Exam 8: Utility and Demand

-John either buys a steak or chicken when dining out. John's marginal utility for steak and chicken is given in the above table. If the price of a steak is $5 and the price of a chicken is $5 and John has $25 to spend on the two goods, what combination of steak and chicken will John consume to maximize his utility?

Kirk consumes normal goods. If Kirk's income decreases and the prices of all goods remain unchanged, in his new consumer equilibrium, his marginal utility from each good will ________ and his total utility will ________.

Utility is best defined as

Marginal utility theory predicts that an increase in income means that the consumption of

We can explain the paradox of value as follows: 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; and the marginal utility per dollar spent on water ________ the marginal utility per dollar spent on gold.

The paradox of value is illustrated by the fact that

________ is the additional satisfaction a person receives from consuming an extra unit of a good.

-In the figure above, diminishing marginal utility is shown by

Liane maximizes her total utility when she allocates all of her available income such that the marginal utility per dollar spent on each good ________.

The marginal utility from the consumption of a good is equal to the

Pizza Pepsi -The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. Initially, a slice of pizza costs $4 and a can of Pepsi $2. Suppose Priscilla has $12 to spend. If the price of pizza falls to $2, Priscilla will choose to

Which of the following occur when a person maximizes utility? I. The marginal utility of each good bought is equal. II) The highest level of utility is attained. III) All of a person's budget is spent.

"Water is very inexpensive. Thus the marginal and total utility of water is small." Analyze the previous statements.

Rembrandt paintings are expensive and not as vital for life as milk, which is cheap. Marginal utility theory explains this paradox of value: The total utility from a Rembrandt painting is ________ than the total utility from milk, and the marginal utility from a Rembrandt painting is ________ than the marginal utility from milk.

Renee consumes pizza and rice. An increase in her income causes her to consume fewer pizzas and more rice. The change in pizzas consumed means that

Sub sandwiches Mountain Dew -Sue consumes only sub sandwiches and Mountain Dew. Subs and Mountain Dew are complements. If the price of a sub sandwiches increases

Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 24 for the last pound of mangos purchased and 10 for the last pound of bananas. To maximize his utility, Robinson should buy

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose that Teddy's marginal utility per dollar from cookies exceeds that from hot chocolate. Teddy can make himself better off if he buys

The only goods you consume are pizza and soda. Both are normal goods. You consider pizza and soda to be substitutes. Which of the following will lead you to eat more pizza?

Ricky is in a consumer equilibrium. Given the prices of goods, Ricky has allocated all his income such that his marginal utility per dollar spent is ________ for ________ goods.