Question 1

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 2

-Tom is stranded on a deserted island where he can only consume coconuts and crabs.Two of his indifference curves are in the figure above.
a∙Would Tom prefer his consumption to be at point a or at point b? At point b or at point c? Explain your answers.
b∙Between points a and b, what is Tom's marginal rate of substitution for a crab?

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-Tom is stranded on a deserted island...

Question 3

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

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Question 4

"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 5

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

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Question 6

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 7

"As Mike consumes more dates over the course of a day, it is likely that his marginal rate of substitution of dates for other goods will rise." Is the previous statement correct or incorrect?

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Question 8

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 9

Why do consumers prefer higher indifference curves?

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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

-The figure above shows a preference map for Sarah, who likes hamburgers and milk shakes.
a∙Which two combinations contain the same amount of hamburgers but different quantities of shakes?
b∙Which combination(s)does Sarah most prefer? Why?
c∙Which combination(s)does Sarah least prefer? Why?
d∙Between which combinations is Sarah indifferent? Why?

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-The figure above shows a preference map...

Question 12

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 13

"Every point on a budget line has an indifference curve passing through it." Explain if the previous statement is correct or not.

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Question 14

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 15

Explain the paradox of value.

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Question 16

"If Ivan says he is indifferent between the consumption of a new pair of jeans or a set of earrings, he means that he does not want either product." Is the previous analysis correct? Explain your answer.

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Question 17

What is the marginal rate of substitution and how does it relate to an indifference curve?

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Question 18

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 19

-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 20

"The marginal rate of substitution of the good measured along the x-axis increases as a consumer moves downward along an indifference curve." Is the previous statement correct or not?

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Quiz 13: Consumer Choice and Demand