Question 1

George has a weekly income (I)of $50,which he uses to purchase doughnuts (D)and coffee (C).The price of a doughnut is $1 and the price of coffee is $2.50.Suppose George's income increases to $100 and the prices of both doughnuts and coffee remain unchanged.Given this income change,one would expect George's budget line to:

Accepted Answer

With an increase in George's weekly income, his purchasing power increases. This implies that he can now afford to purchase more of both doughnuts and coffee, which would cause his budget line to shift to the right. The prices of both doughnuts and coffee remain the same, so there is no reason for the budget line to rotate around any axis point or shift to the left.

Question 2

Use the following to answer questions : $\text {Table: Alaina's Utility from}$
$\text { Consuming Cups of Coffee}$

$\begin{array}{llcc}
 \hline \text {  Cups of} &  \
 \text {  Coffee} & \text { Total Utility }\
 \hline 1 &\text { 11utils }\
2&20\
3&28\
4 &34\
5&39\
6&43
\end{array}$

-(Table: Alaina's Utility from Consuming Cups of Coffee)Use Table: Alaina's Utility from Consuming Cups of Coffee.Alaina's marginal utility from consuming her sixth cup of coffee is _____ utils.

Accepted Answer

The answer of Use the following to answer questions :...

Question 3

In the standard models in economics,consumers maximize utility because they are:

Accepted Answer

In standard models in economics, consumers are assumed to be rational and aim to maximize their utility, or satisfaction, when making consumption decisions.

Question 4

If the price of pecan rolls is $2,the price of a gyro is $6,and the marginal utility of the last pecan roll consumed is 12,then the marginal utility of the last gyro consumed for a consumer purchasing the optimal consumption bundle of pecan rolls and gyros is 36.

Accepted Answer

If the consumer is purchasing the optimal consumption bundle, that means they are allocating their budget in a way that the marginal utility per dollar is equal for all goods. Therefore, if the price of a gyro is three times the price of a pecan roll ($6/$2), the marginal utility of the last gyro consumed should also be three times the marginal utility of the last pecan roll consumed (12*3=36).

Question 5

Suppose Sirach knows that the price of doughnuts is $3 and the price of cupcakes is $4.He also knows that the next doughnut he consumes will increase his total utility by 6 utils and the next cupcake will increase his total utility by 10 utils.Assuming he has enough money to buy either,Sirach should buy a doughnut next.

Accepted Answer

Given the information, Sirach should buy a cupcake next because it provides a higher utility per dollar spent (2.5 utils per dollar for the cupcake vs. 2 utils per dollar for the doughnut).

Question 6

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

Accepted Answer

The concept of utility refers to the satisfaction, happiness or pleasure that a consumer gets from the consumption of a good or service. Therefore, option A is the correct answer as it directly relates to the satisfaction gained from consuming a bundle of goods and services. Option B, rationalization, is not directly related to the satisfaction gained from consumption but rather refers to the process of justifying a choice after it has already been made. Option C, budget constraints, refers to the limitations on consumer spending based on their income and prices of goods and services, and option D, income, refers to the amount of money a consumer has available to spend.

Question 7

At Frankie's Buy-the-Slice Pizza,Brian eats eight slices of pizza.He says that,because pizza is $2 per slice,the utility-maximizing decision is to eat until your marginal utility per dollar is zero.Brian's explanation is correct.

Accepted Answer

Brian's explanation is incorrect because the utility-maximizing decision is to eat until the marginal utility per dollar spent on the last slice of pizza equals the marginal utility per dollar spent on other goods, not until it is zero.

Question 8

For most goods,the income effect has no significant effect on individual consumption.

Accepted Answer

The answer of For most goods,the income effect has no...

Question 9

If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

Accepted Answer

According to the law of demand, when the price of a good increases, the quantity demanded decreases. This can be broken down into two effects: the substitution effect and the income effect. The substitution effect is the tendency for consumers to switch to a cheaper alternative when the price of a good increases. The income effect is the change in purchasing power that occurs when the price of a good changes. For normal goods, the substitution and income effects move in the same direction, meaning a price increase leads to a decrease in quantity demanded due to both effects. However, for inferior goods, the income effect and substitution effect move in opposite directions. As a result, if a price increase leads to an increase in quantity demanded, it must be an inferior good.

