Deck 7: Consumer Choice: Utility Theory and Insights From Neuroscience

Question 1

Brandon eats four tacos a on a Sunday night but admits each slice of pizza doesn't taste as delicious as the previous one.This suggests that,for Brandon,

A) the marginal utility of a slice of pizza is positive but decreasing.
B) the marginal utility of a slice of pizza is negative but increasing.
C) the total utility of slice of pizza is declining by larger and larger increments.
D) the total utility of slice of pizza is increasing by larger and larger increments.

Answer 1

the marginal utility of a slice of pizza is positive but decreasing.

Question 2

Table 7.2
Refer to Table 7.2.The marginal utility of the fourth slice of pie per day is

A) 75.
B) 20.
C) 15.
D) 3.

Answer 2

15.

Question 3

The satisfaction experienced from consuming a good or service is referred to as

A) utility.
B) marginal utility.
C) the law of diminishing marginal utility.
D) all of the above

Answer 3

utility.

Question 4

Refer to Figure 7.1.Increasing the number of movies rented from 3 to 4 will cause total utility to

A) increase.
B) decrease.
C) stay the same.
D) none of the above

Question 5

Refer to Figure 7.2.The marginal utility of the third video game rental is

A) 1.
B) 3.
C) 4.
D) 22.

Question 6

Refer to Figure 7.3.The marginal utility from the fourth slice of pie is

A) 2.
B) 3.
C) 4.
D) 8.

Question 7

Refer to Figure 7.3.The total utility from consuming 2 slices of pie is

A) 4.
B) 7.
C) 12.
D) 15.

Question 8

Table 7.2
Refer to Table 7.2.Diminishing marginal utility sets in after the ________ slice of pie per day.

A) first
B) second
C) third
D) fourth

Question 9

Table 7.1
Refer to Table 7.1.The marginal utility of the third donut per day is

A) 15.
B) 20.
C) 60.
D) 75.

Question 10

Table 7.1
Refer to Table 7.1.The total utility of the five cups of coffee per day is

A) 70.
B) 75.
C) 80.
D) 90.

Question 11

The budget line shows

A) the different combinations of two goods that a consumer can buy.
B) the quantity of a single good that a consumer is willing to buy at different prices.
C) the maximized utility from a good.
D) none of the above

Question 12

Refer to Figure 7.1.The ________ movie rental has a marginal utility of zero.

A) first
B) second
C) third
D) fourth

Question 13

Refer to Figure 7.1.The marginal utility of the third movie rental is

A) 1.
B) 3.
C) 9.33.
D) 28.

Question 14

Table 7.1
Refer to Table 7.1.Diminishing marginal utility sets in after the ________ cup of coffee per day.

A) first
B) second
C) third
D) fourth

Question 15

Refer to Figure 7.2.The marginal utility of the first video game rental is

A) 8.
B) 10.
C) 25.
D) 40.

Question 16

Refer to Figure 7.3.The total utility from consuming 4 slices of pie is

A) 2.
B) 8.
C) 15.
D) 17.

Question 17

Refer to Figure 7.1.The marginal utility of the second movie rental is

A) 10.
B) 12.5.
C) 25.
D) 40.

Question 18

Table 7.1
Refer to Table 7.1.The marginal utility of the third cup of coffee per day is

A) 15.
B) 20.
C) 25.
D) 35.

Question 19

Refer to Figure 7.2.The ________ movie rental has a marginal utility of zero.

A) first
B) second
C) third
D) fourth

Question 20

Table 7.1
Refer to Table 7.1.The total utility of five donuts per day is

A) 60.
B) 65.
C) 70.
D) 78.

Question 21

As more of any one good is consumed in a given period,its

A) total utility decreases then remains constant.
B) marginal utility decreases.
C) total utility decreases then increases.
D) marginal utility increases.

Question 22

Table 7.2
Refer to Table 7.2.The total utility of the five slices of pie per day is

A) 105.
B) 95.
C) 85.
D) 75.

