Question 1

Explain why total utility is maximized when the marginal utility per dollar on all goods is equal.

Accepted Answer

It is easiest to prove that total utilit

Question 2

If the price of a good increases, a consumer will substitute away from the relatively more expensive good, which will increase the marginal utility for that good and bring the consumer back to equilibrium.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the price of a soda is $2 each, the price of a hot dog is $3 each and the budget is $20. If the marginal utility of the fourth soda is 100 and the marginal utility of the fourth hot dog is 150, to maximize utility, a person will buy

Accepted Answer

A)  4 sodas and 4 hot dogs. 
B)  more hotdogs than 4 and fewer sodas than 4 because hot dogs provide more utility. 
C)  more sodas than 4 to increase their utility. 
D)  fewer sodas than 4 and more hot dogs than 4. 
A)  4 sodas and 4 hot dogs. 
B)  more hotdogs than 4 and fewer sodas than 4 because hot dogs provide more utility. 
C)  more sodas than 4 to increase their utility. 
D)  fewer sodas than 4 and more hot dogs than 4.

Question 4

-The table above gives Cathy's total utility from Mt. Dew. If the price of a Mt. Dew is $1.50, Cathy's marginal utility per dollar from the 4th Mt. Dew is ________ units per dollar.

Accepted Answer

A)  15 
B)  10 
C)  82.5 
D)  22.5 
A)  15 
B)  10 
C)  82.5 
D)  22.5

Question 5

Ice cream Romance novels  
-The table above shows Danielle's utility from ice cream and romance novels.
a) What is Danielle's marginal utility from the 4th novel?
b) The price of ice cream is $5 per gallon and a novel is $10. If Danielle's budget for these two goods is $50 and she buys 2 gallons of ice cream, how many novels can she buy? If she buys 6 gallons of ice cream, what is her marginal utility per dollar spent on novels?
c) Which combination of the two goods is better: 4 gallons of ice cream and 3 novels or 6 gallons of ice cream and 2 novels?

Accepted Answer

a) Danielle's marginal utility from the

Question 6

-As Betsy's consumption of coffee increases, her marginal utility from coffee

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains unchanged. 
D)  increases first and then decreases. 
A)  increases. 
B)  decreases. 
C)  remains unchanged. 
D)  increases first and then decreases.

Question 7

What does "diminishing marginal utility" mean?

Accepted Answer

As the consumption of a good or service

Question 8

The water and diamonds paradox of value results from

Accepted Answer

A)  the concept of deadweight loss. 
B)  the "law of demand." 
C)  diminishing marginal utility. 
D)  the elasticity of demand. 
A)  the concept of deadweight loss. 
B)  the "law of demand." 
C)  diminishing marginal utility. 
D)  the elasticity of demand.

Question 9

-Betsy's utility depending from her consumption of coffee is shown in the table above. Betsy's marginal utility from the 3rd cup of coffee per day is

Accepted Answer

A)  30. 
B)  85. 
C)  90. 
D)  10. 
A)  30. 
B)  85. 
C)  90. 
D)  10.

Question 10

-Amy has the total utility values given above for DVD rentals a week. Complete the table by calculating her marginal utilities.

Accepted Answer

@#IMG-DLM& The compl

Question 11

Which of the following is consistent with the assumptions of marginal utility theory?

Accepted Answer

A)  As Jose consumes more of one good, his marginal utility from consuming more of that good decreases. 
B)  As Jose consumes more of one good, his marginal utility from consuming more of that good increases. 
C)  As Jose consumes more of one good, his marginal utility from consuming more of all goods decreases. 
D)  As Jose consumes more of one good, his marginal utility from consuming more of all good increases. 
A)  As Jose consumes more of one good, his marginal utility from consuming more of that good decreases. 
B)  As Jose consumes more of one good, his marginal utility from consuming more of that good increases. 
C)  As Jose consumes more of one good, his marginal utility from consuming more of all goods decreases. 
D)  As Jose consumes more of one good, his marginal utility from consuming more of all good increases.

Question 12

Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar from the tenth slice of pizza and 200 units of utility per dollar from his second soda. Is Abe maximizing his utility? Should Abe change his consumption of pizza and soda?

Accepted Answer

Abe is not maximizing his utility becaus

Question 13

Suppose that Richard has just told you that he would not pay more than $100 dollars for one of his favorite baseball cards. You offer to give him $110 dollars for his card and he refuses. What consumer choice theory or effect explains this result?

Accepted Answer

A)  the endowment effect 
B)  bounded rationality 
C)  bounded self-interest 
D)  bounded will power 
A)  the endowment effect 
B)  bounded rationality 
C)  bounded self-interest 
D)  bounded will power

Question 14

Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys ________.

