Question 1

Suppose that Jen receives 400 units of utility from her last soft drink and 200 units of utility from her last slice of pizza. What can we conclude about Jen's choices if the price of a soft drink is $1 and the price of a slice of pizza is $2?
A) Jen needs to buy less soft drink and less pizza to maximise her utility.
B) Jen should buy more pizza to maximise her utility.
C) Jen should buy more soft drink to maximise her utility.
D) Jen is maximising utility because she buys more of the good providing the most utility.
E) None of the above answers is correct.

Accepted Answer

With a price of $1 for a soft drink and $2 for a slice of pizza, Jen receives more utility per dollar spent on soft drinks as opposed to pizza (400 utility/$1 compared to 100 utility/$1 for pizza). Therefore, to maximize her utility, Jen should purchase more soft drinks and less pizza.

Question 2

-The table above shows Buffy's utility from wooden stakes and cloves of garlic. The total utility Buffy gets from 5 wooden stakes is
A) 7.
B) 65.
C) 122.
D) 222.
E) None of the above answers is correct.

Accepted Answer

The total utility from 5 wooden stakes is 65, as indicated in the table.

Question 3

-The table above shows Buffy's utility from wooden stakes and cloves of garlic. The marginal utility of which clove of garlic is the largest?
A) The third clove.
B) The fifth clove.
C) The first clove.
D) The second clove.
E) The marginal utility of all cloves is the same.

Accepted Answer

Marginal utility refers to the additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service. Typically, the first unit of any good provides the highest marginal utility because it satisfies the most immediate and strongest desire for that good.

Question 4

-The table above gives Ali's total utility from consuming bottles of soft drink and slices of pizza. The price of pizza is $2 per slice and the price of soft drink is $1 per bottle. His marginal utility from the 4th slice of pizza is
A) 34.
B) 17.50.
C) 7.
D) 3.50.
E) 27.

Accepted Answer

The marginal utility is the change in total utility from consuming an additional unit. If the total utility from the 3rd slice is X and from the 4th slice is Y, then the marginal utility from the 4th slice is Y - X. The problem implies that this value is 7.

Question 5

-Sam's total utility for bananas is in the table above. Sam's total utility shows that the law of diminishing marginal utility
A) holds because Sam's total utility from bananas increases as Sam eats more bananas.
B) holds because his marginal utility from bananas decreases as Sam eats more bananas.
C) does not hold because Sam's total utility does not reach its maximum.
D) does not hold because Sam's marginal utility does not decrease to zero.
E) None of the above answers is correct because there are no data for marginal utility with which to answer the question.

Accepted Answer

The law of diminishing marginal utility states that as a person consumes more of a good, the additional (marginal) utility from each additional unit of the good decreases. Choice B correctly reflects this principle by indicating that Sam's marginal utility from bananas decreases as he eats more bananas, which is a direct application of the law of diminishing marginal utility.

Question 6

If Raul's marginal utility per dollar from bread is 25 and the marginal utility per dollar from butter is 30,
A) Raul should purchase more butter and less bread to increase his total utility.
B) Raul's marginal utility from bread will rise if he buys less bread.
C) Raul's marginal utility from butter will fall if he buys more butter.
D) Only answers B and C are correct.
E) Answers A, B and C are correct.

Accepted Answer

The principles of marginal utility indicate that to maximize total utility, a consumer should allocate their budget in a way that the marginal utility per dollar spent on each good is equal. Since Raul's marginal utility per dollar from butter is higher than from bread, he should indeed buy more butter and less bread (A). As he reduces his consumption of bread, the marginal utility from bread will increase due to the law of diminishing marginal utility (B). Similarly, as he increases his consumption of butter, the marginal utility from butter will decrease for the same reason (C). Therefore, all three statements (A, B, and C) are correct.

Question 7

-Suppose the consumer has allocated his or her entire budget. Which of the following conditions is also required for total utility to be maximised?
A) Marginal utility has decreased to zero for all goods.
B) The number of units of each good consumed must be the same.
C) The least inexpensive combination of goods has been purchased.
D) The marginal utility for each good is equal.
E) The marginal utility divided by price for each good is equal.

Accepted Answer

For total utility to be maximized, the consumer should allocate their budget such that the marginal utility per dollar spent is equal across all goods. This ensures the most efficient use of the budget to maximize satisfaction.

Question 8

-Sam's total utility for bananas is in the table above. Sam's marginal utility from the fourth banana is
A) 100
B) 20
C) 25
D) 15
E) It cannot be determined from the given information.

Accepted Answer

Marginal utility is the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. It is calculated as the change in total utility from consuming one more unit. Without the specific table data, the correct answer cannot be determined from the provided information. However, since the question seems to imply a specific answer is expected, it suggests there might be an error in the question setup as it does not provide the necessary data to calculate marginal utility.