Question 23

According to the law of diminishing marginal utility,

A) as the consumption of a particular good increases, marginal utility increases.
B) as the consumption of a particular good increases, marginal utility decreases.
C) total utility is always negative.
D) B and C are correct

Question 24

Maxine has a fixed income per month to spend on goods and services,so in allocating her limited income over a set of goods,she should purchase the goods that

A) have the highest utility regardless of price.
B) have the highest marginal utility.
C) provide the most utility per dollar spent.
D) have equal marginal utilities.

Question 25

Suppose that Erin spends all of her income on two goods,pizza and fiction novels.If the price of pizza rises,then

A) the current marginal utility per dollar spent on pizza will rise.
B) the current marginal utility per dollar spent on pizza will fall.
C) the current marginal utility per dollar spent on fiction novels will rise.
D) the current marginal utility per dollar spent on fiction novels will fall.

Question 26

Marginal utility is defined as the

A) additional utility gained by consuming an extra unit of a good.
B) total utility from all units consumed of a good.
C) total utility from all units consumed divided by the number of units consumed.
D) additional utility gained divided by the price of the good.

Question 27

Table 7.6
Refer to Table 7.6.Pete has $10 to spend.He buys four cookies and three candies.Using the equimarginal rule,which of the following is true?

A) Pete is maximizing his utility.
B) Pete is not spending the entire $10.
C) Pete could make himself better off by buying less candy and more cookies.
D) Pete could make himself better off by buying less cookies and more candy.

Question 28

Marginal utility is the

A) total amount of satisfaction gained by the consumption of a good or service.
B) additional satisfaction gained by the consumption or use of one more unit of something.
C) price of a good relative to the prices of other goods and services.
D) comparison of utility between two different people.

Question 29

If the marginal utility per dollar is not the same for each good,the consumer could ________ her utility by spending ________ on goods for which the marginal utility per dollar is higher.

A) increase; more
B) increase; less
C) decrease; more
D) minimize; more

Question 30

Utility can be thought of as the same as

A) opportunity cost.
B) satisfaction.
C) choice.
D) none of the above

Question 31

Juan is consuming 3 sandwiches and 6 sodas.If a sandwich costs twice as much as a soda,then

A) Juan should buy more sodas.
B) Juan should buy more sandwiches.
C) Juan is maximizing his utility if he derives twice as much utility from the last soda as from the last sandwich.
D) Juan is maximizing his utility if he derives twice as much utility from the last sandwich as from the last soda.

Question 32

Suppose that a consumer is currently spending all of her income on 10 units of good A and 5 units of good B.The price of good A is $4 per unit,the price of good B is $10 per unit,the marginal utility of the last unit of good A consumed is 20,and the marginal utility of the last unit of good B consumed is 60.If the consumer wants to maximize her utility from consuming the two goods,she should

A) consume more of good B and less of good A.
B) consume more of good A and less of good B.
C) continue to consume 10 units of good A and 5 units of good B.
D) consume more of both goods.

Question 33

Table 7.6
Refer to Table 7.6.Pete has $10 to spend.He buys two cookies and four candies.Using the equimarginal rule,which of the following is true?

A) Pete is maximizing his utility.
B) Pete is not spending the entire $10.
C) Pete could make himself better off by buying less candy and more cookies.
D) Pete could make himself better off by buying less cookies and more candy.

Question 34

Table 7.3
Refer to Table 7.3.The effect of the law of diminishing marginal utility is seen after

A) the first movie and the first book.
B) the fifth movie and the second book.
C) the eighth movie and eighth book.
D) None of the above; this is a case where the law does not apply.

Question 35

Table 7.3
Refer to Table 7.3.The marginal utility of the first book is

A) 1.1.
B) 20.
C) 21.
D) 22.

Question 36

Table 7.3
Refer to Table 7.3.For the consumer whose preferences are depicted,the marginal utility of the fifth movie is

A) zero.
B) 3.
C) 6.
D) 12.

Question 37

The equimarginal rule

A) equates the marginal utility per dollar spent on each good purchased.
B) states that in order to maximize utility the consumer should buy more of those goods with a high marginal utility.
C) states that in order to maximize utility the consumer should buy more of those goods that cost less.
D) none of the above

Question 38

The principle of opportunity cost is

A) the opportunity cost of something is what someone sacrifices to get it.
B) the satisfaction of obtaining the best next alternative.
C) the choice someone has to make between two different goods.
D) the cost of paying for something someone needs.

