Exam 10: The Rational Consumer

One point on an indifference curve that displays a diminishing marginal rate of substitution between apples and oranges is 10 apples and 2 oranges; another is 8 apples and 4 oranges. Which of the following combinations of apples and oranges could also lie on this indifference curve?

Tori devotes all of her income to the consumption of peanut butter and jelly. She has just discovered that at her current level of consumption the marginal utility of a jar of peanut butter is 5 and the marginal utility of a jar of jelly is 7. Which of the following statements is TRUE?

Suppose the government decides to help poor families with kids by subsidizing the purchase of milk. The subsidy takes the form of a 50% discount on the price of milk. Suppose also that poor families buy only milk and soda, which are substitutes, although not perfect substitutes. What happens to the amount of milk poor families buy?

The principle of _____ marginal rate of substitution states that the more chocolate Susan consumes in proportion to coffee, the _____ coffee she is willing to substitute for another piece of chocolate.

At the video store, Lucian narrows his selection to either a $2 videocassette of The Evil Dead or a $4 DVD of Finding Nemo. Lucian finally flips a coin to decide which movie to rent. This must mean that Lucian's marginal rate of substitution of The Evil Dead for Finding Nemo is 0.5.

The following bundles can all be on the same indifference curve. Bundle A: 4 enchiladas, 1 burrito; bundle B: 3 enchiladas, 3 burritos; bundle C: 2 enchiladas, 2 burritos.

Use the following to answer question: -(Table: Marginal Utility per Dollar III) Look at the table Marginal Utility per Dollar III. If Liyun has $20 to spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and _____ pounds of potatoes.

Karen consumes gasoline and other goods. A new excise tax on gasoline raises the price. However, the government pays Karen an income subsidy that is just enough for her to stay on her original (pretax) indifference curve. Her new optimal consumption bundle will have:

Use the following to answer questions: Figure: Oreos and Apples -(Figure: Oreos and Apples) Look at the figure Oreos and Apples, which provides an indifference curve map for Diego. As Diego moves along an indifference curve from point F to point E, he buys _____ Oreos to obtain _____ apples.

The _____ is the maximum amount of good X a consumer would be willing to give up to obtain an additional unit of good Y.

Use the following to answer questions: Figure: Consumer Equilibrium II -(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. A level of total utility NOT attainable is at point:

Suppose the government decides to help poor families with kids by subsidizing the purchase of milk. The subsidy takes the form of a 50% discount in the price of milk. Suppose also that poor families buy only milk and Spam (an inferior good). What happens to the amount of Spam poor families buy?

One point on a standard indifference curve is 8 cookies and 2 brownies; another is 6 cookies and 4 brownies. Which of the following combinations of cookies and brownies could lie on this indifference curve?

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. Suppose Madeline is consuming bundle A but then changes her consumption and slowly moves along her indifference curve to bundles B, C, D, and finally E. As she moves toward bundle E, she gives up:

Suppose bad weather and pollution dramatically reduce the supply of crawfish in Louisiana next year. This would most likely lead to _____ in the marginal utility of crawfish consumption.

The marginal rate of substitution assumes that:

Manny consumes only bananas and DVDs, and he is on his highest possible indifference curve. Two bundles on this indifference curve are bundle A (5 bananas and 2 DVDs), and bundle B (3 bananas and 3 DVDs). Between points A and B, what is Manny's marginal rate of substitution of bananas for DVDs?

The maximum amount of one good a consumer would be willing to give up to obtain an additional unit of another is called the:

Indifference curves that are convex to the origin imply:

The income effects of a change in price are most important for goods that: