Question 1

The only goods you consume are pizza and soda. Both are normal goods. You consider pizza and soda to be substitutes. Which of the following will lead you to eat more pizza?

Accepted Answer

A decrease in the price of pizza makes it cheaper, leading to more consumption. An increase in the price of soda, a substitute, will also lead to more pizza consumption as consumers switch from soda to pizza.

Question 2

Bianca consumes apples and bananas and is in consumer equilibrium. The marginal utility of the last apple is 10 and the marginal utility of the last banana is 20. If the price of an apple is $0.50, then what is the price of a banana?

Accepted Answer

In consumer equilibrium, the ratio of the marginal utility to price is equal for all goods. Therefore, (MU of apple / Price of apple) = (MU of banana / Price of banana). Substituting the given values: (10 / 0.50) = (20 / Price of banana). Solving for the price of banana gives $1.00.

Question 3

Shaniq buys only soda and pizza and is buying the amounts that maximize her utility. The marginal utility from a soda is 30 and the price of a soda is $2. The marginal utility from a slice of pizza is also 30. The price of a slice of pizza must be

Accepted Answer

To maximize utility, the marginal utility per dollar spent should be equal for all goods. Since the marginal utility of both soda and pizza is 30, and the price of soda is $2, the price of pizza must also be $2 to maintain equal utility per dollar.

Question 4

Ricardo buys cola and popcorn. Cola sells for $0.50 a can and popcorn sells for $1 per bag. He is in consumer equilibrium. The price of a cola jumps to $1 per can. In his new consumer equilibrium, Ricardo's

Accepted Answer

The price of cola has doubled, so Ricardo will now buy less cola and more popcorn. In his new consumer equilibrium, his marginal utility of cola will be equal to his marginal utility of popcorn.

Question 5

Joe consumes pizza and movies. Pizza and movies are substitutes. According to marginal utility theory, if the price of a pizza rises then

Accepted Answer

The answer of Joe consumes pizza and movies. Pizza and...

Question 6

Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. David maximizes his utility by buying only sodas and pizza. He buys 5 sodas and 10 slices of pizza. If the price of a soda increases to $3 each, David will

Accepted Answer

When the price of soda increases, David will buy fewer sodas, moving along the demand curve for soda, not shifting it.

Question 7

Marginal utility theory predicts that as the price of coffee rises, the ________ a substitute for coffee ________ and the ________ coffee ________.

Accepted Answer

Marginal utility theory suggests that as the price of coffee rises, consumers will seek substitutes, increasing the demand for substitutes, while the quantity demanded of coffee itself decreases due to its higher price.

Question 8

In consumer equilibrium, Harold consumes pizza, sodas, and other goods. Pizza and soda are complements for Harold. The price of a pizza rises while his income remains the same. Harold then consumes

Accepted Answer

When the price of pizza rises, Harold will consume less pizza due to the higher cost. Since pizza and soda are complements, consuming less pizza will also lead to consuming less soda.

Question 9

When the price of popcorn falls, before there is any change in consumption, the

Accepted Answer

When the price of popcorn falls, the marginal utility per dollar from popcorn increases because consumers are getting the same utility for a lower price, making each dollar spent on popcorn more valuable in terms of utility.

Question 10

Marginal utility theory concludes that a decrease in the price of a good increases the quantity demanded and

Accepted Answer

A decrease in the price of a good increases the quantity demanded, leading to higher consumption, which increases total utility as consumers derive more satisfaction from consuming more of the good.

Question 11

Total utility from
 
-Marginal utility theory is used in the derivation of the

Accepted Answer

Marginal utility theory explains that as a consumer consumes more units of a good, the additional satisfaction (marginal utility) from each additional unit decreases, leading to a willingness to pay less for additional units, which results in a negatively sloped demand curve.

Question 12

Using marginal utility theory, when the price of a gallon of milk falls, a consumer will buy

Accepted Answer

According to marginal utility theory, when the price of a good falls, the consumer will buy more of that good because the marginal utility per dollar spent on that good increases, making it more attractive relative to other goods.

Question 13

The predictions of marginal utility theory

Accepted Answer

Marginal utility theory suggests that as a person consumes more of a good, the additional satisfaction (marginal utility) from each additional unit decreases, leading to a willingness to pay less for additional units, which supports the downward-sloping demand curve.

Question 14

Roberta spends all of her income on two items, staplers and paper clips. If the price of a stapler increases, there will be a ________ Roberta's demand curve for staplers and a ________ Roberta's demand curve for paper clips.

Accepted Answer

When the price of a stapler increases, Roberta will move along her demand curve for staplers, purchasing fewer due to the higher price. For paper clips, if they are a substitute or complementary good, the demand curve may shift rightward if she reallocates her spending towards them.

Question 15

Katie finds that the marginal utility from a compact disc is 30 and the marginal utility from a pizza is 10. The price of a compact disc is $15 and the price of a pizza is $10. In order to increase her utility, Katie should

Accepted Answer

Katie should consume more compact discs and fewer pizzas because the marginal utility per dollar spent on compact discs is higher than the marginal utility per dollar spent on pizza.

Question 16

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy

Accepted Answer

According to marginal utility theory, when the price of cookies rises, Teddy will buy fewer cookies and more hot chocolate. This will increase the marginal utility of cookies (since he consumes less of them) and decrease the marginal utility of hot chocolate (since he consumes more of it).

Question 17

Bianca consumes pizza. Marginal utility theory predicts that when the price of pizza increases

Accepted Answer

According to marginal utility theory, when the price of a good increases, the quantity demanded decreases, leading Bianca to buy less pizza.

Question 18

Marginal utility theory predicts that when the price of one good rises, the demand for another good is a substitute increases. This change occurs because of

Accepted Answer

The answer of Marginal utility theory predicts that when the...

Question 19

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy buys

Accepted Answer

According to marginal utility theory, if the price of cookies rises, the marginal utility per dollar spent on cookies decreases, leading Teddy to buy fewer cookies and potentially more of the other good, hot chocolate, to maximize his utility.

Question 20

Total utility from
 
-The above table shows Sue's total utility from golf and tennis. If the price of each hour of golf is twice the price of each hour of tennis, and Sue plays four hours of tennis, then Sue plays

Accepted Answer

The answer of Total utility from
 
-The above table shows...

Quiz 8: Utility and Demand