Question 39

Consumers should allocate their scarce income so that

A) the marginal utility for all goods consumed is zero.
B) the marginal utility for all goods consumed is equal.
C) the marginal utility divided by price is equal for all goods consumed.
D) the marginal utility divided by price is maximized for all goods consumed.

Question 40

When the price of a good falls,the ratio of the marginal utility of that good divided by its price ________ and as a result,consumers purchase ________ of that good.

A) rises; more
B) falls; more
C) rises; less
D) falls; less

Question 41

The budget line and the demand curve are both similar in the way that both show the price of a good that a consumer can buy.

Question 42

At Hillary's current level of consumption,MUₓ/Pₓ = 18 and MUᵧ/Pᵧ = 15.Hillary can increase her utility by increasing her consumption of good X and reducing her consumption of good Y.

Question 43

Table 7.8
Refer to Table 7.8.Jessy spends no more than $75 per month on movies and eating out.The price of a movie is $8 and the price of a meal out is $15.If Jessy watches two movies per month,what is her marginal utility per dollar?

A) 80
B) 12
C) 10
D) 9

Question 44

The utility-maximizing rule says that a person will maximize utility by choosing goods so that the marginal utility for each good is equal.

Question 45

Table 7.7
Refer to Table 7.7.If the price of a soda is $2,the price of a hamburger is $6,and George has $20 of income,George's utility maximizing combination of sodas and hamburgers per day is

A) 4 soda and 2 hamburgers.
B) 1 sodas and 3 hamburger.
C) 4 sodas and 1 hamburgers.
D) 3 sodas and 4 hamburgers.

Question 46

Recall the Application about how marginal utility changes with the quantity consumed to answer the following question(s). Neuroscientists offered subjects in an experiment varying monetary rewards, and observed the neural activity in a subject's striatum region of the brain.
Recall the Application.What was shown in the study that the neuroscientists conducted on subjects and their reaction to varying monetary rewards?

A) It showed that general rewards are subject to diminishing marginal utility.
B) It showed a direct demonstration of the law of diminishing marginal utility.
C) It showed a direct demonstration of the subject's opportunity cost.
D) Nothing was shown in the study.

Question 47

At her current consumption level,Betty gets twice as much marginal utility from an additional bottle of soda as she does from an additional bottle of water.If she is maximizing her utility and the price of soda is $2 per bottle,then the price of a bottle of water must be

A) $1.00.
B) $2.00.
C) $4.00.
D) $8.00.

Question 48

Table 7.8
Refer to Table 7.8.Jessy spends no more than $75 per month on movies and meals out.Movies cost $8 each and a meal out costs $15.If Jessy wants to maximize her utility,she should choose ________ movies and ________ meals out.

A) 0; 5
B) 1; 4
C) 4; 2
D) 3; 3

Question 49

At George's current level of consumption,MUskᵢ tᵣᵢps/Pskᵢ tᵣᵢps = 7 and
MUᵣₑstₐᵤᵣₐnt mₑₐls/Pᵣₑstₐᵤᵣₐnt mₑₐls = 9.George can increase his utility by decreasing his consumption of ski trips and increasing his consumption of restaurant meals.

Question 50

Table 7.8
Refer to Table 7.8.Jessy spends no more than $75 per month on movies and meals out.Movies cost $8 each and a meal out costs $15.If Jessy eats out three times per month,what is her marginal utility per dollar spent?

A) 120
B) 15
C) 9
D) 8

Question 51

Suppose that MUₓ/Pₓ < MUᵧ/Pᵧ.This implies that

A) spending a dollar less on Y and spending a dollar more on X increases utility.
B) spending a dollar less on X, and spending a dollar more on Y increases utility.
C) X is more expensive than Y.
D) Y is more expensive than X.

Question 52

Paul is consuming X and Y so that MUₓ/Pₓ = 18 and MUᵧ/Pᵧ = 14.Using the equimarginal rule,Paul should

A) continue to consume the same amount of X and Y, as he is already maximizing utility.
B) consume less of both X and Y.
C) consume more X and less Y.
D) consume less X and more Y.

