Question 1

Table 10-6
  Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will he consume?

Accepted Answer

Jay's marginal utility per dollar for burgers declines as he consumes more burgers. It starts at 20, drops to 15 for the second burger, 10 for the third burger, and 5 for the fourth burger. Therefore, Jay will consume 4 burgers because at that point the marginal utility per dollar is no longer positive. However, he can still afford 1 can of Pepsi with his remaining $1. Therefore, his total utility-maximizing bundle will be 4 burgers and 1 can of Pepsi, which yields a total utility of 85 (20+15+10+5+35). This choice uses up all of Jay's $7 budget.

Question 2

The amount of income a consumer has to spend on goods and services is known as

Accepted Answer

The answer of The amount of income a consumer has...

Question 3

Which of the following is explained by the law of diminishing marginal utility?

Accepted Answer

The answer of Which of the following is explained by...

Question 4

Table 10-5
 
-Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of a sub sandwich is $4 and the price of a taco is $2. When Harry's income is $14, he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1. Complete this statement: As a result of the change in price

Accepted Answer

Since the price of tacos decreased, Harry's purchasing power has increased, which means he can buy more of both goods. If tacos are a normal good for Harry, which is likely since he initially purchased 3 when the price was $2, he will buy more tacos. This is an example of the income effect of a price change.

Question 5

During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide on number of slices of pizza and cups of Coca-Cola he would consume. Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

Accepted Answer

The answer of During a study session for an economics...

Question 6

Table 10-3
 
-Refer to Table 10-3. The table above shows Lee's marginal utility from consuming ice cream cones and cans of Lime Fizz Soda. Select the phrase that completes the following statement. "We can determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utility

Accepted Answer

To determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utility, we need to know not only his marginal utility of each item but also their prices and Lee's budget constraints. Therefore, option B is the correct choice.

Question 7

Table 10-3
 
-Refer to Table 10-3. The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda. The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1. Use this information to select the correct statement.

Accepted Answer

The answer of Table 10-3
 
-Refer to Table 10-3. The...

Question 8

Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save. Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50. The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20. Marv has only $50 to spend, but has not yet paid for his groceries. How can Marv increase his total utility without spending more than $50?

Accepted Answer

The answer of Marv Pilson has $50 worth of groceries...

Question 9

Table 10-4
 
-Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches. Which of the following statements is false?

Accepted Answer

The answer of Table 10-4
 
-Refer to Table 10-4. For...

Question 10

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Accepted Answer

The limitation described in the question is commonly referred to as the budget constraint, where a consumer's total expenditure is limited by their income. Therefore, the best choice is D, the budget constraint.

Question 11

There are two conditions necessary for a consumer to maximize her utility. One is that the marginal utilities per dollar spent on each good and service consumed are equal. What is the other condition?

Accepted Answer

The answer of There are two conditions necessary for a...

Question 12

Table 10-6
  Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6. What is Jay's optimal consumption bundle?

Accepted Answer

To find Jay's optimal consumption bundle, we need to look for the combination of burgers and Pepsi that maximizes his total utility given his budget. Using the marginal utility per dollar spent approach, we can compare the marginal utility per dollar spent on each good and allocate our budget accordingly.

For burgers, the marginal utility per dollar spent is highest for the first two burgers, at 8 utils per dollar spent. For Pepsi, the marginal utility per dollar spent is highest for the first three cans, at 10 utils per dollar spent.

Therefore, to maximize his total utility under the budget constraint, Jay should consume 2 burgers and 3 cans of Pepsi, which would cost him $2*2+$1*3=$7. This consumption bundle gives a total utility of 16 utils (8 from burgers and 8 from Pepsi), which is the highest utility possible given his budget.

Question 13

Table 10-4
 
-Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches. Which of the following statements is true?

Accepted Answer

Mabel should continue buying grilled chicken sandwiches until the MU/P for steak and cheese sandwiches equals the MU/P for grilled chicken sandwiches, which occurs after she has purchased two grilled chicken sandwiches. Therefore, she should buy two steak and cheese sandwiches and three grilled chicken sandwiches, spending all $14. If she received an additional $4, the MU/P for grilled chicken sandwiches is still higher than that of steak and cheese sandwiches, so the best choice would be another grilled chicken sandwich. Therefore, option B is the correct answer. Options A, C, and D are not efficient ways to allocate Mabel's $14 budget.

Question 14

A budget constraint

Accepted Answer

A budget constraint refers to the limited amount of income available to consumers to spend on goods and services. It reflects the fact that consumers have to make choices and trade-offs about how to allocate their limited resources among different goods and services. Option A is incorrect because it describes indifference curves, not budget constraints. Option C is incorrect because it confuses a budget constraint with a desire to increase income. Option D is incorrect because prices are determined by the market and not by individual consumer choices.

Question 15

In making decisions about what to consume, a person's goal is to

Accepted Answer

The answer of In making decisions about what to consume,...

Question 16

Total utility is maximized in the consumption of two goods by

Accepted Answer

When we consume two goods, the total utility is maximized when we allocate our spending in such a way that the marginal utility per dollar spent is equal for both goods. This is because spending more on one good would lead to a diminishing marginal utility while spending less on another good would lead to an increase in marginal utility per dollar spent. Therefore, the optimal allocation of spending is when the marginal utility per dollar spent is equal for both goods.

Question 17

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears. To maximize his utility, what should Harold do?

Accepted Answer

Since the marginal utility per dollar from oranges is greater than that from pears, Harold should buy fewer pears and more oranges to maximize his utility. This will allow him to allocate his income towards the good that provides him with the greatest satisfaction per dollar spent.

Question 18

Table 10-5
 
-Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of a sub sandwich is $4 and the price of a taco is $2. When Harry's income is $14, he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1. Complete this statement: As a result of the change in price, the marginal utility of each taco Harry consumes increases and

Accepted Answer

When the price of tacos decreases to $1, the marginal utility per dollar of tacos increases, making them relatively more attractive to Harry than subs. This induces a substitution effect that will cause Harry to buy more tacos and fewer subs.

Question 19

Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge?

Accepted Answer

The answer of Marge buys 5 CDs and 7 DVDs....

Question 20

Optimal decisions are made

Accepted Answer

Optimal decisions are made at the margin, meaning that decision makers weigh the costs and benefits of one additional unit of a good or service before deciding whether to consume or produce it. Marginal analysis allows individuals and firms to make efficient decisions based on the additional benefits and costs associated with each decision.

Quiz 10: Consumer Choice and Behavioral Economics

Table 10-6 Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will he consume?