chapter 6

Total utility is defined as the

sum of the amounts of satisfaction a person receives from consuming a good.

The diamond-water paradox is the observation that

those things that have the greatest value in use often have little value in exchange and those things that have little value in use often have the greatest value in exchange.

A good can have high total utility and low marginal utility.

true

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 146, respectively. The marginal utility of the seventh wing is __________ utils.

10

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150, respectively. The marginal utility of the sixth wing is __________ utils.

20

Rich has $100,000 and Poore has $1,000. Which of these statements is most strongly supported by the theory of consumer choice?

An extra dollar is worth less to Rich than it is to Poore.

Economists contend that the goal of individuals is to maximize marginal utility.

False

Economists use the term utility to mean usefulness.

False

Adam Smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price.

True

If the price of substitute (alternative) goods decrease, people will switch their consumption to those substitutes. In the process, people subconsciously increase their total utility.

True

Many people think what they own is more valuable than the same product in the market. This consumer behavior is called____________________.

endowment effect

Economists assume that the goal of consumers is to maximize marginal utility.

false

Marginal utility can never be negative.

false

For economists, framing refers to the

manner in which a problem or statement is presented.

A util is an artificial measurement used as a means of measuring the

satisfaction one receives from the consumption of a good.

The law of diminishing marginal utility says that

the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases.

Marginal utility is the amount of utility one gets from consuming one more unit of the good.

true

One's utility (satisfaction) of a good is a subjective measurement and therefore utility cannot be precisely measured in real life.

true

The same good may have different utility for different people.

true

Suppose you are eating slices of pizza and after consuming the first slice you satisfaction is 14 utils of total utility, after the second you satisfaction is 22 utils of total utility, and after the third, your satisfaction is 25 utils of total utility. Then______________________

your total utility is 25 utils, and the marginal utility of the third slice is 3 utils.