Smartbook 5

Given the table below, when Sean consumes 4 popsicles per hour, his total utility is utils per hour. Popsicles Per Hour:0,1,2,3,4 Total Utility (Utils Per Hour):0,100,150,175,150

150 or one hundred fifty

Given the table below, when Sean consumes 3 popsicles per hour, his total utility is utils per hour. Popsicles Per Hour: 0,1,2,3,4 Total Utility (Utils Per Hour):0,100,150,175,150

175 or one hundred seventy-five

The affordable combination of goods that yields the highest total utility for a consumer

is the optimal combination of goods for a consumer.

The law of demand states that people do _____ of what they want to do as the cost of doing it rises.

less

If two points lie on the same indifference curve, then we know the consumer

likes both bundles equally well.

If a consumer is indifferent between two different consumption bundles, then this implies that the consumer

likes the two bundles equally well.

According to _____ spending should be allocated across goods so that the marginal utility per dollar is the same for each good.

the rational spending rule

A budget constraint describes

the set of all bundles a consumer can purchase given the consumer's income and prices.

True or false: Once people have acquired the food, shelter, and clothing required to maintain their health, economists refer primarily to the goods and services people "want" rather than those they "need".

true

The satisfaction that people derive from all of their consumption activities is called ______.

utility

If a bundle lies outside a consumer's budget triangle, then the consumer:

will not purchase the bundle because they can't afford it

Given the table below, when Sean consumes 1 popsicle per hour, his total utility is utils per hour. Popsicles Per Hour: 0,1,2,3,4 Total Utility (Utils Per Hour): 0,100,150,175,150

100 or one hundred

Suppose that when the price of a sandwich from Dagwood's Deli is $5, there are 200 people who buy 1 sandwich per week and 100 people who buy 2 sandwiches per week. Thus, at a price of $5, the market demand each week for sandwiches from Dagwood's Deli is ______ (enter a numeric value).

400, four hundred, or 4 hundred

The horizontal axis represents quantity ranging from 0 through 9 in increments of 1, while vertical axis represents price ranging from 0 through 3 in increments of 0.5. The data is as follows: The demand curve decreases from (0, 2.65) to (8, 0) through (2, 2), and (5, 1). Note: All data is approximate. The figure to the right shows Geoff's monthly demand for soap. If there are 1000 people in the market (including Geoff), each with demand curve like Geoff, then what is the market demand for soap each month when the price of soap is $1 per bar? (Enter a numeric value)

5000, 5,000, five thousand, or 5 thousand

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Consider the accompanying graph. Select the bundle(s) that the consumer equally prefers to A.

B Reason: B is equally preferred to A since both lie on the same indifference curve. C Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. D Reason: The consumer prefers D to A since D lies above the indifference curve that passes through A. E Reason: The consumer prefers A to E since A lies above the indifference curve that passes through E. F Reason: The consumer prefers A to F since A lies above the indifference curve that passes through F. Correct Answer B

Which of the following best illustrates the substitution effect of an increase in the price of peanut butter?

The decrease in the quantity of peanut butter demanded that results because people switch from using peanut butter to almond butter. Reason: The substitution effect of a price increase is the reduction in the quantity demanded that results because buyers switch to substitute goods.

A bundle of goods refers to

a particular combination of goods.

Marginal utility is the _____ gained from consuming an additional unit of a good.

additional utility

The law of demand states that people do less of what they want to do

as the cost of doing it rises.

The line that describes the set of all bundles a consumer can purchase given the consumer's income and prices is called a _________ constraint.

budget

The line that describes the set of all bundles a consumer can purchase given the consumer's income and prices is called a budget

constraint or line

True or false: Economists believe that our preferences for different goods and services do not change over time. True false question.

false

An indifference curve map tells us _______, while a budget constraint tells us _______.

how various bundles are ranked in order of preference; which bundles are affordable

A(n) _____ traces out the set consumption bundles that a consumer likes equally well.

indifference curve

A(n) _____ tells us how various bundles are ranked in order of preference, while a(n) _____ tells us which bundles are affordable.

indifference curve map; budget constraint

The additional utility gained from consuming an additional unit of a good is called __________ utility.

marginal

The additional utility gained from consuming an additional unit of a good is _____.

marginal utility

The affordable combination of goods that yields the highest total utility for a consumer is known as the ________ combination of goods.

optimal

A consumer will never purchase a bundle that lies _____ because they won't be able to afford it.

outside their affordable triangle

If a consumer is indifferent between two different consumption bundles, then this implies that the consumer Multiple choice question.

regards the two bundles as equivalent.

A consumer's optimal combination of goods is

the affordable combination that yields the highest total utility.

