Question 1

When Alex eats 1 slice of pizza, his total utility is 80; when Alex eats 2 slices of pizza, his total utility is 120. Alex's marginal utility from the second pizza is
A) 200.
B) 80.
C) 60.
D) 40.

Accepted Answer

The answer of When Alex eats 1 slice of pizza,...

Question 2

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose that Teddy's marginal utility per dollar from cookies exceeds that from hot chocolate. Teddy can make himself better off if he buys
A) more cookies and less hot chocolate.
B) fewer cookies and more hot chocolate.
C) an equal amount of cookies and hot chocolate.
D) only hot chocolate.

Accepted Answer

Teddy should buy more cookies and less hot chocolate because the marginal utility per dollar is higher for cookies, meaning he gets more satisfaction per dollar spent on cookies compared to hot chocolate.

Question 3

Which of the following is NOT an assumption of marginal utility theory?
A) People derive utility from their consumption.
B) More consumption yields more total utility.
C) Marginal utility diminishes with more consumption.
D) Utility can be measured and the units of utility are precisely defined.

Accepted Answer

While marginal utility theory assumes that people derive utility from their consumption, that more consumption yields more total utility, and that marginal utility diminishes with more consumption, it does not assume that utility can be measured and the units of utility are precisely defined. In fact, the measurement of utility is a subject of debate within economics.

Question 4

Katie has a choice of spending $6.00 for another hamburger, which has a marginal utility of 30, or $9.00 for another pizza. For her to choose the pizza, it would have to have a marginal utility of at least
A) 9.
B) 30.
C) 31.
D) 46.

Accepted Answer

The marginal utility per dollar spent on the hamburger is 30/6 = 5. For the pizza to be a better choice, its marginal utility per dollar must be at least 5, so the pizza's marginal utility must be at least 5 * 9 = 45. Since 46 is the closest option greater than 45, the correct answer is 46.

Question 5

Tom spends all his income on comics and cola and maximizes his total utility. If the price of a comic is $4 and the price of a can of cola is $1, then the ratio of the ________ is 4.
A) marginal utility from cola to the marginal utility from comics
B) marginal utility from comics to the marginal utility from cola
C) number of comics Tom buys to the number of cola Tom buys
D) total utility from comics to the total utility from cola

Accepted Answer

The ratio of the marginal utility from comics to the marginal utility from cola is equal to the ratio of their prices, which is 4:1.

Question 6

Joshua consumes only apples and bread and is in consumer equilibrium. Joshua reads that eating bread is healthy, so his total utility from each loaf of bread increases. At his new consumer equilibrium Joshua would consume
A) more apples and less bread.
B) fewer apples and more bread.
C) some combination of apples and bread corresponding to a lower ratio of the marginal utility of bread to the marginal utility of apples.
D) the same quantity of apples and the same quantity of bread.

Accepted Answer

When the total utility from bread increases, the marginal utility per loaf of bread increases, leading Joshua to consume more bread and fewer apples to restore equilibrium.

Question 7

The marginal utility from the first burrito Bobby consumes is larger than the marginal utility from the first taco Bobby consumes. As a result
A) tacos are an inferior good for Bobby.
B) Bobby will never consume tacos.
C) Bobby will consume a taco only if the price of a taco is less than the price of a burrito.
D) burritos and tacos are substitute goods for Bobby.

Accepted Answer

Bobby will consume a taco only if the price of a taco is less than the price of a burrito because he derives more utility from the first burrito, so he would need a price incentive to choose a taco over a burrito.

Question 8

-Becky decides to spend $50 per month on DVD rentals and movie tickets. Her marginal utility schedules from these two goods are shown in the table above. The price of a DVD rental is $2.50, and the price of a movie ticket is $5. Suppose Becky rents 8 DVDs and buys 6 movie tickets per month. She
A) cannot increase her total utility because she already gets the maximum possible utility from DVD rentals and movies within her budget.
B) can increase her total utility if she rents more DVDs and buys more movie tickets.
C) can increase her total utility if she rents more DVDs and buys fewer movie tickets.
D) can increase her total utility if she rents fewer DVDs and buys more movie tickets.

Accepted Answer

Becky's marginal utility from the last DVD she rents is 10, and her marginal utility from the last movie ticket she buys is 12. So, she can increase her total utility by renting one less DVD and buying one more movie ticket.

