing total utility, the marginal utilities of the last unit of every product they buy are identical.
F
Robert Woods is maximizing his satisfaction consuming two goods, X and Y. If the marginal utility of X is half that of Y, what is the price of X if the price of Y is $1.00?
(a) $0.50
A decrease in the price of product Z will
(a) increase the marginal utility per dollar spent on Z
Which is a dimension or assumption of the marginal-utility theory of consumer behavior?
(b) The consumer is rational.
A consumer has two basic choices: rent a movie for $4 and spend 2 hours of time watching it or spend $15 for dinner at a restaurant that takes 1 hour of time. If the marginal utilities of the movie and the dinner are the same, and the consumer values time at $15 an hour, the rational consumer will most likely
(b) buy more restaurant dinners and rent fewer movies
Kristin Hansen buys only two goods, food and clothing. Both are normal goods for Kristin. Suppose the price of food decreases. Kristin's consumption of clothing will
(b) increase due to the income effect.
The full price of a product to a consumer is
(b) its market price plus the value of its consumption time
The price of water is substantially less than the price of diamonds because
(b) the marginal utility of a diamond is significantly greater than the marginal utility of a gallon of water
A consumer is making purchases of products A and B such that the marginal utility of product A is 20 and the marginal utility of product B is 30. The price of product A is $10 and the price of product B is $20. The utility-maximizing rules suggests that this consumer should
(c) increase consumption of product A and decrease consumption of product B
Suppose that the prices of A and B are $3 and $2, respectively, that the consumer is pending her entire income and buying 4 units of A and 6 units of B, and that the marginal utility of both the fourth unit of A and the sixth unit of B is 6. It can be concluded that the consumer should buy
(c) less of A and more of B
After eating eight chocolate chip cookies, you are offered a ninth cookie. You turn down the cookie. Your refusal indicates that the
(c) marginal utility is positive for the eighth and negative for the ninth cookie
Utility as defined in this chapter refers to the
(c) satisfaction or pleasure from consuming a good
The reason the substitution effect works to encourage a consumer to buy more of a product when its price decreases is because
(c) the product is now relatively less expensive than it was
Summing the marginal utilities of each unit consumed will determine the total
(c) utility
Compared to cash gifts, non-cash gifts are preferred
(d) less because they decrease total utility
What percentage of student loans are in default?
20%
A decrease in the productivity of labor will tend over time to increase the value of time.
F
A fall in the price of iPads will decrease the demand for digital apps.
F
A consumer's demand curve for a product is down-sloping because total utility decreases as more of the product is consumed.
F
All consumers are subject to budget constraints.
T
If total utility is increasing, then marginal utility is positive and may be either increasing or decreasing.
T
In most cases, a change in incomes will cause a change in the portfolio of goods and services purchased by consumers.
T
Marginal utility is the change in total utility from consuming one more unit of a product.
T
One reason for the increased use of health care services is that consumers pay only part of the full price of the services.
T
Paying $300 to fly from one city to another may be cheaper than paying $50 for a bus trip between the two cities when the economic value of time is taken into account.
T
People tend to eat more at an "all-you-can-eat buffet" because the "price" of additional items is zero but the marginal utility for these items is likely to be positive.
T
The income and substitution effects will induce the consumer to buy less of normal good Z when the price of Z increases.
T
The law of diminishing marginal utility indicates that gains in satisfaction become smaller as successive units of a specific product are consumed.
T
The theory of consumer behavior assumes that consumers act rationally to get the most from their money.
T
To find a consumer's demand for a product, the price of the product is varied while tastes, income, and the prices of other products remain unchanged.
T
Utility and usefulness are not synonymous.
T
After correcting for the time value of income, what will the average college graduate earn (net of tuition costs)? What will an average high school graduate earn?
• College 1.2 million • High school $780,000
When the federal loan and grant programs were put into effect in the early 1970s, what was the stated goal of these programs?
• To increase the proportion of college degrees awarded to students who came from lower-income families.