Consumer surplus is

the difference between a buyer's reservation price for a product and the price a buyer actually paid.

The tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point is known as

the law of diminishing marginal utility.

According to the rational spending rule, spending should be allocated across goods so that

the marginal utility per dollar is the same for each good.

The horizontal axis represents apples (number per week) ranging from 0 through 10 in increments of 5, while vertical axis represents bananas (number per year) ranging from 0 through 10. The data is as follows: The original curve decreases from (0, 10) to (5, 0) while the new curve decreases from (0, 10) to (10, 0). Note: All data is approximate. The shift from the "Original" to the "New" budget constraint in the accompanying graph would occur if

the price of apples decreased.

The horizontal axis represents apples (number per week) ranging from 0 through 10 in increments of 5, while vertical axis represents bananas (number per week) ranging from 0 through 10. The data is as follows: The original curve decreases from (0, 10) to (10, 0) while the new curve decreases from (0, 10) to (5, 0). Note: All data is approximate. The shift from the "Original" to the "New" budget constraint in the accompanying graph would occur if

the price of apples increased.

The horizontal axis represents apples (number per week) ranging from 0 through 10, while vertical axis represents bananas (number per week) ranging from 0 through 10, in increments of 5. The data is as follows: The original curve decreases from (0, 10) to (10, 0), while the new curve decreases from (0, 5) to (5, 0). Note: All data is approximate. The shift from the "Original" to the "New" budget constraint in the accompanying graph would occur if

the price of bananas increased.

Suppose that in response to an increase in the price of sugar, people switch from using sugar to corn syrup. This is an example of ____ of a price change.

the substitution effect Reason: The substitution effect of a price increase is the reduction in the quantity demanded that results because buyers switch to substitute goods.

True or false: economists believe that our preferences for different goods and services can be influenced by our peers. True false question.

true

The process whereby people allocate their income between different goods and services in order to maximize their total satisfaction is known as

utility maximization.

Provided people have achieved bare subsistence levels of consumption, economists speak mainly in terms of people's ______. Multiple choice question.

wants

A _________ of goods is the term used to describe a particular combination of goods.

bundle

A particular combination of goods is typically referred to as a _____ of goods

bundle

The data for cookies per hour and total utility (utils per hour) is as follows: 0; 0. 1; 40. 2; 60. 3; 70. 4; 60. Given the table to the right, as Catherine goes from consuming 3 to 4 cookies per hour, her total utility _____. Multiple choice question.

decreases Reason: As Catherine goes from consuming 3 to 4 cookies per hour, so her total utility decreases from 70 to 60 utils per hour.

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Select all that apply Consider the accompanying graph. The consumer prefers C to which of the following bundles?

A Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. B Reason: The consumer prefers C to B since C lies above the indifference curve that passes through B. D Reason: The consumer equally prefers C to D since both lie on the same indifference curve E Reason: The consumer prefers C to E since C lies above the indifference curve that passes through E. F Reason: The consumer prefers C to F since C lies above the indifference curve that passes through F. Correct Answer A B E F

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Select all that apply Consider the accompanying graph. Select the bundle(s) that the consumer equally prefers to A.

Consider the accompanying graph. Select the bundle(s) that the consumer equally prefers to A. Multiple select question. B Reason: B is equally preferred to A since both lie on the same indifference curve. C Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. D Reason: The consumer prefers D to A since D lies above the indifference curve that passes through A. E Reason: The consumer prefers A to E since A lies above the indifference curve that passes through E. F Reason: The consumer prefers A to F since A lies above the indifference curve that passes through F. Correct Answer B

Utility maximization refers to the process whereby

people allocate their income between different goods and services in order to maximize their total satisfaction.

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Select all that apply Consider the accompanying graph. Select the bundle(s) that the consumer prefers to A.

B Reason: B is equally preferred to A since both lie on the same indifference curve. C Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. D Reason: The consumer prefers D to A since D lies above the indifference curve that passes through A. E Reason: The consumer prefers A to E since A lies above the indifference curve that passes through E. F Reason: The consumer prefers A to F since A lies above the indifference curve that passes through F. Correct Answer C D

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Consider the accompanying graph. The consumer prefers A to which of the following bundles? Multiple select question.

B Reason: B is equally preferred to A since both lie on the same indifference curve. C Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. D Reason: The consumer prefers D to A since D lies above the indifference curve that passes through A. E Reason: The consumer prefers A to E since A lies above the indifference curve that passes through E. F Reason: The consumer prefers A to F since A lies above the indifference curve that passes through F. Correct Answer E F

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Select all that apply Consider the accompanying graph. The consumer prefers A to which of the following bundles?

