econ ch 6

Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What is Kim's total utility maximizing point?

1 movie, 5 yoga classes

In May and June, Tammy spent all her clothing budget on bathing suits and beach bags. Each bathing suit cost $75. At Tammy's optimal choice, her marginal utility from the last bathing suit purchased is 300 and her marginal utility from the last beach bag purchased is 200. This means that each handbag must cost:

50

Jed's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Jed knows that 2 pizzas and 4 burgers will give him a utility of 8. At his utility-maximizing point, Jed's utility is:

8

Refer to the budget line shown in the diagram above. At point U, __________.

P1/P2 = MU1/MU2

In terms of microeconomic analysis, what is the function of "utils"?

a measurement of utility

The most common pattern for marginal utility is ____________________.

diminishing marginal utility

The government wants to make medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing medicare budget. The two areas where they are considering cuts are non-essential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on:

elective surgery due to its lower marginal return rate.

Even with wage increases, the supply curve of labor is most often inelastic for which of the following?

full-time workers

The step-by-step process of finding the choice with highest total utility involves a comparison of the:

marginal utility gained and lost from different choices along the budget constraint.

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

one-third

Which of the following occurs simultaneously with an income effect?

substitution effect

During a severe recession, the government issued food stamps that could only be used to acquire food to a greater number of families. The budget line graph shows food on the horizontal axis and everything else on the vertical axis. The government expects that issuing the food stamps will cause each family's budget constraint line to:

shift to the right.

Which of the following is most likely to cause variation in American household spending patterns?

each of the above will cause a variation

An inferior good is a product:

for which demand decreases as income increases.

The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed.

income effect; higher price

The government distributes food stamps that can only be used to acquire food to low-income families. The budget line graph will show food on the horizontal axis and everything else on the vertical axis. After receiving food stamps, Ted's family is able to consume the same amount of food. The new consumption point for Ted's family will be:

on the new budget line, directly above the old consumption point.

The theoretical model of the intertemporal budget constraint for the U.S. economy as a whole suggests that the most common pattern seems to be that:

the quantity of savings doesn't adjust much to changes in the rate of return.

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,

total utility rises, but marginal utility falls.

Terry attends college and works part-time job in a drug store. She can work up to 40 hours each week, and is paid $9 per hour. The table below shows her utility from different levels of leisure and income. If Terry decides to work 20 hours per week, her total utility from both leisure and income would be:

142

Aleah is an electrical engineer. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. If Aleah decreased her hours of work from 30 to 20 hours per week before her raise, the marginal utility loss from having less income is:

23

Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. Bob's utility maximizing point is:

3 movies; 3 gym workout sessions

For lunch, Maria eats only salads or vegetarian burgers. Her weekly food budget is $36. Each salad costs $6 and each vegetarian burger costs $3. When deciding how much of each good to buy, Maria knows that 2 salads and 4 vegetarian burgers will give her a utility of 8. Maria's utility-maximizing point is:

3 salads, 6 vegetarian burgers

Rick eats only french fries and burgers at his office cafeteria. His weekly lunch budget is $48. Each burger costs $6 and each order of fries costs $3. When deciding how much of each good to buy, Rick knows that 2 burgers and 4 orders of french fries will give him a utility of 8. At his utility-maximizing point, Rick's utility is:

32

Louisa works for a hedge fund company. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Louisa decided to increase her hours of work from 10 to 20 hours per week after receiving her raise. As a result, her marginal utility gain from having more income will now be:

36

Celia works as an articling student with a large law firm. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. If Celia continues to work 50 hours per week after her raise, the raise will increase her utility by:

4

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

Refer to the above diagram. In this instance:

all of the above and the consumer can choose any point on or below the budget constraint line BC.

In the U.S., the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. Evidence suggests that, in the economy as a whole, increased savings in these retirement accounts:\

are being offset by negative savings or less savings in other kinds of accounts.

Refer to the diagram above. What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply (2) curve?

as wages increase over this range, the quantity of hours worked also increases.

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

substitution effect