Accepted Answer

A)  the combination that gives him equal total utility from pies and soda 
B)  2 pies and 2 cans of soda 
C)  only sodas because they are less expensive 
D)  the combination that gives him the same marginal utility per dollar spent on pies as on soda 
A)  the combination that gives him equal total utility from pies and soda 
B)  2 pies and 2 cans of soda 
C)  only sodas because they are less expensive 
D)  the combination that gives him the same marginal utility per dollar spent on pies as on soda

Question 15

-The above table shows Tammy's total utility from videos and CDs. If Tammy has $110 to spend on videos and CDs and if the price of a video is $10 and the price of a CD is $20, then Tammy maximizes her utility by purchasing

Accepted Answer

A)  3 CDs and 5 videos. 
B)  5 CDs and 1 video. 
C)  4 CDs and 3 videos. 
D)  none of the above 
A)  3 CDs and 5 videos. 
B)  5 CDs and 1 video. 
C)  4 CDs and 3 videos. 
D)  none of the above

Question 16

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy

Accepted Answer

A)  more cookies and less hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate. 
B)  more cookies and less hot chocolate, which increases his marginal utility from cookies and decrease his marginal utility from hot chocolate. 
C)  fewer cookies and more hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate. 
D)  fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate. 
A)  more cookies and less hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate. 
B)  more cookies and less hot chocolate, which increases his marginal utility from cookies and decrease his marginal utility from hot chocolate. 
C)  fewer cookies and more hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate. 
D)  fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.

Question 17

Sam consumes only sandwiches and soda and maximizes his total utility. Suppose that the price of a sandwich falls. At the new consumer equilibrium, Sam substitutes ________ for ________. Sam's marginal utility from soda ________ and his marginal utility per dollar spent on sandwiches ________.

Accepted Answer

A)  sandwiches; soda; increases; increases 
B)  soda; sandwiches; decreases; increases 
C)  sandwiches; soda; increases; decreases 
D)  soda; sandwiches; stays the same; stays the same 
A)  sandwiches; soda; increases; increases 
B)  soda; sandwiches; decreases; increases 
C)  sandwiches; soda; increases; decreases 
D)  soda; sandwiches; stays the same; stays the same

Question 18

Bags of Popcorn Bottles of soda  
-Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple

Accepted Answer

A)  equals his marginal utility from his 14th loaf of bread. 
B)  is twice his marginal utility from his 14th loaf of bread. 
C)  is half his marginal utility from his 14th loaf of bread. 
D)  is such that his total utility from apples equals his total utility from bread. 
A)  equals his marginal utility from his 14th loaf of bread. 
B)  is twice his marginal utility from his 14th loaf of bread. 
C)  is half his marginal utility from his 14th loaf of bread. 
D)  is such that his total utility from apples equals his total utility from bread.

Question 19

Gil can consume either pens or milkshakes. Both pens and milkshakes sell for $1. Gil finds that when his income is spent, his marginal utility of pens will be 10 while his marginal utility of milkshakes will be 8. Gil could increase his utility without violating his budget by consuming

Accepted Answer

A)  more pens and fewer milkshakes. 
B)  more pens and more milkshakes. 
C)  fewer pens and fewer milkshakes. 
D)  fewer pens and more milkshakes. 
A)  more pens and fewer milkshakes. 
B)  more pens and more milkshakes. 
C)  fewer pens and fewer milkshakes. 
D)  fewer pens and more milkshakes.

Question 20

What is the water and diamonds paradox of value and what is its resolution?

Accepted Answer

The paradox is that water is critical to

Exam 8: Utility and Demand

Explain why total utility is maximized when the marginal utility per dollar on all goods is equal.

If the price of a good increases, a consumer will substitute away from the relatively more expensive good, which will increase the marginal utility for that good and bring the consumer back to equilibrium.

Suppose the price of a soda is $2 each, the price of a hot dog is $3 each and the budget is $20. If the marginal utility of the fourth soda is 100 and the marginal utility of the fourth hot dog is 150, to maximize utility, a person will buy

-The table above gives Cathy's total utility from Mt. Dew. If the price of a Mt. Dew is $1.50, Cathy's marginal utility per dollar from the 4th Mt. Dew is ________ units per dollar.

-As Betsy's consumption of coffee increases, her marginal utility from coffee

What does "diminishing marginal utility" mean?

The water and diamonds paradox of value results from

-Betsy's utility depending from her consumption of coffee is shown in the table above. Betsy's marginal utility from the 3rd cup of coffee per day is

-Amy has the total utility values given above for DVD rentals a week. Complete the table by calculating her marginal utilities.

Which of the following is consistent with the assumptions of marginal utility theory?

Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar from the tenth slice of pizza and 200 units of utility per dollar from his second soda. Is Abe maximizing his utility? Should Abe change his consumption of pizza and soda?

Suppose that Richard has just told you that he would not pay more than $100 dollars for one of his favorite baseball cards. You offer to give him $110 dollars for his card and he refuses. What consumer choice theory or effect explains this result?

Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys ________.

-The above table shows Tammy's total utility from videos and CDs. If Tammy has $110 to spend on videos and CDs and if the price of a video is $10 and the price of a CD is $20, then Tammy maximizes her utility by purchasing

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy

Sam consumes only sandwiches and soda and maximizes his total utility. Suppose that the price of a sandwich falls. At the new consumer equilibrium, Sam substitutes ________ for ________. Sam's marginal utility from soda ________ and his marginal utility per dollar spent on sandwiches ________.

Bags of Popcorn Bottles of soda -Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple

Gil can consume either pens or milkshakes. Both pens and milkshakes sell for $1. Gil finds that when his income is spent, his marginal utility of pens will be 10 while his marginal utility of milkshakes will be 8. Gil could increase his utility without violating his budget by consuming

What is the water and diamonds paradox of value and what is its resolution?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

Sam consumes only sandwiches and soda and maximizes his total utility. Suppose that the price of a sandwich falls. At the new consumer equilibrium, Sam substitutes for . Sam's marginal utility from soda and his marginal utility per dollar spent on sandwiches .