Exam 7: Utility Maximization

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that

You can drive from Kansas City to St. Louis in five hours. You can fly between the cities in two hours. The price of an airline ticket is $150. The cost of driving between the cities is $50. About what hourly wage would make the "full" cost of driving equal the "full" cost of flying, where "full" cost includes the value of time?

A product has utility if it

Marginal utility is total utility divided by the number of units consumed.

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. If the price of X decreases to $2, then the utility-maximizing combination of the two products is

If total utility is increasing, marginal utility

A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the

Increases in product prices shift the consumer's

The table below shows the utility schedule for a consumer of candy bars. This consumer begins to experience diminishing marginal utility when consuming the

Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is

If consumption of a good is subsidized by the government, then the MU/P of that good among consumers will

When a consumer has maximized total utility, he or she cannot increase total utility by reallocating expenditures among different products.

Each point on a single indifference curve reflects the same level of total utility for a consumer.

Diminishing marginal utility explains why

Refer to the budget line shown in the diagram. Given the same money income, reductions in the prices of both products C and D will

(Consider This) When the federal government started requiring restaurants to print calorie counts next to menu items, some people increased their consumption of higher-calorie items. Whichof the following best explains this phenomenon?

Many people buy no more than one iPad because

The table shows the utility schedule for a consumer of candy bars. Based on the data in the table, you can conclude that the

When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $0.60 per bottle and $0.40 per bag, respectively. It can be concluded that