week 10 utility max

Salina studied 5 hours for her first Economics test and her test score was 85; 6 hours for her second Economics test and scored 90; and 7 hours for her third Economics test and scored 95. She also studied 5 hours for her first Math test and her test score was 68; 6 hours for her second Math test and scored 78; and 7 hours for her third Math test and scored 88. Assume Salina's utility equals her total score across her two exams: utility = math score + econ score, and all the exams were identical in terms of difficulty, benefits of studying, etc. She has no utility cost of studying. 17. Salina's marginal utility from the seventh hour spent studying Economics is A. 5 B. 10 C. 15 D. 45

A. 5

Sven likes to water ski, but can only water ski during the one week that he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. 11. Sven's total utility _______with each hour that he skied. Sven's vacation convinced him that A. even for activities he really enjoys, diminishing marginal utility eventually sets in. B. blueberry picking yields higher total utility than does water skiing. C. even for activities he really enjoys, total utility declines each time he engages in it. D. economic theory applies only to things you buy, not recreation

A. even for activities he really enjoys, diminishing marginal utility eventually sets in.

Sven likes to water ski, but can only water ski during the one week that he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. 11. Sven's total utility _______with each hour that he skied. A. increased B. decreased C. remained constant D. first increased than decreased

A. increased

If Salina has already spent 5 hours studying Economics and 5 hours studying Math, she should spend the next hour A. Studying Math for half an hour and Economics for half an hour B. Studying only Economics C. Studying only Math D. Studying Economics for 45 minutes and Math for 15 minutes

C. Studying only Math • The marginal benefit for an additional hour of Math is 10, while it's only 5 for economics. So she should choose the highest of the marginal utilities for that hour.

Sven likes to water ski, but can only water ski during the one week that he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. 11. Sven's total utility _______with each hour that he skied. 12. On the fifth day of Sven's vacation, he had decided that another hour of skiing would yield A. more utility than the day before B. the same level of utility as the day before C. less utility than blueberry picking D. no utility at all

C. less utility than blueberry picking

Assume you have $5,000 to invest. Assume stock in IBM costs $50 per share and pays a yearly dividend of $10 per unit of stock. Assume stock in TI costs $20 per share and pays a yearly dividend of $5 per unit of stock. Ignoring all other factors, to maximize your investment return you should: a. invest $5,000 in IBM. b. invest $5,000 in Tl. c. split your investment so that the ratio of your shares of TI relative to IBM is 2.5 to 1. d. split your investment so that the ratio of your shares of IBM relative to TI is 2.5 to 1.

a. invest $5,000 in IBM. • TI has a 25% return per share (since if you spend $20 you get 5) vs 20% for IBM. Here there is no issue of decreasing marginal utility since (as long as the marginal utility of money is positive) you just want to get as much money out of this as possible

Unlike newspaper dispensing devices, soft drink dispensing machines do not permit people to take more than one can with each payment. The reason is that the: a. opportunity cost of an additional can of soft drink increases very rapidly. b. marginal utility of an extra soft drink declines fairly slowly, particularly because they are storable and can be consumed later. c. marginal utility of an extra soft drink can decline quite rapidly. d. opportunity cost of an additional can of soft drink increases very slowly.

b. marginal utility of an extra soft drink declines fairly slowly, particularly because they are storable and can be consumed later.

Newspaper dispensing devices often allow the consumer to open the door and take all newspapers even if they have paid for only one. To the uninitiated it may seem that the newspaper vending company "trusts" people to take only a single paper upon payment for one newspaper. An economist would more likely say that the vending company is actually relying on the law of: a. supply. b. increasing opportunity costs. c. diminishing marginal utility. d. demand. e. none of the above.

c. diminishing marginal utility.

Consider the problem of how much coffee to drink. If the marginal utility of a 3rd cup of coffee is 23 utils (value in utility) and the marginal utility of the 4th cup is 15 utils (value in utility), then: a. it is optimal for the consumer to have 3 cups of coffee. b. the price of a cup of coffee must be 15 cents. c. the described situation is evidence of the law of diminishing marginal utility. d. total utility from 4 cups of coffee must be lower than the total utility from 3 cups of coffee

c. the described situation is evidence of the law of diminishing marginal utility.

If marginal utility is positive, then a. total utility must be decreasing. b. total utility must be below zero. c. total utility must be increasing. d. none of the above would be necessarily true.

c. total utility must be increasing.