AP Micro Consumer Choice

The demand curve comes from

consumers who have preferences and constraints, and who do the best with what they have.

The demand curve comes from a consumer's making optimal choices subject to his / her constraints.

True

The slope of a consumer's budget constraint is the opportunity cost of buying one good in terms of how much of the other that he gives up.

True

The slope of an indifference curve is all of the following except

increasing

Jack likes to play golf. Although he is experiencing diminishing marginal utility, his marginal utility remains positive. We can say that Jack's total utility is

increasing at a decreasing rate

Suppose that the marginal utility per dollar of apples is greater than the marginal utility per dollar for candy bars as the result of a fall in the price of apples. To achieve consumer equilibrium the consumer reallocates dollars from candy bars to apples. In the process, he

maximizes total utility, and act according to the law of demand

Suppose a person is obtaining greater utility per dollar from consuming one good than from another. This person is

not maximizing utility

The economic interpretation of an indifference curve is

the rate at which the consumer is willing to trade one good for another to remain equally satisfied.

The slope of the budget constraint tells us

the relative prices for each of the two goods, and the market's opportunities for trade.

The consumer trades until he / she reaches the point of maximum attainable satisfaction. This is the point at which

the slope of the budget constraint is equal to the marginal rate of substitution.

The marginal rate of substitution is

the slope of the consumer's indifference curve

An indifference curve is a set of points representing combinations of ________ goods that a consumer finds __________ desirable and satisfying.

two; equally

Assume that the price for peanut butter and bread is $1 each. Dan's marginal utility for peanut butter is 10 utils, and his marginal utility for bread is 20 utils. Given this situation,

Dan gains more utility per dollar from consuming bread than peanut butter

f a person is receiving greater utility per dollar from consuming apples than from consuming oranges, then the person is maximizing her total utility.

False

When marginal utility becomes negative, total utility begins to increase.

False; decrease

An indifference curve that lies tangent to the budget constraint illustrates the combination of goods X and Y that provides the consumer the least satisfaction.

False; most satisfaction

A linear indifference curve reflects the fact that the two goods are perfect substitutes for each other.

True

When a consumer's income decreases, the consumer's budget constraint

shifts inward

Tom receives 30 utils from one candy bar, 45 utils from two candy bars, and 55 utils from three candy bars. The marginal utility of the third candy bar is ____________, and Tom's _________ utility rises as his ______________ utility declines.

10; total; marginal

If the total utility of one golf game is 10 utils, and the total utility of two golf games is 24 utils, the marginal utility of the second game is

14 utils

Suppose you are eating nachos. The total utility after the fourth, fifth, sixth, and seventh nachos are, respectively, 50, 86, 106, and 120. The marginal utility of the sixth nacho is

20 utils

Assume Joe gets 60 utils from consuming one hamburger and gets 90 utils from consuming two hamburgers. When Joe consumes two hamburgers, the marginal utility from consuming the second hamburger is

30 utils

An indifference curve that lies tangent to the budget constraint illustrates the combination of goods X and Y that provide the consumer the least satisfaction.

False

Economists use budget constraints and indifference curves together to find the producer's optimal choice under the constraint of the budget and prices.

False

In a two-good model, if the price of good X falls, the budget line changes in exactly the same way as if the consumer had received an income increase.

False

The budget constraint is not affected when a consumer's budget or the price of either of the goods changes.

False

Suppose Valerie is consuming one novel per week and one movie per week. Further assume that the marginal utility of novels is 40 utils, and the marginal utility of movies is 50 utils. If each novel and each movie costs $4.00, is Valerie attaining consumer equilibrium?

No. She needs to buy fewer novels and see more movies.

Suppose Val is buying chips and beer in quantities such that she is achieving consumer equilibrium. The price of chips then increases. Which of the following is true?

The marginal utility of chips per dollar spent on chips is less than the marginal utility of beer per dollar spent on beer.

If a consumer's income increases, that consumer's budget constraint

shifts outward away from the origin

In regard to potato chips, marginal utility is the _____________ satisfaction from eating ___________ potato chip(s).

additional; one more

Indifference curves are

all kinds of shapes as long as they decrease in slope, and unable to cross.

The law of diminishing marginal utility states that at some point, a person's marginal utility from additional consumption

decreases

Suppose Mike has a budget of $6, and he can purchase some combination of tacos or burritos. Tacos are $1.25 each, and burritos are $1.50 each. If Mike's budget increases to $12, his purchasing power for tacos and burritos _________, and his budget constraint shifts __________.

doubles; outward

Heather's indifference curve for frozen cappuccinos and donuts illustrates that the only way she can remain equally satisfied when you take away a frozen cappuccino is to give her some quantity of donuts instead. This implies that the indifference curve is

downward sloping

When the price of good X falls, more of that good will be consumed. To find the highest satisfaction from a combination of goods, the consumer will

find a combination that falls on the new budget line and is tangent to an indifference curve or find a combination of goods that maximizes the consumer's utility within the constraint of his new budget.

When a consumer optimizes his / her satisfaction at a point at which an indifference curve is tangent to the budget constraint,

the consumer can increase his / her satisfaction only by increasing his / her income.

Suppose you are eating nachos. The total utility after the fourth, fifth, sixth, and seventh nachos are, respectively, 50, 86, 106, and 120. This situation demonstrates the

the law of diminishing marginal utility