Assignment #7

For two goods, A and B, the rational spending rule is expressed as:

(MUA/PA) = (MUB/PB).

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Suppose that at the original income of $30, the price of a loaf of bread increased to $3 and the price of a jar of peanut butter decreased to $2. Dusty can buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter.

10;15

Joe is shopping for a new computer. A computer can be delivered to Joe's home for $1,200. Alternatively, Joe can pick up the same computer at the warehouse for $1,000. How should Joe buy the computer?

Joe should drive to the warehouse if his cost of driving to the warehouse is less than $200.

If Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ______ Terry's total utility from owning 8 pairs.

Less than

If a consumer reallocates his or her spending away from Good B and towards Good A, then the consumer's total utility will increase if:

MUA/PA > MUB/PB.

Let MUc denote the marginal utility that Pablo receives from a cup of coffee, and let Pc denote the price of a cup of coffee. We typically expect that as Pablo buys more coffee:

MUc/Pc will fall.

Angela is currently playing five games of pool and bowling three games. At this level of consumption, her marginal utility from a game of pool is 10 and her marginal utility from bowling a game is 6. If both pool and bowling cost $1 a game, Angela should:

bowl less and play pool more.

Suppose that each week Henry buys 12 peaches and 3 apples at his local farmer's market. Both kinds of fruit cost $1 each. From this we can infer that:

if Henry is maximizing his utility, then his marginal utility from the 12th peach he buys must equal his marginal utility from the 3rd apple he buys.

Sven likes to water ski, but can only water ski during the one week each year when 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. Sven's total utility ______ with each hour that he skied.

increased

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the first pie than from eating the third pie.

more

For two goods, coffee and scones, suppose that MU(coffee)/P(coffee) = 4 and MU(scones)/P(scones) = 3. To maximize your total utility from these two goods, you should purchase:

more coffee and fewer scones.

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

purchase less than 20 units of good X and more than 25 units of good Y.

Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Alex should:

reallocate his spending away from coffee and towards soda.

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

resources; satisfaction

When the price of a good falls, marginal utility per dollar spent on that good ______, prompting consumers to purchase ______ of that good.

rises; more

Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3.00, then Joaquin:

should reallocate his spending towards pecan pie and away from pumpkin pie.

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

total utility; 1

Higher education is a ______ and assigned textbooks are _____

wants;wants

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. If Dusty's income rises to $45, Dusty can now buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter.

30;15

Laura's total utility from consuming 8, 9, and 10 bonbons is 35, 42, and 45, respectively. Her marginal utility from the 9th bonbon is _____.

7

Blair has vast riches and consumes thousands of dollars' worth of consumer goods each week, yet she is never satisfied. Why not?

People's wants are unlimited.

Sven likes to water ski, but can only water ski during the one week each year when 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. Sven's vacation convinced him that:

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