Question 53

With respect to the equimarginal rule,a person will maximize utility when the

A) total utility per dollar spent is equalized across products.
B) marginal utility is equalized across products.
C) total utility is equalized across products.
D) marginal utility per dollar spent is equalized across products.

Question 54

Dan is consuming coffee and bagels so that MU_c/P_c = 15 and MU_b/P_b = 9.Using the equimarginal rule,Dan should

A) continue to consume the same amount of coffee and bagels, as he is already maximizing utility.
B) consume less of both coffee and bagels.
C) consume more coffee and less bagels.
D) consume less coffee and more bagels.

Question 55

A budget line connects the combinations of two goods that exhaust a consumer's budget.

Question 56

One explanation for the development of online music services is

A) these services will help reduce the incidence of of piracy.
B) consumers do not care about the price they pay for one song.
C) consumers stopped purchasing CDs.
D) the government mandated this market.

Question 57

A consumer's budget set does not include all combinations of goods that a consumer can afford given the consumer's income and the prices of the goods.

Question 58

Suppose that Carolyn's current level of consumption,MUₓ/Pₓ = 18 and MUᵧ/Pᵧ = 10.Carolyn can increase her utility by increasing her consumption of good Y and reducing her consumption of good X.

Question 59

The equimarginal rule says that a person will maximize utility by choosing the good for which the marginal utility is the greatest.

Question 60

According to economics,why would a consumer download a song illegally?

A) Most people have a criminal mentality.
B) The expected cost of the act is greater than the expected benefit.
C) There are no other options for most consumers.
D) The expected benefit of the act is greater than the expected cost.

Question 61

What is a budget line?

Question 62

Utility is not easy to measure and quantify.

Question 63

If marginal utility is decreasing,consuming an additional unit of a product will cause total utility to decline.

Question 64

Table 7.5
Table 7.5 shows how the total utility that Alan derives from watching basketball games changes as he watches more and more games each week.Fill in the table.Do the numbers in the table support the law of diminishing marginal utility? Explain.

Question 65

What is meant by utility?

Question 66

Table 7.4
Table 7.4 shows how the total utility that Zach derives from eating candy bars changes as he consumes more and more candy bars each day.Fill in the table.Do the numbers in the table support the law of diminishing marginal utility? Explain.

Question 67

Kylie spends her income of $150 per week on two goods: movies (which cost $5 each)and books (which cost $10 each).At her current level of consumption,the marginal utility from the last movie consumed is 20 and the marginal utility from the last book consumed is 30.Is Kylie maximizing her utility? Why or why not? If not,what should Kylie do to achieve a higher level of utility?

Question 68

Comment on the following statement: "Diminishing marginal utility implies that total utility will fall when an additional unit of a good is consumed."

Question 69

If marginal utility is positive,consuming an additional unit of a product will cause total utility to decline.

Question 70

The law of diminishing marginal utility means that total utility must fall as more units of a good are consumed.

Question 71

What is the law of diminishing marginal utility?

Question 72

Mike is a college student who works part time and earns $100 per week.He spends his entire income on two goods: pepperoni pizzas and bottles of soda.The price of a pepperoni pizza is $10 and the price of a bottle of soda is $2.Draw Mike's budget line.

Question 73

If marginal utility is negative,consuming an additional unit of a product will cause total utility to decline.

Question 74

Total utility is the additional satisfaction received from consuming an additional unit of a product.

Question 75

Susie receives an allowance from her parents of $10 per week.She spends her entire allowance on two goods: cans of hairspray and bubble gum.The price of a can of hairspray is $2 and the price of a pack of bubble gum is $1.Draw Susie's budget line.

Question 76

What is the equimarginal rule?

Question 77

Colin spends his income of $100 per week on two goods: pizzas (which cost $8 each)and milk (which costs $1 per gallon).At his current level of consumption,the marginal utility from the last pizza consumed is 32 and the marginal utility from the last gallon of milk is 4.Is Colin maximizing his utility? Why or why not? If not,what should Colin do to achieve a higher level of utility?

Question 78

The law of diminishing marginal utility implies that demand curves will be upward sloping.

Question 79

As an individual consumes more of a good,total utility always increases and marginal utility always decreases.

Question 80

What is the difference between total utility and marginal utility?