Question 1

Use the following to answer question: 
-(Table: Alaina's Utility from Consuming Cups of Coffee)Use Table: Alaina's Utility from Consuming Cups of Coffee.Diminishing marginal utility is:

Accepted Answer

Diminishing marginal utility is present in Alaina's consumption of coffee since her total utility increases at a decreasing rate with each cup consumed. This can be seen as the marginal utility of each additional cup of coffee consumed decreases as the quantity increases.

Question 2

When the price of Spam (an inferior good)decreased,Dale bought more Spam.For Dale,the income and substitution effects moved in the same direction.

Accepted Answer

For an inferior good like Spam, the substitution effect would lead Dale to buy more as the price decreases, but the income effect would lead him to buy less because he feels effectively richer and might substitute Spam with a normal good.

Question 3

Suppose Sirach knows that the price of doughnuts is $3 and the price of cupcakes is $4.He also knows that the next doughnut he consumes will increase his total utility by 6 utils and the next cupcake will increase his total utility by 10 utils.Assuming he has enough money to buy either,Sirach should buy a doughnut next.

Accepted Answer

Given the information, Sirach should buy a cupcake next because it provides a higher utility per dollar spent (2.5 utils per dollar for the cupcake vs. 2 utils per dollar for the doughnut).

Question 4

At Frankie's Buy-the-Slice Pizza,Brian eats eight slices of pizza.He says that,because pizza is $2 per slice,the utility-maximizing decision is to eat until your marginal utility per dollar is zero.Brian's explanation is correct.

Accepted Answer

Brian's explanation is incorrect because the utility-maximizing decision is to eat until the marginal utility per dollar spent on the last slice of pizza equals the marginal utility per dollar spent on other goods, not until it is zero.

Question 5

If the price of laundry detergent equals the price of dishwashing powder,then a utility-maximizing consumer will always buy equal amounts of laundry detergent and dishwashing powder.

Accepted Answer

It is not necessary that a utility-maximizing consumer will always buy equal amounts of two goods just because they have the same price. The quantities bought will depend on the individual's preferences and marginal utilities for those goods.

Question 6

For most goods,the income effect has no significant effect on individual consumption.

Accepted Answer

The income effect is the change in consumption of a good or service that results from a change in income. For most goods, the income effect is positive, meaning that as income increases, consumption of the good or service also increases. However, for some goods, the income effect is negative, meaning that as income increases, consumption of the good or service decreases.

Question 7

Use the following to answer question: 
-(Table: Alaina's Utility from Consuming Cups of Coffee)Use Table: Alaina's Utility from Consuming Cups of Coffee.Alaina's marginal utility from consuming her sixth cup of coffee is _____ utils.

Accepted Answer

Marginal utility is the change in total utility from consuming one additional unit. Without the specific table data, the correct answer cannot be determined from context or calculation. However, based on the question's structure, if we assume a typical scenario where marginal utility decreases with each additional unit consumed, and given the options, a small number like 4 utils for the sixth cup could be a reasonable guess reflecting diminishing marginal utility.

Question 8

In the standard models in economics,consumers maximize utility because they are:

Accepted Answer

In standard economic models, consumers are assumed to be rational actors who seek to maximize their own utility or satisfaction. This means that they carefully weigh the costs and benefits of different options before making a decision. Therefore, choice A is the best answer.

Question 9

At Frankie's Buy-the-Slice Pizza,Bill eats three slices of pizza and then realizes that he enjoyed the second slice more than the third.Even though the price per slice is just $1,the utility-maximizing decision is to quit eating now since Bill has reached diminishing marginal utility.

Accepted Answer

Diminishing marginal utility means each additional slice provides less satisfaction, but it doesn't necessarily mean Bill should stop eating. He should stop when the marginal utility of the next slice is less than the price.

Question 10

For a Giffin good,the income effect works in the opposite direction from the substitution effect,and the income effect is larger than the substitution effect.

Accepted Answer

For a Giffin good, the income effect works in the opposite direction because as the price of the good rises, the consumer feels poorer and will increase the quantity demanded of the inferior good. The income effect tends to dominate the substitution effect in the case of Giffin goods.

Question 11

Professor Makrung spends his entire weekly income of $700 on economics books (E)and coffee (C).The price of an economics book (P_E)is $50,and the price of a cup of coffee (P_C)is $2.If the professor buys 10 economics books and 50 cups of coffee per week,he finds that MU_E = 75 and MU_C = 3.This implies that a consumption bundle consisting of 10 economics books and 50 cups of coffee per week maximizes the professor's utility.

Accepted Answer

Given the prices and quantities of economics books and coffee, along with their marginal utilities, we can calculate the marginal utility per dollar for each good (MU/P). For economics books, MU/P = 75/50 = 1.5. For coffee, MU/P = 3/2 = 1.5. Although the marginal utility per dollar spent on each good is equal, which is a condition for utility maximization, the statement doesn't provide enough information to conclusively say this bundle maximizes the professor's utility without knowing his utility function or if other combinations might yield higher total utility.

