Question 1

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,what is Devon's cross elasticity of demand of snorkeling with respect to the price of windsurfing?
A)1.0
B)0.67
C)1.5
D)10
E)1.33

Accepted Answer

The answer of Consider Devon's total utility from snorkeling and...

Question 2

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then
A)a slice of pizza costs three times as much as a breadstick.
B)her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick.
C)a breadstick costs three times as much as a slice of pizza.
D)she spends more on pizza than she spends on breadsticks.
E)her marginal utility from the second slice of pizza equals her marginal utility from the sixth breadstick.

Accepted Answer

When Katie is trying to maximize her total utility, she will continue consuming pizza and breadsticks until the marginal utility per dollar spent on each item is equal. This means that the last unit of pizza and breadsticks that Katie consume should provide her the same level of satisfaction per dollar spent. This is given in option B, where her marginal utility from the second slice of pizza (last slice) divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick (last breadstick) divided by the price of a breadstick. This is the condition that needs to be met for her to maximize her total utility.

Question 3

Ron starts out in consumer equilibrium,consuming two goods,X and Y.Ron's income rises.At this point,we can definitely conclude that A)MU_X/P_X > MU_Y/P_Y,and then Ron increases his consumption of X. B)MU_X/P_X > MU_Y/P_Y,and then Ron decreases his consumption of X. C)MU_X/P_X < MU_Y/P_Y,and then Ron increases his consumption of X. D)MU_X/P_X < MU_Y/P_Y,and then Ron decreases his consumption of X. E)none of the above.

Accepted Answer

The correct answer is "none of the above" because the question does not provide enough information to determine how Ron's consumption of goods X and Y will change with an increase in income. The change in consumption depends on whether the goods are normal or inferior, and the relative income and substitution effects, none of which are specified in the options provided.

Question 4

The marginal utility per dollar from pizza is greater than the marginal utility per dollar from pop.To maximize utility,a consumer buys
A)less pizza and more pop.
B)equal quantities of pizza and pop.
C)more pizza and less pop.
D)more pizza and more pop.
E)less pizza and less pop.

Accepted Answer

Since the marginal utility per dollar from pizza is greater than the marginal utility per dollar from pop, the consumer should buy more pizza and less pop to maximize their overall utility. This is because for every additional dollar spent on pizza, the consumer is gaining more marginal utility than they would from spending that same dollar on pop. Therefore, by allocating more of their budget towards pizza, the consumer can maximize their overall utility.

Question 5

As a consumer's income decreases,marginal utility theory predicts that
A)the price of normal goods falls.
B)the demand for normal goods decreases.
C)the demand for all goods decreases.
D)the demand for normal goods increases.
E)total utility increases.

Accepted Answer

According to the law of diminishing marginal utility, as a consumer's income decreases, the marginal utility of each additional unit of a normal good decreases. As a result, the demand for the good decreases, as consumers are willing to pay less for each unit of the good. This is reflected in choice B, where the demand for normal goods decreases.

Question 6

Use the table below to answer the following questions.
Windsurfing equipment rents for $10 per hour and snorkeling equipment rents for $5 per hour.
Table 8.3.1 
-Consider Devon's utility from snorkeling and windsurfing in Table 8.3.1.Devon has $55 to spend.What are Devon's choices for time spent on the two activities?
A)1 hour of windsurfing and 9 hours of snorkeling
B)2 hours of windsurfing and 7 hours of snorkeling
C)3 hours of windsurfing and 5 hours of snorkeling
D)4 hours of windsurfing and 3 hours of snorkeling
E)5 hours of windsurfing and 1 hour of snorkeling

Accepted Answer

The answer of Use the table below to answer the...

Question 7

Ron starts out in consumer equilibrium,consuming two goods,X and Y.The price of Y rises.Immediately after the rise in price A)MU_X/P_X > MU_Y/P_Y,and then Ron increases his consumption of Y. B)MU_X/P_X > MU_Y/P_Y,and then Ron decreases his consumption of Y. C)MU_X/P_X < MU_Y/P_Y,and then Ron increases his consumption of Y. D)MU_X/P_X < MU_Y/P_Y,and then Ron decreases his consumption of Y. E)MU_X/P_X > MU_Y/P_Y,and then Ron increases his consumption of X and Y.

Accepted Answer

When the price of Y rises, the marginal utility per dollar spent on Y decreases, making MU_X/P_X greater than MU_Y/P_Y. To restore equilibrium, Ron will decrease his consumption of Y.

Question 8

If the price of a good increases,everything else remaining the same,then the consumer's total utility
A)decreases.
B)increases.
C)decreases if the good has no substitutes and remains the same if the good has at least one substitute.
D)increases if the good has no substitutes and remains the same if the good has at least one substitute.
E)remains the same.

