Exam 25: Consumer Choice

If there are only two goods in the economy, chocolate and peanut butter, and the price of chocolate falls, the new utility-maximizing bundle for a typical consumer would entail consuming _____ peanut butter and ______ chocolate.

A bar owner must decide how best to raise revenues. A cover charge will allow him to offer cheaper drink prices. If the owner does decide to require a cover charge and offer cheaper drinks, how much should it be to avoid losing customers? Explain.

Which statement is TRUE?

If the marginal utility per dollar for hamburgers is 2, and the marginal utility per dollar for pizza is 1, then this consumer should consume more hamburgers.

The slope of the indifference curve is equal to the marginal rate of substitution.

Use the following to answer questions: Figure: Income and Substitution Effects -(Figure: Income and Substitution Effects) Refer to the figure. The consumer is initially in equilibrium at Point A then moves to Point B. What is the substitution effect from the price change?

If another unit of good X gives a consumer 15 additional units of satisfaction, and another unit of good Y gives 45 additional units of satisfaction, the MRS is equal to one-third.

If the marginal utility per dollar for hamburgers is higher than the marginal utility per dollar for tacos, then to maximize utility the consumer should only consume hamburgers.

Amy purchased four cantaloupes at $2 each and three watermelons at $4 each. If Amy is following the optimal consumption rule, the marginal utility of the fourth cantaloupe and third watermelon are:

Use the following to answer questions: Figure: Optimal Choice 2 -(Figure: Optimal Choice 2) Refer to the figure. This figure represents indifference curves of a consumer who purchases flip-flops and sneakers. If the dotted line represents this consumer's budget constraint, then bundle D on the graph:

Figure: Work Leisure Refer to the figure. Which statement is FALSE?

If you purchase a ticket to a concert but then lose the ticket, a rational consumer would:

Figure: Labor Supply 2 Refer to the figure. The figure represents the budget constraint and indifference curves for the labor-leisure decision of a consumer when the wage rate falls from $20 to $10. For this worker:

If the marginal utility per dollar for hamburgers is higher than the marginal utility per dollar for tacos, then in order to maximize utility the consumer should only consume hamburgers.

Which of the following methods have been used to reduce the disincentive effects of welfare on labor supply? I. The government reduces welfare benefits by $1 of every $1 of labor income earned. II. The government limits the amount of time that someone can collect welfare. III. The government provides an Earned Income Tax Credit that supplements the income of the working poor.

At the consumer's optimal consumption bundle, the MRS_XY is 4, and the marginal utility of good X is 8. What is the marginal utility of good Y?

Use the following to answer questions: Figure: Budget Constraint 2 -Figure: Budget Constraints 3 Refer to the figure. What could have caused the shift in the budget constraint?

Use the following to answer questions: Figure: Coffee and Comic Books -(Figure: Coffee and Comic Books) Refer to the figure. A consumer has $5 to spend on comic books (priced at $1 per comic book) and coffee (priced at $1 per cup). Using the figure, how many comic books and cups of coffee will this consumer purchase?

A worker might respond to a higher wage by working less.

Use the following to answer questions: Figure: Indifference Curve -(Figure: Indifference Curve) Refer to the figure. This figure represents the indifference curve of a consumer who purchases flip-flops and sneakers. Which statement is TRUE?