B Reason: B is equally preferred to A since both lie on the same indifference curve. C Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. D Reason: The consumer prefers D to A since D lies above the indifference curve that passes through A. E Reason: The consumer prefers A to E since A lies above the indifference curve that passes through E. F Reason: The consumer prefers A to F since A lies above the indifference curve that passes through F. Correct Answer E F

Consider a market for snowboards in which there are 4 potential buyers. The first has a reservation price of $200; the second has a reservation price of $300; the third has a reservation price of $400; and the fourth has a reservation price of $500. If snowboards sell for $250 and if each potential buyer only wants one snowboard, then total consumer surplus in this market will be ________ dollars.

450 or $450

The data for popsicles per hour and total utility (utils per hour) is as follows: 0; 0. 1; 100. 2; 150. 3; 175. 4; 150. Given the table to the right, as Sean goes from consuming 3 to 4 popsicles per hour, his total utility _____.

decreases Reason: As Sean goes from consuming 3 to 4 popsicles per hour, his total utility decreases from 175 to 150 utils per hour.

The horizontal axis represents quantity ranging from 0 through 5 in increments of 1, while vertical axis represents price ranging from 0 through 7 in increments of 1. The data is as follows: The curve increases from (0, 0) to (5, 4.1) through (1, 3.5), (3, 5.3), (3, 5.9), and (4, 5.3). Note: All data is approximate. The figure on the right shows the relationship between the number of hours of TV that Mike watches each day and his total utility. When Mike goes from watching 2 to 3 hours of TV per day, his total utility _____.

increases

The first curve shows point D across bottom left, second curve shows point A across top left, third curve shows point D across bottom left, and fourth curve shows point B across top right. A budget curve decreases from (0, 15) to (10, 0), intersecting second curve at A across top left and third curve at C across bottom right. Consider the accompanying graph. We know the consumer will:

not purchase bundle B because it's not affordable

The difference between a buyer's reservation price for a product and the price the buyer actually paid is known as consumer

surplus

When the price of a good goes up, part of the reason consumers purchase less of the good is that they

switch to less expensive substitutes.

When the price of a good or service goes up, consumers will tend to

switch to less expensive substitutes.

The horizontal axis represents apples (number per week) ranging from 0 through 10, while vertical axis represents bananas (number per week) ranging from 0 through 10, in increments of 5. The data is as follows: The original curve decreases from (0, 5) to (10, 0) while the new curve decreases from (0, 10) to (10, 0). Note: All data is approximate. The shift from the "Original" to the "New" budget constraint in the accompanying graph would occur if

the price of bananas decreased.

Consider a market for skateboards in which there are 3 potential buyers. The first has a reservation price of $100, the second has a reservation price of $200, and the third has a reservation price of $300. If skateboards sell for $150 and if each potential buyer only wants one skateboard, then what will be total consumer surplus in this market?

$200 Reason: Right! Two skateboards will be sold. One to the potential buyer whose reservation price is $300 (and who will receive a surplus of $150) and the other to the potential buyer whose reservation price is $200 (and who will receive a surplus of 50). Thus, total consumer surplus will be $200.

Total utility refers to the

total satisfaction that people derive from all of their consumption activities.

The curves are labeled IC 1, IC 2, and IC 3 (moving from left to right), where IC 1 shows points E and F across the left, IC 2 shows points A and B across the center, and IC 3 shows points C and D across the right. Points F, B, and D on top curves lie close to each other. Points E, A, and C at bottom of respective curves lie close to each other. Consider the accompanying graph. The consumer prefers C to which of the following bundles?

A Reason: The consumer prefers C to A since C lies above the indifference curve that passes through A. B Reason: The consumer prefers C to B since C lies above the indifference curve that passes through B. D Reason: The consumer equally prefers C to D since both lie on the same indifference curve E Reason: The consumer prefers C to E since C lies above the indifference curve that passes through E. F Reason: The consumer prefers C to F since C lies above the indifference curve that passes through F. Correct Answer A B E F

The law of diminishing marginal utility captures the tendency for the _____ gained from consuming an additional unit of a good to diminish as consumption increases beyond some point.

additional utility

Economists assume that people ______.

allocate their income between different goods and services to make themselves as happy as possible

The horizontal axis represents quantity ranging from 0 through 5 in increments of 1, while vertical axis represents price ranging from 0 through 7 in increments of 1. The data is as follows: The curve increases from (0, 0) to (5, 4.1) through (1, 3.5), (3, 5.3), (3, 5.9), and (4, 5.3). Note: All data is approximate. The figure on the right shows the relationship between the number of hours of TV that Mike watches each day and his total utility. When Mike goes from 3 to 4 hours of TV per day, his total utility _____.

decreases