Accepted Answer

When the price of a good increases, the consumer will be able to purchase less of that good with their budget. This will result in a decrease in the total utility that the consumer receives, as they are consuming less of the good that they previously enjoyed.

Question 9

Harold can consume apples and oranges.He likes them equally well and currently is in consumer equilibrium.Then the price of oranges rises,while his income remains the same.What will happen to his consumption?
A)Consumption of oranges increases;consumption of apples decreases.
B)Consumption of oranges increases;consumption of apples increases.
C)Consumption of oranges decreases;consumption of apples decreases.
D)Consumption of oranges decreases;consumption of apples increases.
E)Consumption of oranges decreases;consumption of apples could either increase or decrease.

Accepted Answer

The price of oranges rises, making them relatively more expensive than apples. As a result, Harold will substitute apples for oranges, decreasing his consumption of oranges and increasing his consumption of apples.

Question 10

Use the table below to answer the following questions.
Windsurfing equipment rents for $10 per hour and snorkeling equipment rents for $5 per hour.
Table 8.3.1 
-Devon enjoys windsurfing and snorkeling.His total utility from each activity is summarized in Table 8.3.1.Devon has $35 to spend.How long will Devon choose to windsurf and to snorkel?
A)1 hour windsurfing and 5 hours snorkeling
B)2 hours windsurfing and 3 hours snorkeling
C)3 hours windsurfing and 1 hour snorkeling
D)4 hours windsurfing and no hours snorkeling
E)2 hour windsurfing and 4 hours snorkeling

Accepted Answer

The answer of Use the table below to answer the...

Question 11

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,how long does Devon choose to windsurf and to snorkel?
A)1 hour of windsurfing and 3 hours of snorkeling
B)2 hour of windsurfing and 7 hours of snorkeling
C)3 hours of windsurfing and 5 hours of snorkeling
D)4 hours of windsurfing and 3 hours of snorkeling
E)5 hours of windsurfing and 1 hour of snorkeling

Accepted Answer

Without the specific details from Table 8.3.1, it's impossible to directly calculate or infer the correct answer. However, the choice is based on the principle that individuals allocate their budget to maximize total utility, considering the prices of activities and their total income.

Question 12

Chuck and Barry have identical total utility schedules but Chuck has a much higher income.If each is maximizing his total utility,then
A)they will have equal total utilities.
B)Chuck will have lower total utility than Barry.
C)Chuck will have lower marginal utility than Barry for each normal good consumed.
D)Chuck will have higher marginal utility than Barry for each normal good consumed.
E)they will have equal marginal utilities for each normal good consumed.

Accepted Answer

Chuck, with a higher income, can afford to consume more of each normal good, leading to a lower marginal utility for each additional unit consumed compared to Barry, who consumes less due to lower income.

Question 13

Bikes and roller blades are substitutes.Marginal utility theory predicts that when the price of a bike rises,the quantity of bikes demanded
A)decreases and the demand curve for roller blades shifts rightward.
B)decreases and the demand curve for roller blades shifts leftward.
C)decreases and a movement occurs down along the demand curve for roller blades.
D)increases and the demand curve for roller blades shifts rightward.
E)increases and the demand curve for roller blades shifts leftward.

Accepted Answer

Since bikes and roller blades are substitutes, an increase in the price of bikes would lead to a decrease in the quantity of bikes demanded and an increase in the demand for roller blades, shifting the demand curve for roller blades rightward.

Question 14

Billy likes candy and popcorn.Candy sells for $0.50 a bag and popcorn sells for $1 per bag.Currently he is in consumer equilibrium.Then the price of candy rises to $1 a bag.Which statement is true in the new consumer equilibrium?
A)The marginal utility from popcorn will increase.
B)Marginal utility per dollar on candy will be equal to 2.
C)Total utility will increase.
D)The marginal utility from candy will decrease.
E)The marginal utility from candy will be equal to the marginal utility from popcorn.

Accepted Answer

In consumer equilibrium, the marginal utility per dollar spent on each good is equal. When the price of candy rises, Billy will adjust his consumption until the marginal utility per dollar spent on candy equals that of popcorn again.

Question 15

Cindy has $70 a month to spend,and she can spend as much time as she likes playing golf and tennis.The price of an hour of golf is $10,and the price of an hour of tennis is $5.If Cindy equalizes the marginal utility per hour from golf and from tennis,she
A)can increase her total utility by spending less time golfing and more time playing tennis.
B)can increase her total utility by spending more time golfing and less time playing tennis.
C)maximizes her total utility.
D)can increase her total utility only if the price of golf decreases.
E)cannot increase her total utility.

Accepted Answer

The answer of Cindy has $70 a month to spend,and...

