Question 1

Suppose Hank spends his entire budget buying 2 bagels and 3 cups of coffee each day. Also, suppose the marginal utility of the second bagel is 100 and the marginal utility of the third cup of coffee is 200. Which of the following statements is TRUE?
A) Hank is not maximizing his utility.
B) Hank will be maximizing his utility as long as the price of a cup of coffee is twice the price of a bagel.
C) Hank might be maximizing utility only if the price of a cup of coffee is less than the price of a bagel.
D) Hank is not maximizing utility because he is not buying equal amounts of each good.

Accepted Answer

Hank will be maximizing his utility if the marginal utility per dollar spent is equal for both goods. If the marginal utility of the second bagel is 100 and the third cup of coffee is 200, then the price of a cup of coffee should be twice the price of a bagel for utility maximization.

Question 2

Suppose Hanna spends her entire budget buying bagels and cups of coffee each day. Also, suppose the marginal utility of her last bagel is 100 and the marginal utility of her last cup of coffee is 200. If the price of a bagel is $4 and the price of a cup of coffee is $2, then
A) Hanna needs to decrease her consumption of bagels to maximize her utility.
B) Hanna needs to increase her consumption of bagels to maximize her utility.
C) Hanna should buy half as many bagels as coffee in order to maximize her utility.
D) bagels must provide more total utility than coffee.

Accepted Answer

The answer of Suppose Hanna spends her entire budget buying...

Question 3

-Given the data in the above table, if income is $16, and the price is $1 for a bottle of water and $2 for a hamburger, what is the quantity of water and the quantity of hamburgers that will maximize the consumer's total utility?
A) 5 bottles of water and 5 hamburgers
B) 4 bottles of water and 6 hamburgers
C) 6 bottles of water and 5 hamburgers
D) 6 bottles of water and 6 hamburgers

Accepted Answer

The consumer's total utility is maximized when the marginal utility per dollar spent on each good is equal. In this case, the marginal utility per dollar spent on water is 10 utils/dollar, and the marginal utility per dollar spent on hamburgers is 5 utils/dollar. Therefore, the consumer should spend $10 on water and $6 on hamburgers. This will allow the consumer to purchase 6 bottles of water and 5 hamburgers, which will maximize their total utility.

Question 4

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2 for a hamburger, what is the quantity of water and the quantity of hamburgers that will maximize the consumer's total utility?
A) 5 bottles of water and 4 hamburgers
B) 4 bottles of water and 4 hamburgers
C) 1 bottle of water and 6 hamburgers
D) 6 bottles of water and 6 hamburgers

Accepted Answer

The consumer's total utility is maximized when the marginal utility of water is equal to the marginal utility of hamburgers, and the budget constraint is satisfied. In this case, the marginal utility of water is 10, and the marginal utility of hamburgers is 5. The budget constraint is 13 = 1 * Qw + 2 * Qh, where Qw is the quantity of water and Qh is the quantity of hamburgers. Solving for Qw, we get Qw = 13 - 2 * Qh. Substituting this into the equation for the marginal utilities, we get 10 = 5 * (13 - 2 * Qh), which gives Qh = 4. Substituting this back into the equation for Qw, we get Qw = 5. Therefore, the consumer will maximize their total utility by consuming 5 bottles of water and 4 hamburgers.

Question 5

Sarah consumes only strawberries and cream, and she is spending all of her income. Her marginal utility of her last dish of strawberries is 200 and her marginal utility of her last pint of cream is 200. The price of strawberries is $1.00 per dish and the price of cream is $2.00 per pint. To maximize her utility, Sarah should
A) buy more strawberries and less cream.
B) buy more cream and less strawberries.
C) not change her purchases of strawberries and cream.
D) definitely buy no cream at her consumer equilibrium.

Accepted Answer

Sarah should buy more strawberries and less cream because the marginal utility per dollar spent on strawberries (200/1 = 200) is greater than that on cream (200/2 = 100).

Question 6

Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. Jean maximizes utility and buys only sodas and slices of pizza. If the price of a soda increases to $3 each, Jean's marginal utility per soda
A) will increase and she'll buy more soda.
B) will decrease and she'll buy fewer sodas.
C) will decrease and she'll buy more pizza.
D) Both B and C are correct.

Accepted Answer

The increase in the price of soda will make it relatively more expensive compared to pizza. As a result, Jean will substitute away from soda and towards pizza. This means that her marginal utility per soda will decrease and she will buy fewer sodas.

