Question 1

Restaurants that allow customers to eat as much as they want for a fixed price must make money or they would not remain in business. How can they earn profits when people can always eat more so that the restaurant's costs keep getting higher? What practice that regular restaurants use will not be used by all-you-can-eat places?

Accepted Answer

The answer of Restaurants that allow customers to eat as...

Question 2

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 
-Referring to the above table, suppose Bob's ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal. If the price of beer increases

Accepted Answer

If Bob's ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal, it means that he is spending his money on beer and pizza in a way that maximizes his utility. If the price of beer increases, it means that beer is now relatively more expensive compared to pizza. As a result, Bob will consume less beer (because he will get less marginal utility per dollar spent on beer) and more pizza (because he will get more marginal utility per dollar spent on pizza). Therefore, the correct answer is C.

Question 3

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 
-In the above table, Bob experiences diminishing marginal utility after consuming how many pieces of pizza?

Accepted Answer

The answer of Bob's Marginal Utility for consuming beer and...

Question 4

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 
-In the above table, how much beer and pizza will Bob consume if the price of a piece of pizza is $2.00 and the price of a beer is $2.00?

Accepted Answer

Bob will consume 2 pieces of pizza and 2 beers because the prices are equal, and this combination maximizes his utility given his budget constraint.

Question 5

If a consumer concludes that the marginal utility of the last dollar spent on vegetables exceeds the marginal utility of the last dollar spent on junk food, he will respond by

Accepted Answer

If the consumer concludes that the marginal utility of the last dollar spent on vegetables exceeds the marginal utility of the last dollar spent on junk food, he will respond by consuming relatively more vegetables and less junk food. This is because the consumer perceives that the additional satisfaction gained from consuming the last dollar spent on vegetables is higher than that gained from the last dollar spent on junk food. As a result, the consumer will shift his consumption towards the good that provides greater utility.

Question 6

Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should

Accepted Answer

Dr. Rodriguez should increase his consumption of beer relative to wine because the marginal utility per dollar is higher for beer (30 units) than for wine (15 units), indicating he gets more utility per dollar spent on beer.

Question 7

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 
-According to the above table, how much total utility does Bob get from 3 pieces of pizza?

Accepted Answer

Based on the table, Bob's marginal utility for the third piece of pizza is 30 utils. Therefore, he will have a total utility of (85 + 30) 115 utils from consuming 3 pieces of pizza.

As for the best choice, it depends on what Bob values more - beer or pizza. If he values beer more, he should consume 2 pieces of pizza and 2 beers, which would give him a total utility of 120 utils (60 utils from each beer and 30 utils from each of the 2 pieces of pizza). However, if he values pizza more, he should consume 3 pieces of pizza, which would give him a total utility of 115 utils.

Question 8

For any two goods, X and Y, if MU_X divided by P_X equals 2.5 and MU_Y divided by P_Y equals 4.0, then with given income and prices the consumer should

Accepted Answer

The ratio of marginal utility to price is higher for good Y (4.0) than for good X (2.5). This indicates that the consumer receives more satisfaction per dollar spent on good Y than on good X. Therefore, the consumer should buy relatively more of good Y and less of good X.

Question 9

For good A and good B, the consumer maximizes personal satisfaction when

Accepted Answer

The consumer maximizes satisfaction when the marginal utility per dollar spent on each good is equal, which is represented by MU_A/P_A = MU_B/P_B.

Question 10

Suppose Isaac's marginal utility from attending his 5th White Sox game was 40 and the marginal utility from attending his 1st U2 concert was 200. Assume that the price of a Sox ticket is $20 and the price of a U2 ticket is $120. Which of the following would be true?

Accepted Answer

Isaac's marginal utility per dollar spent (MU/$) for the Sox game is 2 (40/20), and for the U2 concert, it is 1.67 (200/120). This means that for every dollar spent, Isaac gets more utility from attending a Sox game compared to a U2 concert. Therefore, he would attend more Sox games and less U2 concerts.

Question 11

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 
-In the above table, Bob experiences diminishing marginal utility after consuming how many beers?

Accepted Answer

Bob experiences diminishing marginal utility after consuming 2 beers. At this point, his marginal utility decreases from 16 to 12. Therefore, the best choice(s) for Bob would be to consume 2 beers and 1 pizza or 1 beer and 2 pizzas, depending on his individual preferences. Consuming more beers beyond the second will result in lower overall satisfaction.

Question 12

Jill likes lobsters but she does not eat lobsters in every meal. How can utility theory explain this?

Accepted Answer

The answer of Jill likes lobsters but she does not...

Question 13

In order to maximize utility, a consumer should allocate money income so that

Accepted Answer

Allocating money income so that the marginal utility obtained from the last dollar spent on each product is the same will result in the consumer achieving equilibrium. This is because if the marginal utility per dollar spent on one product is higher than another, the consumer can increase utility by shifting some expenditure from the lower marginal utility product to the higher one. Allocating money income to equalize the marginal utility per dollar spent on each product will maximize overall utility.

Question 14

What is the principle of diminishing marginal utility?

Accepted Answer

The answer of What is the principle of diminishing marginal...

Question 15

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 
-In the above table, how much total utility does Bob get from consuming 4 beers?

Accepted Answer

The total utility from consuming 4 beers is 125 utils, as indicated in the table.

Question 16

The consumer optimum for consuming two goods is achieved when

Accepted Answer

The consumer optimum is achieved when the marginal utility per last dollar spent is equal for the two goods. This means that the consumer is getting the most satisfaction possible given their budget constraint. When the marginal utility per last dollar spent is equal, the consumer is allocating their spending in a way that maximizes their utility.

Question 17

Newspaper vending machines are often built so that customers can pay to lift a door and take a paper off a pile of daily newspapers. Newspaper distributors are not concerned about customers taking the whole stack of papers because

Accepted Answer

The marginal utility of a second daily newspaper is zero because once a customer has one newspaper, additional copies do not provide additional value, reducing the incentive to take more than one.

Question 18

Assume that Jackie concludes that he should eat less and play racquetball more. In this situation, it must be true that the marginal utility of the last dollar spent on food is

Accepted Answer

If Jackie concludes that he should eat less and play racquetball more, it means that at the current level of consumption, the marginal utility of the last dollar spent on food is less than the marginal utility of the last dollar spent on racquetball. Otherwise, he would not have decided to reduce his consumption of food and increase his consumption of racquetball. Therefore, the correct answer is B.

Question 19

Despite the fact that water is necessary to sustain life, it is less expensive than soft drinks. Economic theory suggests that this is so because

Accepted Answer

According to marginal utility theory, as one consumes more of a good, the additional satisfaction derived from each additional unit of the good decreases. This means that the marginal utility per dollar spent on water is lower than that of soft drinks, even though the total utility of water consumption may be higher. Therefore, the market equilibrium price of water is lower than that of soft drinks. There is no evidence of a conspiracy or irrational behavior among consumers or sellers in this case.

Question 20

Why does total utility rise at a decreasing rate as an individual's consumption of an item increases?

Accepted Answer

The answer of Why does total utility rise at a...

Quiz 20: Consumer Choice

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income -Referring to the above table, suppose Bob's ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal. If the price of beer increases

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income -In the above table, Bob experiences diminishing marginal utility after consuming how many pieces of pizza?

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income -In the above table, how much beer and pizza will Bob consume if the price of a piece of pizza is $2.00 and the price of a beer is $2.00?