Micro Ch. 10 Quiz Answers
If eating the first jelly bean gives you 15 units of utility and eating the second jelly bean gives you 10 additional units of utility, then the:
total utility of two jelly beans is 25. Feedback: To find the total utility of two jelly beans, add the two marginal utility values together.
In the table above, the law of diminishing marginal utility is apparent starting at a quantity of:
4 units. Feedback: Marginal utility starts to decline with the 4th unit. Total utility still increases until marginal utility falls below zero with the 6th unit.
According to the graph above, total utility is maximized at point:
D. Feedback: Total utility is maximized when marginal utility is zero. At this point, all of the small, positive contributions of additional utility have been made but marginal utility is not yet negative. Total utility increases only as long as marginal utility is positive.
Fads, such as wearing extremely skinny jeans, come and go. Which assumption of economists' theory of individual choice do such fads violate?
Preferences are given. Feedback: Fads illustrate that tastes change and are shaped by society. They are not given.
Assume Jo lives in a world where there are only two goods, X and Y. If, for Jo, MUX/PX > MUY/PY, how can she increase her total utility?
She could buy less Y and use the money saved to buy more X. Feedback: Since X gives Jo more satisfaction per dollar than Y, Jo could increase her total utility by substituting out of Y and into X.
Which of the following is the best example of the law of diminishing marginal utility?
The more M&Ms I eat, the less I enjoy eating more M&Ms. Feedback: The principle of diminishing marginal utility says that as you consume more of a good, you enjoy the additional units less than you did the preceding units.
Marginal utility is the:
additional satisfaction one gets from the consumption of another unit of a product.
Jennifer is trying to decide between a cup of coffee and a glass of orange juice. The coffee costs $1 and yields 10 units of additional utility. The juice costs $2 and yields 16 units of additional utility. If Jennifer follows the principle of rational choice, she will buy:
coffee since it gives her the most marginal utility per dollar. Feedback: The principle of rational choice says that individuals make choices by comparing the marginal utility per dollar spent. Coffee gives 10 / $1 = 10 units of utility per dollar while orange juice gives only 16 / $2 = 8 units of utility per dollar.
Which of the following is not an underlying assumption of economists' theory of consumer choice?
consumers consider social issues when deciding what to buy. Feedback: Mainstream economic theory does not focus on individuals' consideration of social issues. See the discussion of the contrast between the real world and economists' implicit assumptions in the textbook.
Assuming diminishing marginal utility, if the marginal utility per dollar of cheeseburgers is less than the marginal utility per dollar of chili dogs, you can increase total utility without spending more money by:
consuming more chili dogs and fewer cheeseburgers. Feedback: Decreasing consumption of cheeseburgers will raise its MU/P, and increasing consumption of chili dogs will lower its MU/P.
The law of demand can be explained by the law of:
diminishing marginal utility. Feedback: The law of demand is explained by the fact that when the price of a good declines, MU/P rises, so consumers who had been in equilibrium must reestablish equilibrium by also reducing MU; they can accomplish this by increasing consumption of the good whose price fell.
"The third piece of chocolate cake I had for breakfast this morning was good, but not as good as the first." This reflects:
diminishing marginal utility. Feedback: This reflects the law of diminishing marginal utility. If the 3rd piece was still good, marginal utility is still positive and total utility is still increasing.
Economists assume that consumers will choose to purchase and consume that good that:
gives them the greatest additional satisfaction per dollar spent. Feedback: The principle of rational choice states that one will spend money on those items for which one receives the highest utility per dollar.
Economists focus on self
interest and utility maximization:-as a simplifying abstraction that allows them to cut through obfuscations and a confusing mix of motivations. Feedback: Good economists understand the difference between simplifying assumptions and reality.
As one moves down along a demand curve:
marginal utility falls. Feedback: The demand curve slopes downward because of the law of diminishing marginal utility. Down along the demand curve, quantity rises, and thus marginal utility falls.
Economists assume that the goal of consumers is to:
maximize total utility. Feedback: Economists assume consumers are trying to make themselves as happy as possible. That is, they are trying to maximize their total utility.
The principle of rational choice assumes people:
maximize total utility. Feedback: Rational choice is the analysis of how individuals choose goods in order to maximize total utility.
Suppose Bill was consuming his utility
maximizing combination of pizza and bagels when the price of bagels increased by 10%. In response to the income effect, Bill will:-decrease his consumption of bagels because the higher price of bagels has made Bill poorer. Feedback: According to the income effect, there will be a reduction in the quantity demanded when the price rises because the price increase makes one poorer.
A consumer is following the utility
maximizing rule if:-her marginal utility per dollar spent is the same for all goods.
In consumer theory when economists talk about utility, they are referring to:
satisfaction. Feedback: Utility is the satisfaction or happiness you get from consuming a good or service.