Question 7

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2.00 for a hamburger, what is the marginal utility per dollar spent on the fifth hamburger?
A) 10 units of utility
B) 8 units of utility
C) 6 units of utility
D) 4 units of utility

Accepted Answer

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

Question 8

-Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs $2 each. The table above gives your utility from consuming these two goods. If your income is $20, which of the following consumption combinations will you choose?
A) 5 slices of pizza and no Diet Pepsi
B) 4 slices of pizza and 2 Diet Pepsis
C) 3 slices of pizza and 4 Diet Pepsis
D) 2 slice of pizza and 6 Diet Pepsis

Accepted Answer

The combination of 3 slices of pizza ($12) and 4 Diet Pepsis ($8) exactly matches the $20 budget and maximizes utility based on the given table.

Question 9

Brian consumes only pizza and soda. When the price of a soda is $2 and the price of a slice of pizza is $4, Brian maximizes his utility by buying 5 sodas and 10 slices of pizza. If the marginal utility of the 5th soda is 100, then the marginal utility from the 10th slice of pizza must be
A) 200.
B) 100.
C) 50.
D) More information is needed to determine the marginal utility of the 10th slice of pizza.

Accepted Answer

To maximize utility, the marginal utility per dollar spent on each good should be equal. The marginal utility per dollar for soda is 100/2 = 50. Therefore, the marginal utility of the 10th slice of pizza must be 50 * 4 = 200.

Question 10

Sam spends all of his income on textbooks and hot dogs. The price of a textbook is $40 and the price of a hot dog is $0.50. If Sam is maximizing his utility and the marginal utility he derives from the last textbook he purchases is 400, then the marginal utility he derives from his last hot dog purchased must be
A) 400.
B) 10.
C) 5.
D) 20.

Accepted Answer

To maximize utility, the marginal utility per dollar spent should be equal for all goods. For textbooks: MU/Price = 400/40 = 10. For hot dogs: MU/Price = x/0.5. Setting them equal: 10 = x/0.5, solving for x gives x = 5.

Question 11

Bags of Popcorn Bottles of soda
 
-In the table above, if Brent maximizes his utility by consuming 3 bags of popcorn and 3 bottles of soda, then the ratio of the price of popcorn to the price of soda is expected to be
A) 1/2.
B) 5/6.
C) 6/5.
D) 2.

Accepted Answer

The answer of Bags of Popcorn Bottles of soda
 
-In...

Question 12

-Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs $2 each. The table above gives your utility from consuming these two goods. If your income is $14, which of the following consumption combinations will you choose?
A) 3 slices of pizza and 1 Diet Pepsi
B) 2 slices of pizza and 3 Diet Pepsis
C) 1 slice of pizza and 5 Diet Pepsis
D) 0 slices of pizza and 7 Diet Pepsis

Accepted Answer

To maximize utility given the budget constraint, calculate the total cost and utility for each option. Option B costs $14 (2 slices of pizza at $4 each and 3 Diet Pepsis at $2 each) and provides the highest utility within the budget.

Question 13

Sarah consumes pizzas and hamburgers. The price of a hamburger is $1 and the marginal utility from her last hamburger is 5. Let P_p be the price of a pizza and MU_p be the marginal utility of pizzas. In consumer equilibrium, the ratio MU_p/P_p for Sarah's last pizza must equal A) 0.2. B) 1.0. C) 5.0. D) infinity.

Accepted Answer

In consumer equilibrium, the marginal utility per dollar spent on each good should be equal. Since the marginal utility of the last hamburger is 5 and its price is $1, the ratio is 5/1 = 5. Therefore, MU_p/P_p must also be 5.

Question 14

Bags of Popcorn Bottles of soda
 
-Jenny buys sodas and popcorn. Sodas sell for $1 and popcorn sells for $2 a bag. Currently she is in consumer equilibrium, with the marginal utility from her last dollar spent on popcorn equal to 100 units of utility. The marginal utility from her last dollar spent on sodas is
A) 20 units of utility.
B) 30 units of utility.
C) 50 units of utility.
D) 100 units of utility.

Accepted Answer

The answer of Bags of Popcorn Bottles of soda
 
-Jenny...

Question 15

-Suppose that you consume only pizza and Diet Pepsi. The table above gives your utility from consuming these two goods. What is the marginal utility you get from the fourth slice of pizza?
A) 36
B) 18
C) 12
D) 4

Accepted Answer

The marginal utility is the change in total utility from consuming one additional unit. If the utility from the third slice is 72 and from the fourth slice is 84, the marginal utility of the fourth slice is 84 - 72 = 12.

Question 16

-The table above gives the utility from pens and pencils. If pens and pencils both cost $.25 each and the consumer has an income of $2.25, which of the following combinations maximizes the consumer's utility?
A) 3 pens and 6 pencils
B) 4 pens and 5 pencils
C) 5 pens and 4 pencils
D) 6 pens and 3 pencils

Accepted Answer

The consumer has an income of $2.25 and pens and pencils both cost $.25 each. So, the consumer can buy 9 pens or 9 pencils. The utility from 5 pens and 4 pencils is 20, which is the highest utility that the consumer can achieve with their budget.

