Exam 8: Consumer Choice

_____ is the understanding that perfect information is not likely to be available, and that as a result people make decisions that in hindsight look irrational, but in reality are the rational results of a brain that is economizing.

Consumers should allocate their income so that the marginal utility associated with the:

When a good becomes more expensive, it yields less satisfaction per dollar, so consumers buy less of it and more of other goods.This is called the _____ effect.

If MU_x / P_x = MU_Y / P_Y then _____.

Assume that a consumer purchases a combination of products X and Y and the MU_x / P_x = 75 utils per dollar and MU_y / P_y = 50 utils per dollar.To maximize utility without spending more dollars, the consumer should buy:

Total utility is determined by:

As the price of a good increases:

As a consumer eats additional pieces of pizza, total utility will _____.

According to the law of diminishing utility, _____.

It is often observed that, over the same period of time and for the same good, marginal utility declines rapidly for some consumers and very little for others.This observation illustrates:

Jen spent her weekly allowance of $110 on clothes and cosmetics.Assume that she had allocated $100 to shoes and $10 to lipsticks and is in equilibrium.What can you conclude from her purchase decisions?

Mr.Rational has $27 that he plans to spend purchasing 5 units of good X (priced at $3 per unit)and 6 units of good Y (priced at $2 per unit).The marginal utility of the fifth unit of X is 30, and the marginal utility of the sixth unit of Y is 30.If Mr.Rational is a utility maximizer, he should:

Utility is most closely defined as _____.

If the price of videotapes decreases, then the _____.

Individuals behave so as to maximize their utility.

In order to have a meaningful measure of marginal utility, we must define the time period during which consumption is occurring.

Due to the law of diminishing marginal utility, _____.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3 In Figure 6.3, the consumer is in equilibrium at point:

"Throwing good money after bad" is also known as the _____ effect.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3 Refer to Figure 6.3.The consumer prefers _____ to _____.