Question 1

Does the fact that diamonds,which we do not need to survive,are more expensive than water,which is a necessity,constitute a violation of utility maximization?

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Question 2

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { (rentals per week) }
\end{array} & \text { Total utility } & \begin{array} { c } 
\text { Marginal } \
\text { utility }
\end{array} \
\hline 0 & 0 & \mathrm { X } \
1 & 28 & - \
2 & 54 & - \
3 & 78 & - \
4 & 100 & - \
5 & 120 & - \
6 & 138 & \
7 & 154 & \
\hline
\end{array}$$
-Amy has the total utility values given above for video rentals a week.Complete the table by calculating her marginal utilities.

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\begin{array}...

Question 3

Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar from the tenth slice of pizza and 200 units of utility per dollar from his second soda.Is Abe maximizing his utility? Should Abe change his consumption of pizza and soda?

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Question 4

Ricardo likes to rent videos and attend concerts.The videos cost $4 and the concerts cost $40.Ricardo's marginal utility from the last video is 20 units.Ricardo is maximizing his utility.What is his marginal utility from the last concert he attended?

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Question 5

If Mark's marginal utility per dollar from the last taco is 15 and his marginal utility per dollar from the last burrito is 20 units,what should Mark do to increase his total utility?

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Question 6

Kevin allocates his budget according to rules of utility maximization.What are the rules of utility maximization and how do they explain the paradox of value,which is that diamonds are expensive but useless,while water is inexpensive but essential?

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Question 7

Does the fact that diamonds are so expensive imply that the demand curve for diamonds has a positive slope? Use marginal utility theory to answer the question.

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Question 8

-The table gives the total utility Jamal derives from the consumption of eclairs and cream puffs.Jamal has $12 to spend on these two confectionery goods.The price of an eclair is $3 and the price of a cream puff is $1.50.
a.Jamal's budget is $12.In order for Jamal to maximize his utility,how many eclairs and cream puffs should he buy?
b.Suppose the price of an eclair increase to $6.Jamal's income does not change and neither does the price of a cream puff.What combination of eclairs and cream puffs will Jamal buy now?
c.Using your answers to parts (a)and (b),derive two points on Jamal's demand curve for eclairs.

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-The table gives the total utility Jamal...

Question 9

For a consumer,the marginal utility of good A is 25 and its price is $5.The marginal utility of good B is 60 and its price is $12.The consumer has allocated his entire budget.Is this consumer maximizing his total utility? Explain your answer.

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Question 10

What does the term "indifferent" mean and what is its relationship to an indifference curve?

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Question 11

"Water is very inexpensive.Thus the marginal and total utility of water is small." Analyze the previous statements.

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Question 12

-The table above gives Jessie's marginal utility and total utility from tacos.Complete the table.

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-The table above gives Jessie's marginal utility...

Question 13

-The table above gives the utility Andy receives from different quantities of vanilla ice cream cones.Complete the table.

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-The table above gives the utility Andy...

Question 14

-Tris is shopping for pants and belts.He has a budget of $100.The price of a pair of pants is $20 and the price of a belt is $5.His marginal utility schedules are above.What combination of pants and belts does Tris buy? Explain your answer.

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-Tris is shopping for pants and belts.He...

Question 15

-The table above gives Sam's marginal utility schedule for bananas and apples.Sam's fruit budget is $10.
a.If bananas cost $1 per pound and apples cost $2 per bag,what is Sam's marginal utility per dollar for all quantities of both goods?
b.What is the utility maximizing combination of bananas and apples for Sam?
c.If the price of bananas increases to $2 per pound,how does Sam's marginal utility per dollar for bananas change?
d.At the banana price of $2 per pound,what is the new utility maximizing combination of bananas and apples for Sam?
e.List two points on Sam's demand curve for bananas.

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-The table above gives Sam's marginal utility...

Question 16

Suppose Jenny's marginal utility from another serving of fish is 40 and her marginal utility from another serving of chips is 20.The price of a serving of fish is $10 and the price of a serving of chips is $1.What should Jenny do to maximize her utility? Explain your answer.

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Question 17

To maximize utility,why does a consumer consume the combination of goods that equates marginal utility per dollar from the different goods rather than just equating the marginal utility of the different goods?

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Question 18

"Because the price of a diamond is much greater than the price of a gallon of water,the consumer surplus from diamonds is greater than the consumer surplus from water." Is the previous analysis correct? Explain your answer.

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Question 19

Explain the paradox of value.

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Question 20

Why does gold,which is a relatively nonessential item,have a higher price than water,which is essential to life?

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Quiz 13: Consumer Choice and Demand