Question 17

-The table above gives the utility from pens and pencils. The marginal utility derived from the third pen is
A) 200.
B) 155.
C) 445.
D) 45.

Accepted Answer

The marginal utility is the additional utility gained from consuming one more unit. If the utility from two pens is 400 and from three pens is 445, the marginal utility from the third pen is 445 - 400 = 45.

Question 18

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2 for a hamburger, what is the marginal utility per dollar spent on water and on hamburgers when the consumer is in consumer equilibrium?
A) 20 units of utility per dollar spent
B) 10 units of utility per dollar spent
C) 5 units of utility per dollar spent
D) 1 unit of utility per dollar spent

Accepted Answer

In consumer equilibrium, the marginal utility per dollar spent on each good is equal. If the price of water is $1 and the price of a hamburger is $2, the marginal utility per dollar spent on both should be equal. Given the options, 5 units of utility per dollar spent is a reasonable assumption for equilibrium.

Question 19

Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple
A) equals his marginal utility from his 14th loaf of bread.
B) is twice his marginal utility from his 14th loaf of bread.
C) is half his marginal utility from his 14th loaf of bread.
D) is such that his total utility from apples equals his total utility from bread.

Accepted Answer

The answer of Usharani consumes 35 apples a week and...

Question 20

Shaniq has seen two movies this week and two baseball games. Her marginal utility of one more movie is 20 and her marginal utility of one more baseball game is 30. Shaniq will go to a baseball game tonight, rather than to another movie
A) no matter how much more the baseball game costs compared to the movie.
B) if the baseball game costs $10.00 and the movie costs $7.00.
C) if the baseball game costs $10.00 and the movie costs $5.00.
D) Both answers B and C are correct.

Accepted Answer

The answer of Shaniq has seen two movies this week...

Quiz 8: Utility and Demand

Suppose Hank spends his entire budget buying 2 bagels and 3 cups of coffee each day. Also, suppose the marginal utility of the second bagel is 100 and the marginal utility of the third cup of coffee is 200. Which of the following statements is TRUE?

Suppose Hanna spends her entire budget buying bagels and cups of coffee each day. Also, suppose the marginal utility of her last bagel is 100 and the marginal utility of her last cup of coffee is 200. If the price of a bagel is $4 and the price of a cup of coffee is $2, then

-Given the data in the above table, if income is $16, and the price is $1 for a bottle of water and $2 for a hamburger, what is the quantity of water and the quantity of hamburgers that will maximize the consumer's total utility?

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2 for a hamburger, what is the quantity of water and the quantity of hamburgers that will maximize the consumer's total utility?

Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. Jean maximizes utility and buys only sodas and slices of pizza. If the price of a soda increases to $3 each, Jean's marginal utility per soda

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2.00 for a hamburger, what is the marginal utility per dollar spent on the fifth hamburger?

-Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs $2 each. The table above gives your utility from consuming these two goods. If your income is $20, which of the following consumption combinations will you choose?

Brian consumes only pizza and soda. When the price of a soda is $2 and the price of a slice of pizza is $4, Brian maximizes his utility by buying 5 sodas and 10 slices of pizza. If the marginal utility of the 5th soda is 100, then the marginal utility from the 10th slice of pizza must be

Bags of Popcorn Bottles of soda -In the table above, if Brent maximizes his utility by consuming 3 bags of popcorn and 3 bottles of soda, then the ratio of the price of popcorn to the price of soda is expected to be

-Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs $2 each. The table above gives your utility from consuming these two goods. If your income is $14, which of the following consumption combinations will you choose?

Sarah consumes pizzas and hamburgers. The price of a hamburger is $1 and the marginal utility from her last hamburger is 5. Let Pp be the price of a pizza and MUp be the marginal utility of pizzas. In consumer equilibrium, the ratio MUp/Pp for Sarah's last pizza must equal

-Suppose that you consume only pizza and Diet Pepsi. The table above gives your utility from consuming these two goods. What is the marginal utility you get from the fourth slice of pizza?

-The table above gives the utility from pens and pencils. If pens and pencils both cost $.25 each and the consumer has an income of $2.25, which of the following combinations maximizes the consumer's utility?

-The table above gives the utility from pens and pencils. The marginal utility derived from the third pen is

-Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2 for a hamburger, what is the marginal utility per dollar spent on water and on hamburgers when the consumer is in consumer equilibrium?

Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple

Shaniq has seen two movies this week and two baseball games. Her marginal utility of one more movie is 20 and her marginal utility of one more baseball game is 30. Shaniq will go to a baseball game tonight, rather than to another movie

Sarah consumes pizzas and hamburgers. The price of a hamburger is $1 and the marginal utility from her last hamburger is 5. Let P_p be the price of a pizza and MU_p be the marginal utility of pizzas. In consumer equilibrium, the ratio MU_p/P_p for Sarah's last pizza must equal