Exam 10: The Rational Consumer

Smedley, a careful utility maximizer, consumes peanut butter and ice cream. Assume that both peanut butter and ice cream are normal goods. He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of ice cream increased. As he adjusted to this event, he consumed _____ peanut butter and _____ ice cream.

When Laurie asks Matt if he wants a large popcorn and small soda or a large soda and small popcorn, Matt says, "Oh, I'm indifferent." This means Matt:

Gwen is consuming the optimal consumption bundle of potatoes and steak. Call this bundle A. Her income is $100, the price of steak is $10, and the price of potatoes is $1. Put potatoes on the vertical axis and put steak on the horizontal axis. Her income increases to $500, and the prices of steak and potatoes remain constant. With the increase in income, Gwen changes her consumption of the two goods and now maximizes utility at bundle B. If potatoes are inferior goods for Gwen,

Economists identify the satisfaction a person derives from the consumption of goods and services as:

You have an economics test tomorrow and you think that you might need to stay up all night to study for it. Your professor argues against pulling this all-nighter because he thinks there is a point where more studying (and less sleeping) can actually do more harm than good. Using the concepts of total and marginal utility, explain your professor's position.

Use the following to answer questions: -(Table: Madeline's Preferences for T-Shirts and Coffee) Look at the table Madeline's Preferences for T-Shirts and Coffee. Assume each consumption bundle provides the same level of utility. As Madeline moves from bundle A to bundle E, her total utility:

Use the following to answer questions: Figure: Consumer Equilibrium II -(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. Which of the following statements is TRUE?

Housing tends to take up a substantial share of a consumer's spending. An increase in the price of housing will result in:

LaToya sees honey and sugar as perfect substitutes. She is always willing to substitute 1 teaspoon of honey for 2 teaspoons of sugar. If honey is three times as expensive as sugar, LaToya will use:

Use the following to answer questions: Figure: The Optimal Consumption Bundle -(Figure: The Optimal Consumption Bundle) Look at the figure The Optimal Consumption Bundle. Which of the following could lead to an optimal consumption bundle on indifference curve I₁?

Use the following to answer questions: Figure: The Consumption of Video Games and E-Books -(Figure: The Consumption of Video Games and E-Books) Look at the figure The Consumption of Video Games and E-Books. Which chart shows the effects of a decrease in income when video games are an inferior good and e-books are a normal good?

If the marginal rate of substitution of cookies for brownies equals the price of cookies in terms of brownies when the consumer is on the budget line, the consumer:

At the optimal consumption bundle:

In terms of indifference curves, an increase in total utility is represented by a _____ indifference curve.

Utility is most closely related to:

Assume that as the price of cauliflower falls, the income effect causes consumers to buy fewer heads of cauliflower. We can conclude that cauliflower is:

Use the following to answer questions: Figure: Kristin's Budget Line -(Figure: Kristin's Budget Line) Look at the figure Kristin's Budget Line. The price of a cup of cappuccino is $3, and the price of an apple is $1. Kristin's income is:

Use the following to answer questions: Figure: Indifference Curve Map I -(Figure: Indifference Curve Map I) Look at the figure Indifference Curve Map I. It shows that:

Use the following to answer questions: Figure: Harold's Indifference Curves The figure shows three of Harold's indifference curves for bread and cheese. -(Figure: Harold's Indifference Curves) Look at the figure Harold's Indifference Curves. The price of cheese is $2 per pound and Harold has $10 to spend on bread and cheese. As the price of bread rises from $1 to $2 per loaf, his consumption of bread:

Use the following to answer questions: Figure: Consumer Equilibrium III -(Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III. Kurt would maximize his utility at point _____ with the consumption of _____.