Microecon: Ch. 13 Study Questions

The table shows Peter's total utility from ice cream and nuts. What is Peter's marginal utility from the second ice cream cone and marginal utility per dollar when he buys 2 ice cream cones and the price of an ice cream cone is ​$2​? What is Peter's marginal utility from the third bag of nuts and marginal utility per dollar when he buys 3 bags of nuts and the price of a bag of nuts is ​$5​? Peter's marginal utility from the second ice cream cone is _____ units. If the price of an ice cream cone is ​$2​, then the marginal utility per dollar for ice cream when Peter buys 2 ice cream cones is ____ here units per dollar. Peter's marginal utility from the third bag of nuts is _____ here units. If the price of a bag of nuts is ​$5​, then the marginal utility per dollar for nuts when Peter buys 3 bags of nuts is _____ units per dollar.

100 50 90 18 for marginal utility, subtract the three cones from the two. the difference in total utility is the answer for the units per dollar, divide the total utility by the price of the cones

The table shows​ Jerry's total utility from burgers and magazines. The price of a burger is ​$2​, the price of a magazine is ​$4​, and Jerry has ​$12 a week to spend. What quantities of burgers and magazines maximize​ Jerry's utility? Jerry maximizes his total utility when he buys _____ here burgers and _____ here magazines a week.

2; 2

Emil's subway ticket and gasoline budget is ​$42 a week. The price of a subway ticket is ​$3 and the price of a gallon of gasoline is ​$7. How does Emil's budget line change if the price of a gallon of gasoline rises​, other things remaining the​ same? How does Emil's budget line change if Emil's budget for subway tickets and gasoline decreases​, other things remaining the​ same? Draw Emil's budget line and label it. Other things remaining the​ same, if the price of a gallon of gasoline rises​, Emil's budget line​ _______. Other things remaining the​ same, if Emil's budget for subway tickets and gasoline decreases​, his budget line​ _______.

budget line: point one at y=14; point two at x=6 rotates inward; shifts inward

US gas price jumps 6 cents The average U.S. price of regular gasoline is up 6 cents a gallon to​ $2.50 in recent weeks. ​Source: CNBC, March​ 11, 2019 Donna buys only two​ goods: gasoline and pasta. How do the events in the news clip change​ Donna's consumption​ possibilities, the relative price of​ pasta, and her budget in terms of​ pasta? As the gasoline price​ rises, Donna's consumption possibilities​ _______, and the relative price of pasta​ _______. ​Donna's budget in terms of pasta​ _______.

decrease; decreases does not change

The graph shows​ Betsy's budget line. Draw​ Betsy's new budget line when the price of a bread roll falls. Label it. How do we determine the relative price from the​ graph? The relative price of the good measured on the​ _______ is the​ _______.

draw the first point on the same y-point. then the second point further from the y-axis. x-axis; magnitude of the slope of the budget line

In the land of free flight As the time it takes to get through airports has​ increased, other means of travel have begun to look more attractive. Amtrak now competes comfortably with the airlines on its​ Boston-New York-Washington express rail service. ​Source: The Economist​, June​ 14, 2007 Compare the marginal utility per dollar from train travel and air travel. If travelers sometimes take the train and sometimes​ fly, the marginal utility per dollar from a train trip​ _______ the marginal utility per dollar from a flight. If travelers never​ fly, then the marginal utility per dollar from a flight is​ _______.

equals; zero

What has a greater consumer surplus—water or​ gold? What has a greater total utility—water or​ gold? When a household maximizes total​ utility, what is greater—the marginal utility per dollar from water or the marginal utility per dollar from​ gold? The consumer surplus from​ water, which is​ cheap, is​ _______ than the consumer surplus from​ gold, which is expensive. The total utility from gold is​ _______ than the total utility from water. When a household maximizes total​ utility, the marginal utility per dollar from water​ _______ the marginal utility per dollar from gold.

greater; less equals

Vlad loves sailing his boat every weekend. He pays ​$600 a month to a marina where he keeps the boat​, but he tells a friend that he thinks he's getting a real bargain and would willingly pay twice the price for the great service he gets from the marina. Vlad's other expense is his downtown parking space​, which is ​$500 a month. Unlike the marina​, he ​doesn't think the deal he gets from the parking lot is all that​ good, and he is on the verge of looking for something better for the same price. Why does Vlad's consumption of sailing and downtown parking explain the paradox of​ value? For Vlad​, how does the consumer surplus from sailing compare to the consumer surplus from downtown parking​? Vlad's consumption of sailing and downtown parking explains the paradox of value because for Vlad​, sailing has a​ _______ total utility and a​ _______ marginal utility than downtown parking. For Vlad, sailing has a _____ consumer surplus than downtown parking.

greater; smaller greater

Total utility​ _______ and marginal utility​ _______ as more of a good is consumed.

increases; diminishes

Shemar drinks apple cider every week throughout the winter. Draw a curve that illustrates​ Shemar's marginal utility from apple cider. Label it. What is​ Shemar's marginal​ utility? ​Shemar's marginal utility​ _______.

is the change in his total utility that results from a one-unit increase in the quantity of cider he consumes draw a curve that starts high and finishes low (according to y-values)