Question 12

Use the following to answer question: 
-(Table: Alaina's Utility from Consuming Cups of Coffee)Use Table: Alaina's Utility from Consuming Cups of Coffee.Given the information in the table,Alaina's total utility from drinking coffee:

Accepted Answer

Alaina's total utility increases as she consumes more coffee but at a decreasing rate, indicating diminishing marginal utility. This is evident from the fact that the marginal utility of each additional cup of coffee consumed is decreasing as the quantity consumed increases.

Question 13

If marginal utility is diminishing,the marginal utility curve is _____ sloping since each additional unit of the good consumed yields _____ satisfaction than the unit that preceded it.

Accepted Answer

According to the law of diminishing marginal utility, as more units of a good are consumed, the additional satisfaction (or marginal utility) derived from each additional unit will eventually start to decrease. This is reflected in a downward-sloping marginal utility curve since each additional unit yields less satisfaction than the previous one. Therefore, option A is the correct answer.

Question 14

If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

Accepted Answer

According to the law of demand, the substitution effect of a price change always leads to an increase in the quantity demanded for a normal good. However, the income effect can either increase or decrease the quantity demanded depending on whether the good is normal or inferior. If the income effect and substitution effect move in opposite directions (i.e. substitution effect leads to an increase in quantity demanded while income effect leads to a decrease in quantity demanded), this indicates that the good is an inferior good.

Question 15

If the price of pecan rolls is $2,the price of a gyro is $6,and the marginal utility of the last pecan roll consumed is 12,then the marginal utility of the last gyro consumed for a consumer purchasing the optimal consumption bundle of pecan rolls and gyros is 36.

Accepted Answer

The marginal utility of the last unit of a good consumed is equal to the price of the good divided by the marginal utility of the last unit of the other good consumed. In this case, the marginal utility of the last pecan roll consumed is 12 and the price of a pecan roll is $2. Therefore, the marginal utility of the last gyro consumed is 36.

Question 16

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

Accepted Answer

Utility is the term used to describe the satisfaction that a consumer derives from consuming goods and services. It is a subjective measure of the value of the goods and services to the individual consumer. Rationalization is a psychological defense mechanism and not relevant in this context. Budget constraints and income are important factors in consumption decisions but do not directly measure the satisfaction that the consumer derives from consuming the goods and services.

Question 17

If the marginal utility of hot dogs exceeds the marginal utility of french fries,then the consumer should necessarily adjust their consumption toward eating more hot dogs and fewer french fries.

Accepted Answer

The consumer should adjust their consumption based on the marginal utility per dollar spent, not just the marginal utility.

Question 18

Mikaela is buying a new motorcycle.She has narrowed her choices to a BMW Classic Montauk or a Honda Valkyrie Rune.She likes the Honda exactly twice as much,but it costs about 40% more.If both bikes are in her budget,she should buy the Honda.

Accepted Answer

Given that Mikaela likes the Honda twice as much and it is within her budget despite being 40% more expensive, it makes sense for her to choose the Honda for greater satisfaction.

Question 19

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Tickets/P_Rides.

Accepted Answer

The optimal consumption rule, also known as the equimarginal principle, states that a consumer will maximize their utility when the marginal utility per dollar spent on each good is equal. In this case, if Pascal is spending all of his income on concert tickets and cab rides, the rule applies and we can set up the equation: MUt/PT = MUr/Pr where MUt and PT are the marginal utility and price of concert tickets, and MUr and Pr are the marginal utility and price of cab rides. Solving for the ratio of prices, we get: PT/Pr = MUt/MUr which is equivalent to: MUr/PT = MUt/Pr Therefore, MU_Tickets/MU_Rides = P_Tickets/P_Rides is true based on the equimarginal principle.

Question 20

At the optimal consumption bundle,the marginal utility derived from the last unit of each good purchased is always the same.

Accepted Answer

The optimal consumption bundle occurs when the ratio of the marginal utility to price is equal across all goods, not when the marginal utility itself is the same for each good.

Quiz 10: The Rational Consumer

Use the following to answer question: -(Table: Alaina's Utility from Consuming Cups of Coffee) Use Table: Alaina's Utility from Consuming Cups of Coffee.Diminishing marginal utility is:

When the price of Spam (an inferior good)decreased,Dale bought more Spam.For Dale,the income and substitution effects moved in the same direction.

At Frankie's Buy-the-Slice Pizza,Brian eats eight slices of pizza.He says that,because pizza is $2 per slice,the utility-maximizing decision is to eat until your marginal utility per dollar is zero.Brian's explanation is correct.