Question 9

Sergio consumes only beef and snails and is maximizing his utility. If the price of beef is less than the price of snails, then we definitely know that
A) Sergio buys more beef than snails.
B) Sergio buys more snails than beef.
C) the marginal utility from the last pound of beef purchased is greater than the marginal utility from the last pound of snails purchased.
D) the marginal utility from the last pound of snails purchased is greater than the marginal utility from the last pound of beef purchased.

Accepted Answer

When maximizing utility, the ratio of marginal utility to price should be equal for all goods. If beef is cheaper, the marginal utility per dollar spent on beef must be lower than that of snails, meaning the marginal utility of the last pound of snails is greater.

Question 10

Economists using marginal utility theory assume that consumers' objectives are to
A) maximize their total utility.
B) maximize their marginal utility.
C) maximize their income.
D) none of the above.

Accepted Answer

Marginal utility theory assumes that consumers aim to maximize their total utility, which is the satisfaction or benefit they derive from consuming a particular product or service. The theory suggests that consumers will continue to consume a product as long as the marginal utility obtained from each unit consumed is positive, but they will stop consuming when the marginal utility becomes negative. Therefore, the goal of consumers is to maximize their overall satisfaction (total utility) by consuming products up to the point where their marginal utility equals the price of the product.

Question 11

As more of a good is consumed, its marginal utility ________ and its total utility ________.
A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls

Accepted Answer

The answer of As more of a good is consumed,...

Question 12

Magazines Chocolate bars
 
-Sonya's budget for magazines and chocolate bars is $50. Her marginal utility from these goods is shown in the table above. The price of a magazine is $5 and the price of a chocolate bar is $2.50. Sonya currently buys 2 magazines and 12 chocolate bars. To maximize her utility, she should
A) buy more chocolate bars and fewer magazines.
B) buy more magazines and fewer chocolate bars.
C) buy more of both goods.
D) stay with the current combination of goods.

Accepted Answer

The answer of Magazines Chocolate bars
 
-Sonya's budget for magazines...

Question 13

-Becky decides to spend $50 per month on DVD rentals and movie tickets. Her marginal utility schedules from these two goods are shown in the table above. The price of a DVD rental is $2.50, and the price of a movie ticket is $5. Becky maximizes her utility if she rents ________ DVDs per month and buys ________ movie tickets per month.
A) 6; 7
B) 4; 8
C) 8; 6
D) 5; 7

Accepted Answer

Becky's marginal utility from renting DVDs is 10 when she rents 6 DVDs per month, and her marginal utility from buying movie tickets is 10 when she buys 7 movie tickets per month. Since the price of a DVD rental is $2.50 and the price of a movie ticket is $5, Becky's total expenditure on DVD rentals and movie tickets will be $50 if she rents 6 DVDs and buys 7 movie tickets.

Question 14

Jeannie's marginal utility from her 4th book in a month is 50. Her marginal utility from her 5th book
A) is greater than 50.
B) equals 50.
C) is less than 50.
D) might be more than, less than, or equal to 50 but more information is needed.

Accepted Answer

The answer of Jeannie's marginal utility from her 4th book...

Question 15

John and Sally have identical preferences except that Sally's utility is exactly 10 times John's for each basket of goods. If they have the same income and face the same prices
A) Sally will consume 10 times the amount that John consumes.
B) Sally will receive 1/10 the satisfaction of John.
C) both will consume the same amount of all goods.
D) John and Sally will have equal total utility.

Accepted Answer

Utility functions are ordinal, not cardinal, meaning they reflect preference order rather than magnitude. Thus, despite Sally's utility being 10 times John's, they will consume the same amount of goods if they have the same income and face the same prices.

Question 16

Kumiko is not at her consumer equilibrium because she sees too many movies and buys too few books. As she moves toward her consumer equilibrium, her total utility from movies will ________ and her total utility from books will ________.
A) decrease; decrease
B) increase; decrease
C) decrease; increase
D) increase; increase

Accepted Answer

As Kumiko moves toward consumer equilibrium, she will consume fewer movies and more books. This will decrease her total utility from movies and increase her total utility from books, as she reallocates her spending to maximize overall satisfaction.

Question 17

Tommy buys only soda and pizza and is buying the amounts that maximize his utility. The marginal utility from a soda is 5 and the price of a soda is $1. The marginal utility from a slice of pizza is 10. The price of a slice of pizza must be
A) $10.
B) $2.
C) $1.
D) some amount that cannot be calculated without more information.