Question 16

With a given income and prices of goods,Marcus is in consumer equilibrium when
A)he purchases the same amounts of all goods.
B)his marginal utility from all goods is maximized.
C)his marginal utility from all goods is equal.
D)he maximizes total utility.
E)his total utility per dollar is equal for all goods.

Accepted Answer

In consumer equilibrium, Marcus maximizes his total utility given his budget constraint.

Question 17

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose that Devon's total income rises from $35 to $55,ceteris paribus.Given that Devon changes his choice of windsurfing and snorkeling,what is his income elasticity for windsurfing?
A)zero
B)28.6
C)44.4
D)0.64
E)1.55

Accepted Answer

The income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. Given that Devon changes his choice of windsurfing and snorkeling when his income rises, and without specific numbers on how much more he consumes, we cannot calculate the exact elasticity. However, the fact that he changes his consumption pattern suggests that windsurfing has a positive income elasticity, indicating it is a normal good. Among the provided options, 0.64 (D) is a reasonable positive value indicating a less than proportionate response, which is typical for many goods.

Question 18

Ron starts out in consumer equilibrium,consuming two goods,X and Y.The price of X rises.Immediately after the rise in price A)MU_X/P_X > MU_Y/P_Y,and then Ron increases his consumption of X. B)MU_X/P_X > MU_Y/P_Y,and then Ron decreases his consumption of X. C)MU_X/P_X < MU_Y/P_Y,and then Ron increases his consumption of X. D)MU_X/P_X < MU_Y/P_Y,and then Ron decreases his consumption of X. E)MU_X/P_X > MU_Y/P_Y,and then Ron increases his consumption of X and Y.

Accepted Answer

When the price of X rises, the marginal utility per dollar spent on X decreases (MU_X/P_X decreases), making X less attractive. In contrast, the marginal utility per dollar spent on Y remains the same, assuming no changes to the price of Y. Therefore, the ratio of MU_Y/P_Y is now greater than the ratio of MU_X/P_X, indicating that Y has become relatively more attractive than X. As a result, Ron decreases his consumption of X and increases his consumption of Y to reach a new consumer equilibrium.

Question 19

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,what is Devon's price elasticity of demand for windsurfing?
A)1.0
B)0.67
C)1.5
D)10
E)1.33

Accepted Answer

The answer of Consider Devon's total utility from snorkeling and...

Question 20

Beverly is currently in consumer equilibrium.An increase in her income
A)increases her total utility.
B)decreases her total utility.
C)increases her marginal utility from all goods.
D)decreases her marginal utility from all goods.
E)increases her consumption of all goods.

Accepted Answer

An increase in income allows Beverly to purchase more goods, which increases her total utility as she can consume more of the goods she values.

Quiz 8: Utility and Demand

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,what is Devon's cross elasticity of demand of snorkeling with respect to the price of windsurfing?

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then

Ron starts out in consumer equilibrium,consuming two goods,X and Y.Ron's income rises.At this point,we can definitely conclude that

The marginal utility per dollar from pizza is greater than the marginal utility per dollar from pop.To maximize utility,a consumer buys

As a consumer's income decreases,marginal utility theory predicts that

Ron starts out in consumer equilibrium,consuming two goods,X and Y.The price of Y rises.Immediately after the rise in price

If the price of a good increases,everything else remaining the same,then the consumer's total utility

Harold can consume apples and oranges.He likes them equally well and currently is in consumer equilibrium.Then the price of oranges rises,while his income remains the same.What will happen to his consumption?

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,how long does Devon choose to windsurf and to snorkel?

Chuck and Barry have identical total utility schedules but Chuck has a much higher income.If each is maximizing his total utility,then

Bikes and roller blades are substitutes.Marginal utility theory predicts that when the price of a bike rises,the quantity of bikes demanded

Billy likes candy and popcorn.Candy sells for $0.50 a bag and popcorn sells for $1 per bag.Currently he is in consumer equilibrium.Then the price of candy rises to $1 a bag.Which statement is true in the new consumer equilibrium?

Cindy has $70 a month to spend,and she can spend as much time as she likes playing golf and tennis.The price of an hour of golf is $10,and the price of an hour of tennis is $5.If Cindy equalizes the marginal utility per hour from golf and from tennis,she

With a given income and prices of goods,Marcus is in consumer equilibrium when

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose that Devon's total income rises from $35 to $55,ceteris paribus.Given that Devon changes his choice of windsurfing and snorkeling,what is his income elasticity for windsurfing?

Ron starts out in consumer equilibrium,consuming two goods,X and Y.The price of X rises.Immediately after the rise in price

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,what is Devon's price elasticity of demand for windsurfing?

Beverly is currently in consumer equilibrium.An increase in her income