Question 9

-For David, the marginal utility from an additional car is 2,000 units and the marginal utility from an additional vacation is 1,000 units. David is allocating all of his budget. Hence, to maximise his utility, David will
A) save his budget by not spending it until he can afford both the car and the vacation.
B) shift his consumption from the vacation to the car.
C) buy both the car and the vacation now.
D) shift his consumption from the car to the vacation.
E) possibly do something, but there is not enough information available to determine what he would do.

Accepted Answer

The correct answer is E because the information provided does not include the prices of the car and the vacation or the budget constraint. Without knowing the prices or how the marginal utilities compare to the prices, we cannot determine the optimal allocation of David's budget to maximize his utility.

Question 10

-The table above gives Ali's total utility from consuming bottles of soft drink and slices of pizza. The price of pizza is $2 per slice and the price of soft drink is $1 per bottle. His marginal utility from the 4th bottle of soft drink is
A) 3.
B) 5.25.
C) 21.
D) 34.
E) 3 units for soft drink ÷ 7 units for pizza.

Accepted Answer

The marginal utility of the 4th bottle of soft drink is the additional utility Ali gets from consuming the 4th bottle compared to the 3rd. If the total utility from 3 bottles is, for example, 31 units, and from 4 bottles is 34 units, the marginal utility of the 4th bottle would be 34 - 31 = 3 units.

Question 11

Diminishing marginal utility means that as more of a good is consumed,
A) the consumption of some other good must diminish.
B) the price of the good rises.
C) the utility of an additional unit decreases.
D) more income is spent.
E) the price of the good falls.

Accepted Answer

Diminishing marginal utility refers to the decrease in additional satisfaction or usefulness as more units of a product are consumed or acquired. This occurs because each additional unit of the product provides less utility than the previous unit consumed or acquired. Therefore, the utility of an additional unit decreases.

Question 12

Suppose the price of a pair of jeans is $25 and the price of a t-shirt is $15. The consumer's budget is entirely allocated. If the marginal utility from a pair of jeans is 100 units and the marginal utility from a t-shirt is 75 units, the consumer is
A) not in equilibrium and should purchase more t-shirts and more jeans.
B) not in equilibrium but should maintain the current level of purchases.
C) in equilibrium because his or her utility is maximised.
D) not in equilibrium and should purchase fewer t-shirts and more jeans.
E) not in equilibrium and should purchase fewer jeans and more t-shirts.

Accepted Answer

To be in equilibrium, the consumer should allocate their budget in a way that the marginal utility per dollar spent on each good is equal. Here, the marginal utility per dollar for jeans is 100/25 = 4 units per dollar, and for t-shirts, it is 75/15 = 5 units per dollar. Since the marginal utility per dollar is higher for t-shirts, the consumer should buy fewer jeans and more t-shirts to reach equilibrium.

Question 13

-For a consumer to maximise utility, in part the consumer must
A) make the marginal utility per dollar from each good as different as possible for all goods.
B) spend as little of the budget as possible.
C) allocate the entire available budget.
D) make the marginal utility per dollar from each good as small as possible for all goods.
E) Answers A and B are both correct.

Accepted Answer

To maximize utility, a consumer must allocate their entire available budget to ensure no utility is left unattained that could be achieved with the remaining budget. This principle is part of the utility maximization rule, which also includes equalizing the marginal utility per dollar spent across all goods.

Question 14

The consumption of bottled water increased dramatically during the 1990s. If consumers' utility schedules for water remained constant over this time period, in order for consumers to stay in equilibrium, the price of bottled water must have
A) fallen.
B) risen because marginal utility increased since people consumed more bottled water.
C) risen because the supply of water must have increased.
D) remained constant because the marginal utility schedule did not change.
E) We don't have enough information to say what happened to the price.

Accepted Answer

If consumers' utility schedules for water remained constant and the consumption of bottled water increased dramatically during the 1990s, the demand for bottled water must have increased. In order for there to be equilibrium, the price of bottled water must have fallen to match the increased demand. Therefore, A is the best choice.

Question 15

-The above table shows Homer's utility from boxes of doughnuts. As Homer's consumption of doughnuts increases, his
A) marginal utility is negative and decreasing.
B) marginal utility is negative but increasing.
C) total utility is not related to his marginal utility.
D) marginal utility is positive but decreasing.
E) marginal utility is positive and increasing.

Accepted Answer

Marginal utility refers to the additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service. As Homer consumes more doughnuts, his satisfaction from each additional doughnut decreases, which is a common phenomenon known as diminishing marginal utility. This means his marginal utility is positive (he still gains some satisfaction from each additional doughnut) but decreasing (each additional doughnut brings less satisfaction than the one before).

Question 16

Assume you are in a store looking at a shirt you want to buy. You expect to buy the shirt until you look at the price, then you decide the shirt is not a good buy. How can your decision be viewed in economic terms?
A) The shirt has zero marginal utility for you.
B) The opportunity cost of the shirt was too low.
C) The shirt's marginal utility divided by price was too low compared to other goods.
D) The shirt's marginal utility divided by price was too high compared to other goods.
E) None of the above answers is correct.