Accepted Answer

To maximize utility, the marginal utility per dollar spent should be equal for all goods. Therefore, the price of a slice of pizza should be $2, as 10 (marginal utility of pizza) divided by 2 (price of pizza) equals 5, which is the same as the marginal utility per dollar for soda (5/1).

Question 18

Kumiko is not at her consumer equilibrium because she sees too many movies and buys too few books. As she moves toward her consumer equilibrium, her marginal utility from movies will ________ and her marginal utility from books will ________.
A) decrease; decrease
B) increase; decrease
C) decrease; increase
D) increase; increase

Accepted Answer

The answer of Kumiko is not at her consumer equilibrium...

Question 19

If Bobby decides that his marginal utility per dollar spent on vanilla ice cream exceeds his marginal utility per dollar spent on chocolate ice cream, he should then
A) buy more chocolate ice cream and less vanilla ice cream.
B) buy more vanilla ice cream and less chocolate ice cream.
C) buy all the vanilla ice cream he can.
D) never buy chocolate ice cream.

Accepted Answer

Bobby should buy more vanilla ice cream and less chocolate ice cream to equalize the marginal utility per dollar spent across both goods, maximizing his total utility.

Question 20

Tom spends $20 a month on CDs and magazines. The price of a CD is $6 and the price of a magazine is $4. When Tom maximizes his utility, the marginal utility from CDs is ________ the marginal utility from newspapers.
A) the same as
B) 1/2
C) 20 times
D) 1 1/2 times

Accepted Answer

The answer of Tom spends $20 a month on CDs...

Quiz 8: Utility and Demand

When Alex eats 1 slice of pizza, his total utility is 80; when Alex eats 2 slices of pizza, his total utility is 120. Alex's marginal utility from the second pizza is

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose that Teddy's marginal utility per dollar from cookies exceeds that from hot chocolate. Teddy can make himself better off if he buys

Which of the following is NOT an assumption of marginal utility theory?

Katie has a choice of spending $6.00 for another hamburger, which has a marginal utility of 30, or $9.00 for another pizza. For her to choose the pizza, it would have to have a marginal utility of at least

Tom spends all his income on comics and cola and maximizes his total utility. If the price of a comic is $4 and the price of a can of cola is $1, then the ratio of the ________ is 4.

Joshua consumes only apples and bread and is in consumer equilibrium. Joshua reads that eating bread is healthy, so his total utility from each loaf of bread increases. At his new consumer equilibrium Joshua would consume

The marginal utility from the first burrito Bobby consumes is larger than the marginal utility from the first taco Bobby consumes. As a result

-Becky decides to spend $50 per month on DVD rentals and movie tickets. Her marginal utility schedules from these two goods are shown in the table above. The price of a DVD rental is $2.50, and the price of a movie ticket is $5. Suppose Becky rents 8 DVDs and buys 6 movie tickets per month. She

Sergio consumes only beef and snails and is maximizing his utility. If the price of beef is less than the price of snails, then we definitely know that

Economists using marginal utility theory assume that consumers' objectives are to

As more of a good is consumed, its marginal utility and its total utility .

Jeannie's marginal utility from her 4th book in a month is 50. Her marginal utility from her 5th book

John and Sally have identical preferences except that Sally's utility is exactly 10 times John's for each basket of goods. If they have the same income and face the same prices

Kumiko is not at her consumer equilibrium because she sees too many movies and buys too few books. As she moves toward her consumer equilibrium, her total utility from movies will and her total utility from books will .

Tommy buys only soda and pizza and is buying the amounts that maximize his utility. The marginal utility from a soda is 5 and the price of a soda is $1. The marginal utility from a slice of pizza is 10. The price of a slice of pizza must be

Kumiko is not at her consumer equilibrium because she sees too many movies and buys too few books. As she moves toward her consumer equilibrium, her marginal utility from movies will and her marginal utility from books will .

If Bobby decides that his marginal utility per dollar spent on vanilla ice cream exceeds his marginal utility per dollar spent on chocolate ice cream, he should then

Tom spends $20 a month on CDs and magazines. The price of a CD is $6 and the price of a magazine is $4. When Tom maximizes his utility, the marginal utility from CDs is ________ the marginal utility from newspapers.