Question 10

Use the following to answer questions : $\text {Table: Alaina's Utility from}$
$\text { Consuming Cups of Coffee}$

$\begin{array}{llcc}
 \hline \text {  Cups of} &  \
 \text {  Coffee} & \text { Total Utility }\
 \hline 1 &\text { 11utils }\
2&20\
3&28\
4 &34\
5&39\
6&43
\end{array}$

-(Table: Alaina's Utility from Consuming Cups of Coffee)Use Table: Alaina's Utility from Consuming Cups of Coffee.Diminishing marginal utility is:

Accepted Answer

The answer of Use the following to answer questions :...

Question 11

George has a weekly income (I)of $50,which he uses to purchase doughnuts (D)and coffee (C).The price of a doughnut is $1 and the price of coffee is $2.50.Suppose George's income drops to $25 and the prices of doughnuts and coffee each fall to one-half their initial prices.One would expect George's budget line to:

Accepted Answer

George's initial budget line can be represented by the equation $D+C=50$ (where D is the quantity of doughnuts and C is the quantity of coffee purchased). After the changes in income and price, his new budget line can be represented by the equation $(1/2)D+(1/2)C=12.5$. These two lines are parallel to each other and have the same slope, so they are identical. Therefore, his budget line stays the same and does not shift or rotate.

Question 12

At the optimal consumption bundle,the marginal utility derived from the last unit of each good purchased is always the same.

Accepted Answer

The answer of At the optimal consumption bundle,the marginal utility...

Question 13

If marginal utility is diminishing,the marginal utility curve is _____ sloping since each additional unit of the good consumed yields _____ satisfaction than the unit that preceded it.

Accepted Answer

According to the statement "marginal utility is diminishing", it means that each additional unit of the good consumed yields less satisfaction than the unit that preceded it. This leads to a downward sloping marginal utility curve.

Question 14

If the marginal utility of hot dogs exceeds the marginal utility of french fries,then the consumer should necessarily adjust their consumption toward eating more hot dogs and fewer french fries.

Accepted Answer

The answer of If the marginal utility of hot dogs...

Question 15

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Ticket_s/P_Rides.

Accepted Answer

The optimal consumption rule states that for a consumer to maximize utility, the marginal utility per dollar spent on all goods purchased must be equal. In this case, the ratio of the marginal utility of tickets to the price of tickets must be equal to the ratio of the marginal utility of rides to the price of rides. Therefore, the statement given in the question is true.

Question 16

George has a weekly income (I)of $50,which he uses to purchase doughnuts (D)and coffee (C).If the price of a doughnut is $1 and the price of coffee is $2.50,his budget constraint can be expressed as:

Accepted Answer

The budget constraint equation can be expressed as:
$1D + $2.50C ≤ $50
where $1D represents the total spending on doughnuts and $2.50C represents the total spending on coffee. $50 is the total income available for spending on the two goods.
Option D is the only one that matches this equation, with 50 - 2.50C on the right side of the inequality. Therefore, the best choice is D.

Question 17

Tonya's budget constraint for litres of gasoline (G)and shirts (S)each month can be expressed by the equation G = 100 - 2S,where G is the number of litres of gasoline she buys and S is the total number of shirts she buys.Assume that she spends her entire budget each month.If the price of shirts is $10,the price of gasoline is _____ per litre,and the total amount of income spent on both shirts and gasoline each month is _____.

Accepted Answer

The slope of the budget constraint (-2) indicates the price ratio of shirts to gasoline. If shirts cost $10, gasoline costs $5 per litre. Substituting S = 0 in the budget constraint gives G = 100, so the total income is 100 litres * $5 = $500.

Question 18

When the price of Spam (an inferior good)decreased,Dale bought more Spam.For Dale,the income and substitution effects moved in the same direction.

Accepted Answer

The answer of When the price of Spam (an inferior...

Question 19

Use the following to answer questions : $\text {Table: Alaina's Utility from}$
$\text { Consuming Cups of Coffee}$

$\begin{array}{llcc}
 \hline \text {  Cups of} &  \
 \text {  Coffee} & \text { Total Utility }\
 \hline 1 &\text { 11utils }\
2&20\
3&28\
4 &34\
5&39\
6&43
\end{array}$

-(Table: Alaina's Utility from Consuming Cups of Coffee)Use Table: Alaina's Utility from Consuming Cups of Coffee.Given the information in the table,Alaina's total utility from drinking coffee:

Accepted Answer

The answer of Use the following to answer questions :...

