Economics test 3

The law of demand tells us that A. The quantity demanded increases as price falls B. Demand increases because price falls C. People respond too price changes D. Demand creates its own supply, meaning that if there's a demand, supply will be created to satisfy it E. Demand depends on people having income to satisfy it

A

You would be inclined to bid on a good at an auction if A. The MU/P was higher than those for other good you consume B. It's MU/P was lower Thames those other goods you consume C. The consumer surplus was less than its price D. The consumer surplus was greater than the marginal utility form consuming the good E. The marginal utility was higher than its price

A

Suppose the development of oil fields around Caspian seas lead to an increase in the world supply of gasoline would lead to A. An increase in the equilibrium price and lower consumer surplus B. A decrease in the equilibrium price and lower consumer surplus C. An increase in the equilibrium price and greater consumer surplus D. A decrease in the equilibrium price and lower consumer surplus E. No change in surplus

B

Suppose Jessica's MU/P is 8 for swimming lessons, 12 for voice lessons, and 4 for piano lessons. In order for Jessica to maximize total utility, she should definitely A. Take more swim lessons B. take more voice lessons C. Take more piano lessons D. Find other activities to do E. Take fewer lessons of each type

B... there is a higher satisfaction so you take more for the max utility

We are unable to make precise ____________ of the marginal utilities of money, which has sobering implications for tax policies that impose higher _________ on the wealthy

Comparisons between people, taxes

The law of diminishing marginal utility suggests that as more is ____________ the ______________ a person derives from each additional unit _____________________

Consumed, extra utility, diminishes

A persons utility is maximized amount a person would be willing to pay for a good or service and the amount actually paid is called _____________

Consumer surplus

Producer surplus

Difference between the price at which a producer is willing to supply a good and the market price

Suppose that Ron paid a scalper ( a seller on the black market for tickets) $300 for a ticket to see The Rolling Stones and his true willingness to pay was $500. We can be sure that A. The ticket scalper extracted all the possible consumer surplus from Ron B. Rons consumer surplus was low because he paid more than the face vault for the ticket C. Rons marginal utility to price ratio for the concert was extremely high compared to that for other goods E. Ron enjoyed $200 of consumer surplus from the purchase

E so he is satisfied that he saved 200 when he was willing to pay more he saved 200

If the law of diminishing marginal utility applies then a graph of total utility will show a positive slope that increases as the number of units consumed increases (T/F)

False

If the marginal utility to price ratio for oranges is higher than the marginal utility to price ratio for bananas when Josie leaves the store, then she should have purchased fewer oranges and more bananas (T/F)

False

If the marginal utility to price ratio is the same for all but a few goods, then a consumer has maximized total utility (T/F)

False

Marginal utility is always a very small quantity (T/F)

False

Two people who consume precisely the same quantity of a particular good will enjoy the same total utility levels (T/F)

False

Utility is the satisfaction of enjoyment that a person obtains from consuming a good that can be measured precisely by psychological tests (T/F)

False

Utils are the units in which psychologists' testing devices are calibrated to determine the utility people obtain from consumption (T/F)

False

MU/P equalization principle

Principle by which consumers arrange consumption

Marginal utility per dollar

Satisfaction per dollar spent for a unit of a good

Utility is the ______________ or _______________ enjoyment a person obtains from consuming a good

Satisfaction, enjoyment

Law of diminishing marginal utility

Smaller additions to total utility from consumption

Utility

The feeling of satisfaction from consumption

Consumer surplus is the difference between what a consumer is willing to pay for a good and what the consumer actually pays (T/F)

True

If Ruth's consumer surplus is zero, then she must be paying exactly the highest amount that's she was willing to pay for a good (T/F)

True

If water is extremely scarce, then the marginal utility of an additional unit is high and the water-diamond paradox is less apparent (T/F)

True

In choosing to purchase a combination of goods, consumers must consider prices and not just utilities (T/F)

True

Marginal utility analysis can be used to explain government policies regarding taxation and the redistribution of income from the rich to the poor given "reasonableness" of diminishing marginal utility of income (T/F)

True

The law of diminishing marginal utility suggests that as the quantity consumed increases, the additional to total utility from additional unit consumed will decreased (T/F)

True

The total amount of satisfaction someone enjoys from consuming a specific quantity of goods is called total utility (T/F)

True

The water-diamond paradox is that water is extremely useful but is valued at a low rate, while diamonds are less useful but are valued at a much higher rate (T/F)

True

Interpersonal comparisons of utility

Utility that a consumers enjoys by paying less than he or she is willing and able to pay for a good

Marginal utility

addition to satisfaction from consuming one more unit

Utils

hypothetical units of satisfaction or utility

total utility

the total satisfaction from consumption