Accepted Answer

This decision can be viewed in economic terms as a comparison of the shirt's marginal utility (the satisfaction or benefit gained from owning the shirt) and its price. If the marginal utility divided by price is too low compared to other goods, meaning you don't feel like the satisfaction gained from owning the shirt is worth the price, then you would decide not to buy it. This is a common example of how consumers make decisions based on the relative value of goods and services in the marketplace.

Question 17

Kevin likes beef stew. But every bite of the stew that he eats provides him with less and less total utility. This fact means that Kevin's marginal utility is
A) increasing at an increasing rate.
B) increasing, but at a decreasing rate.
C) decreasing.
D) not changing.
E) changing, but the rate of change is not certain without more information.

Accepted Answer

The decreasing total utility of each additional bite indicates a decreasing marginal utility.

Question 18

-Given the data in the above table, what is the marginal utility of the second litre of ice cream?
A) 75
B) 60
C) 150
D) 80
E) 70

Accepted Answer

The answer of 
-Given the data in the above table,...

Question 19

-The table above shows Buffy's utility from wooden stakes and cloves of garlic. As Buffy uses more stakes, the marginal utility of a stake ________ and as she uses more cloves of garlic, the marginal utility of a clove of garlic ________.
A) decreases; decreases
B) decreases; increases
C) increases; decreases
D) increases; increases
E) does not change; does not change

Accepted Answer

The principle of diminishing marginal utility states that as a person consumes more of a good, the additional satisfaction (marginal utility) gained from consuming an additional unit of that good tends to decrease. This applies to both wooden stakes and cloves of garlic for Buffy, meaning the marginal utility decreases for both as she consumes more.

Question 20

-Given the data in the above table, what is the marginal utility of the fourth litre of ice cream?
A) 210
B) 260
C) 60
D) 65
E) 50

Accepted Answer

The answer of 
-Given the data in the above table,...

Quiz 12: Consumer Choice and Demand

Suppose that Jen receives 400 units of utility from her last soft drink and 200 units of utility from her last slice of pizza. What can we conclude about Jen's choices if the price of a soft drink is $1 and the price of a slice of pizza is $2?

-The table above shows Buffy's utility from wooden stakes and cloves of garlic. The total utility Buffy gets from 5 wooden stakes is

-The table above shows Buffy's utility from wooden stakes and cloves of garlic. The marginal utility of which clove of garlic is the largest?

-The table above gives Ali's total utility from consuming bottles of soft drink and slices of pizza. The price of pizza is $2 per slice and the price of soft drink is $1 per bottle. His marginal utility from the 4th slice of pizza is

-Sam's total utility for bananas is in the table above. Sam's total utility shows that the law of diminishing marginal utility

If Raul's marginal utility per dollar from bread is 25 and the marginal utility per dollar from butter is 30,

-Suppose the consumer has allocated his or her entire budget. Which of the following conditions is also required for total utility to be maximised?

-Sam's total utility for bananas is in the table above. Sam's marginal utility from the fourth banana is

-For David, the marginal utility from an additional car is 2,000 units and the marginal utility from an additional vacation is 1,000 units. David is allocating all of his budget. Hence, to maximise his utility, David will

-The table above gives Ali's total utility from consuming bottles of soft drink and slices of pizza. The price of pizza is $2 per slice and the price of soft drink is $1 per bottle. His marginal utility from the 4th bottle of soft drink is

Diminishing marginal utility means that as more of a good is consumed,

Suppose the price of a pair of jeans is $25 and the price of a t-shirt is $15. The consumer's budget is entirely allocated. If the marginal utility from a pair of jeans is 100 units and the marginal utility from a t-shirt is 75 units, the consumer is

-For a consumer to maximise utility, in part the consumer must

The consumption of bottled water increased dramatically during the 1990s. If consumers' utility schedules for water remained constant over this time period, in order for consumers to stay in equilibrium, the price of bottled water must have

-The above table shows Homer's utility from boxes of doughnuts. As Homer's consumption of doughnuts increases, his

Assume you are in a store looking at a shirt you want to buy. You expect to buy the shirt until you look at the price, then you decide the shirt is not a good buy. How can your decision be viewed in economic terms?

Kevin likes beef stew. But every bite of the stew that he eats provides him with less and less total utility. This fact means that Kevin's marginal utility is

-Given the data in the above table, what is the marginal utility of the second litre of ice cream?

-The table above shows Buffy's utility from wooden stakes and cloves of garlic. As Buffy uses more stakes, the marginal utility of a stake and as she uses more cloves of garlic, the marginal utility of a clove of garlic .

-Given the data in the above table, what is the marginal utility of the fourth litre of ice cream?