Question 20

George has a weekly income (I)of $50,which he uses to purchase doughnuts (D)and coffee (C).If the price of a doughnut is $1 and the price of coffee is $2.50,which consumption bundle lies BEYOND George's budget constraint?

Accepted Answer

George's weekly income is $50. The cost of the consumption bundles are calculated as follows: A) $25 (for coffee) + $25 (for doughnuts) = $50, B) $37.50 (for coffee) + $15 (for doughnuts) = $52.50, C) $12.50 (for coffee) + $10 (for doughnuts) = $22.50, D) $12.50 (for coffee) + $5 (for doughnuts) = $17.50. Only option B exceeds George's budget of $50.

Quiz 10: The Rational Consumer

In the standard models in economics,consumers maximize utility because they are:

If the price of pecan rolls is $2,the price of a gyro is $6,and the marginal utility of the last pecan roll consumed is 12,then the marginal utility of the last gyro consumed for a consumer purchasing the optimal consumption bundle of pecan rolls and gyros is 36.

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

At Frankie's Buy-the-Slice Pizza,Brian eats eight slices of pizza.He says that,because pizza is $2 per slice,the utility-maximizing decision is to eat until your marginal utility per dollar is zero.Brian's explanation is correct.

For most goods,the income effect has no significant effect on individual consumption.

If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

At the optimal consumption bundle,the marginal utility derived from the last unit of each good purchased is always the same.

If marginal utility is diminishing,the marginal utility curve is _ sloping since each additional unit of the good consumed yields _ satisfaction than the unit that preceded it.

If the marginal utility of hot dogs exceeds the marginal utility of french fries,then the consumer should necessarily adjust their consumption toward eating more hot dogs and fewer french fries.

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Ticket_s/P_Rides.

George has a weekly income (I) of $50,which he uses to purchase doughnuts (D) and coffee (C) .If the price of a doughnut is $1 and the price of coffee is $2.50,his budget constraint can be expressed as:

When the price of Spam (an inferior good)decreased,Dale bought more Spam.For Dale,the income and substitution effects moved in the same direction.

George has a weekly income (I) of $50,which he uses to purchase doughnuts (D) and coffee (C) .If the price of a doughnut is $1 and the price of coffee is $2.50,which consumption bundle lies BEYOND George's budget constraint?

Quiz 10: The Rational Consumer

In the standard models in economics,consumers maximize utility because they are:

If the price of pecan rolls is $2,the price of a gyro is $6,and the marginal utility of the last pecan roll consumed is 12,then the marginal utility of the last gyro consumed for a consumer purchasing the optimal consumption bundle of pecan rolls and gyros is 36.

The satisfaction that a consumer gets from the consumption of a bundle of goods and services is:

At Frankie's Buy-the-Slice Pizza,Brian eats eight slices of pizza.He says that,because pizza is $2 per slice,the utility-maximizing decision is to eat until your marginal utility per dollar is zero.Brian's explanation is correct.

For most goods,the income effect has no significant effect on individual consumption.

If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

At the optimal consumption bundle,the marginal utility derived from the last unit of each good purchased is always the same.

If marginal utility is diminishing,the marginal utility curve is _____ sloping since each additional unit of the good consumed yields _____ satisfaction than the unit that preceded it.

If the marginal utility of hot dogs exceeds the marginal utility of french fries,then the consumer should necessarily adjust their consumption toward eating more hot dogs and fewer french fries.

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to PTickets and PRides,respectively,then it must be the case that MUTickets/MURides = PTickets/PRides.

George has a weekly income (I) of $50,which he uses to purchase doughnuts (D) and coffee (C) .If the price of a doughnut is $1 and the price of coffee is $2.50,his budget constraint can be expressed as:

When the price of Spam (an inferior good)decreased,Dale bought more Spam.For Dale,the income and substitution effects moved in the same direction.

George has a weekly income (I) of $50,which he uses to purchase doughnuts (D) and coffee (C) .If the price of a doughnut is $1 and the price of coffee is $2.50,which consumption bundle lies BEYOND George's budget constraint?

If marginal utility is diminishing,the marginal utility curve is _ sloping since each additional unit of the good consumed yields _ satisfaction than the unit that preceded it.

The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Ticket_s/P_Rides.