If the price of laundry detergent equals the price of dishwashing powder,then a utility-maximizing consumer will always buy equal amounts of laundry detergent and dishwashing powder.

For most goods,the income effect has no significant effect on individual consumption.

Use the following to answer question: -(Table: Alaina's Utility from Consuming Cups of Coffee) Use Table: Alaina's Utility from Consuming Cups of Coffee.Alaina's marginal utility from consuming her sixth cup of coffee is _____ utils.

In the standard models in economics,consumers maximize utility because they are:

At Frankie's Buy-the-Slice Pizza,Bill eats three slices of pizza and then realizes that he enjoyed the second slice more than the third.Even though the price per slice is just $1,the utility-maximizing decision is to quit eating now since Bill has reached diminishing marginal utility.

For a Giffin good,the income effect works in the opposite direction from the substitution effect,and the income effect is larger than the substitution effect.

Use the following to answer question: -(Table: Alaina's Utility from Consuming Cups of Coffee) Use Table: Alaina's Utility from Consuming Cups of Coffee.Given the information in the table,Alaina's total utility from drinking coffee:

If marginal utility is diminishing,the marginal utility curve is _ sloping since each additional unit of the good consumed yields _ satisfaction than the unit that preceded it.

If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

If the price of pecan rolls is $2,the price of a gyro is $6,and the marginal utility of the last pecan roll consumed is 12,then the marginal utility of the last gyro consumed for a consumer purchasing the optimal consumption bundle of pecan rolls and gyros is 36.

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

If the marginal utility of hot dogs exceeds the marginal utility of french fries,then the consumer should necessarily adjust their consumption toward eating more hot dogs and fewer french fries.

Mikaela is buying a new motorcycle.She has narrowed her choices to a BMW Classic Montauk or a Honda Valkyrie Rune.She likes the Honda exactly twice as much,but it costs about 40% more.If both bikes are in her budget,she should buy the Honda.

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Tickets/P_Rides.

At the optimal consumption bundle,the marginal utility derived from the last unit of each good purchased is always the same.

Quiz 10: The Rational Consumer

Use the following to answer question: -(Table: Alaina's Utility from Consuming Cups of Coffee) Use Table: Alaina's Utility from Consuming Cups of Coffee.Diminishing marginal utility is:

When the price of Spam (an inferior good)decreased,Dale bought more Spam.For Dale,the income and substitution effects moved in the same direction.

At Frankie's Buy-the-Slice Pizza,Brian eats eight slices of pizza.He says that,because pizza is $2 per slice,the utility-maximizing decision is to eat until your marginal utility per dollar is zero.Brian's explanation is correct.

If the price of laundry detergent equals the price of dishwashing powder,then a utility-maximizing consumer will always buy equal amounts of laundry detergent and dishwashing powder.

For most goods,the income effect has no significant effect on individual consumption.

Use the following to answer question: -(Table: Alaina's Utility from Consuming Cups of Coffee) Use Table: Alaina's Utility from Consuming Cups of Coffee.Alaina's marginal utility from consuming her sixth cup of coffee is _____ utils.

In the standard models in economics,consumers maximize utility because they are:

At Frankie's Buy-the-Slice Pizza,Bill eats three slices of pizza and then realizes that he enjoyed the second slice more than the third.Even though the price per slice is just $1,the utility-maximizing decision is to quit eating now since Bill has reached diminishing marginal utility.

For a Giffin good,the income effect works in the opposite direction from the substitution effect,and the income effect is larger than the substitution effect.

Use the following to answer question: -(Table: Alaina's Utility from Consuming Cups of Coffee) Use Table: Alaina's Utility from Consuming Cups of Coffee.Given the information in the table,Alaina's total utility from drinking coffee:

If marginal utility is diminishing,the marginal utility curve is _____ sloping since each additional unit of the good consumed yields _____ satisfaction than the unit that preceded it.

If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

If the price of pecan rolls is $2,the price of a gyro is $6,and the marginal utility of the last pecan roll consumed is 12,then the marginal utility of the last gyro consumed for a consumer purchasing the optimal consumption bundle of pecan rolls and gyros is 36.

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

If the marginal utility of hot dogs exceeds the marginal utility of french fries,then the consumer should necessarily adjust their consumption toward eating more hot dogs and fewer french fries.

Mikaela is buying a new motorcycle.She has narrowed her choices to a BMW Classic Montauk or a Honda Valkyrie Rune.She likes the Honda exactly twice as much,but it costs about 40% more.If both bikes are in her budget,she should buy the Honda.

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to PTickets and PRides,respectively,then it must be the case that MUTickets/MURides = PTickets/PRides.

At the optimal consumption bundle,the marginal utility derived from the last unit of each good purchased is always the same.

If marginal utility is diminishing,the marginal utility curve is _ sloping since each additional unit of the good consumed yields _ satisfaction than the unit that preceded it.

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Tickets/P_Rides.