Exam 10: The Rational Consumer

An individual consuming two goods, X and Y, has the usual downward-sloping, convex indifference curves. All EXCEPT one of the following will characterize the optimal consumption point. Which is the EXCEPTION?

Max consumes only yogurt and almonds, and he is on his highest possible indifference curve. Bundle A (4 yogurts and 2 almonds) and bundle B (3 yogurts and 3 almonds) are on this indifference curve. Between points A and B, what is Max's marginal rate of substitution of yogurt for almonds?

Use the following to answer questions: -(Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that the price of good X is $2 per unit and the price of good Y is $1 per unit, that you consume three units of good X and three units of good Y, and that you are spending all of your income. To maximize utility, assuming that the goods are divisible, you would consume _____ of X and _____ of Y.

Use the following to answer questions: Figure: Consumer Equilibrium I The figure shows three of Owen's indifference curves for pizza and soda per week. Owen has $180 per month to spend on the two goods. The price of a pizza is $20, and the price of a soda is $1.50. -(Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I. If Owen consumes 1.5 pizzas and 100 sodas, he:

Luis is consuming his optimal consumption bundle of pizza and tacos. The marginal utility associated with the last pizza he consumes is 1 util, and the marginal utility associated with the last taco is 3 utils. What must be the relative price of pizza in terms of tacos?

Use the following to answer question: -(Table: Marginal Utility per Dollar IV) Look at the table Marginal Utility per Dollar IV. If Ashyra has $40 to spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and _____ pounds of potatoes.

At the optimal consumption bundle, the marginal utility of each good purchased is always the same.

Use the following to answer questions: Figure: Consumer Equilibrium II -(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. The LOWEST level of total utility shown in the figure is associated with point _____ on curve _____.

Which of the following best describes the income effect of a price increase?

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 effect of a decrease in income when both video games and e-books are normal goods?

Use the following to answer questions: -(Table: Alaina's Utility from Consuming Cups of Coffee) Look at the table Alaina's Utility from Consuming Cups of Coffee. Diminishing marginal utility:

The demand curve for a normal good will always slope downward because:

It is said that consumers maximize utility because they are:

When we graphically isolate the substitution effect of a change in the price of one good, utility is held constant.

Assume that diminishing marginal utility applies to both slippers and tutus and that Natasha is spending all of her income. If Natasha purchases a combination of ballet slippers and tutus such that MU_Slippers / P_Slippers = 20 and MU_Tutus / P_Tutus = 5, to maximize utility, Natasha should buy _____ slippers and _____ tutus.

Mario sees popcorn and pretzels as perfect substitutes. He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn is $3 and the price of a cup of pretzels is $1, Mario will eat:

A consumer is attempting to maximize utility in her consumption of goods A and B. If her income and the price of good A do not change but the marginal utility of good B is constant and the price of good B decreases, this will _____ utility per dollar spent on good B.

Use the following to answer questions: Figure: Indifference Curves and Consumption Bundles -(Figure: Indifference Curves and Consumption Bundles) Look at the figure Indifference Curves and Consumption Bundles. The lines AA and BC are parallel. The optimal consumption point could shift from b to c as a result of any of the following EXCEPT:

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 I₃?

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. Suppose Kristin initially consumes 10 cups of cappuccino and 30 apples. Then, the price of apples increases to $3 each and the price of cappuccino remains unchanged. As a result of the price change, Kristin's optimal consumption bundle changes, reflected by a decrease in the consumption of both apples and cappuccinos. If Kristin is to maintain the same level of utility as before the price change, she must: