Question 1

Joe is currently in consumer equilibrium by consuming cheese and crackers, such that the last cracker consumed yielded 8 utils and the last piece of cheese consumed yielded 12 utils. Assume the price of crackers is two cents per cracker and the price of cheese is three cents per piece. If the price of crackers increases to four cents, Joe should __________ his consumption of crackers and his marginal utility from crackers will __________ and also __________ his consumption of cheese and his marginal utility from cheese will __________.

Accepted Answer

The answer of Joe is currently in consumer equilibrium by...

Question 2

According to the traditional theory of marginal utility as presented in the textbookbook, as more units of a good are acquired, the consumer's marginal utility

Accepted Answer

The traditional theory of marginal utility posits that as a consumer acquires more units of a good, the additional satisfaction (marginal utility) gained from consuming each additional unit decreases. This is known as the law of diminishing marginal utility.

Question 3

Which of the following statements is true?

Accepted Answer

In consumer theory, equilibrium is reached when a consumer allocates their income in a way that maximizes their total utility given the prices of goods and services. This means that at equilibrium, the consumer cannot increase their total utility by reallocating their spending, implying they are achieving the greatest total utility possible with their income and the given prices.

Question 4

Given two goods, X and Y, their prices, P_X and P_Y, a consumer is in equilibrium when the last dollar spent on X yields

Accepted Answer

In consumer equilibrium, the last dollar spent on each good yields the same marginal utility. This principle is known as the equal marginal principle, indicating that consumers allocate their budget to maximize total utility, achieving equilibrium when the marginal utility per dollar is equal across all goods.

Question 5

Diamonds are more expensive than water because

Accepted Answer

Diamonds are more expensive than water primarily because they are relatively scarce and provide higher marginal utility. This means that the additional satisfaction or usefulness obtained from using one more unit of a diamond is perceived to be greater than that of using an additional unit of water, despite water being essential for life. This concept is a fundamental principle in economics related to supply, demand, and the subjective value of goods.

Question 6

If the marginal utility of a good is negative, then

Accepted Answer

When the marginal utility of a good is negative, it means that consuming an additional unit of the good decreases the overall satisfaction of the consumer. Therefore, consumers should buy less of it to avoid the decrease in satisfaction.

Question 7

Given that MU_X/P_X < MU_Y/P_Y, consumers who spend all their income on these two goods

Accepted Answer

The given inequality suggests that the marginal utility per dollar spent on X is less than the marginal utility per dollar spent on Y. Therefore, consumers can increase their total utility by buying more of Y and less of X, as this will allocate their spending towards the good that provides more utility per dollar spent.

Question 8

Given two goods, X and Y, and their prices, P_X and P_Y a consumer will maximize total utility by allocating expenditures such that

Accepted Answer

The consumer maximizes total utility by equating the marginal utility per dollar spent on each good, which is represented by the equation in choice C.

Question 9

A consumer is in equilibrium if he or she derives the same

Accepted Answer

A consumer is in equilibrium when the marginal utility per dollar spent on each good consumed is equal. This ensures that the consumer is allocating their budget in a way that maximizes their total utility given their budget constraint.

Question 10

Suppose that the total utility from consuming one unit of good X is 87 utils, the total utility of two units of good X is 150 utils, and the total utility of three units of good X is 180 utils. The marginal utility of the third unit is

Accepted Answer

The marginal utility of the third unit is the additional utility gained from consuming the third unit, calculated as the total utility from three units (180 utils) minus the total utility from two units (150 utils), which equals 30 utils.

Question 11

Suppose that the total utility from consuming one unit of good Z is 80 utils, the total utility from consuming two units of good Z is 125 utils, and the total utility from consuming three units of good Z is 160 utils. The marginal utility received from consuming the third unit of good Z is

Accepted Answer

The marginal utility of consuming the third unit of good Z is the additional utility gained from consuming the third unit compared to the second unit. This is calculated as the total utility from three units (160 utils) minus the total utility from two units (125 utils), which equals 35 utils.

Question 12

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MU_L = 40 and MU_E = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

Accepted Answer

Valerie should consume more eye shadow and less lipstick because the marginal utility per dollar spent on eye shadow (MU_E = 36) is higher than that for lipstick (MU_L = 40) when considering their respective prices ($9 for eye shadow and $15 for lipstick). This suggests she would gain more satisfaction per dollar by reallocating her spending towards more eye shadow and less lipstick.

Question 13

In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition

Accepted Answer

Consumer equilibrium is achieved when the ratio of the marginal utility to the price of one good is equal to the ratio of the marginal utility to the price of another good, which is accurately represented in choice D.

Question 14

The theory of consumer choice assumes that consumers attempt to maximize

Accepted Answer

The theory of consumer choice assumes that consumers attempt to maximize total utility, which is the total satisfaction received from consuming a given total quantity of a good or service.

Question 15

To an economist, utility refers to the

Accepted Answer

Utility, in economics, refers to the satisfaction or pleasure that individuals derive from consuming goods and services.

Question 16

To resolve the diamond-water paradox, it is important to note that under most circumstances,

Accepted Answer

The diamond-water paradox is resolved by understanding that the marginal utility of water is lower than that of diamonds because water is abundant and diamonds are scarce. This means that the additional satisfaction (utility) gained from consuming one more unit of water is less than that from consuming one more unit of diamond.

Question 17

The law of diminishing marginal utility helps to explain

Accepted Answer

The law of diminishing marginal utility explains why people trade (A) as they seek to maximize utility by exchanging goods that provide less additional satisfaction for those that provide more. It also explains the law of demand (B) because as the quantity consumed increases, the additional satisfaction decreases, leading consumers to buy less at higher prices.

Question 18

Suppose that a consumer purchases a combination of X and Y such that MU_X/P_X = 15 utils per dollar and MU_Y /P_Y = 10 utils per dollar. To maximize utility, the consumer should buy

Accepted Answer

To maximize utility, a consumer should equate the marginal utility per dollar spent across all goods. Since the marginal utility per dollar of X (15 utils per dollar) is higher than that of Y (10 utils per dollar), the consumer should buy more of X and less of Y to equalize the marginal utility per dollar spent on each.

Question 19

Suppose a consumer is purchasing Coke (c) and pretzels (p) in quantities such that he is achieving consumer equilibrium. Then the price of Coke increases. Which of the following will be true?

Accepted Answer

When the price of Coke increases, the marginal utility per dollar spent on Coke (MU_C/P_C) decreases, making it less than the marginal utility per dollar spent on pretzels (MU_P/P_P).

Question 20

Suppose a consumer is purchasing Coke and pretzels in quantities such that she is achieving consumer equilibrium. Then the price of Coke decreases. The consumer will likely __________ her consumption of Coke and the marginal utility of Coke will __________ while the total utility from Coke will __________.

Accepted Answer

When the price of Coke decreases, the consumer will likely increase her consumption of Coke to achieve a new consumer equilibrium. As she consumes more Coke, the marginal utility (additional satisfaction from consuming one more unit) of Coke will decrease due to the law of diminishing marginal utility. However, the total utility (overall satisfaction) from Coke will increase because she is consuming more of it.

Quiz 20: Consumer Choice and Behavioral Economics

According to the traditional theory of marginal utility as presented in the textbookbook, as more units of a good are acquired, the consumer's marginal utility

Which of the following statements is true?

Given two goods, X and Y, their prices, P_X and P_Y, a consumer is in equilibrium when the last dollar spent on X yields

Diamonds are more expensive than water because

If the marginal utility of a good is negative, then

Given that MU_X/P_X < MU_Y/P_Y, consumers who spend all their income on these two goods

Given two goods, X and Y, and their prices, P_X and P_Y a consumer will maximize total utility by allocating expenditures such that

A consumer is in equilibrium if he or she derives the same

Suppose that the total utility from consuming one unit of good X is 87 utils, the total utility of two units of good X is 150 utils, and the total utility of three units of good X is 180 utils. The marginal utility of the third unit is

Suppose that the total utility from consuming one unit of good Z is 80 utils, the total utility from consuming two units of good Z is 125 utils, and the total utility from consuming three units of good Z is 160 utils. The marginal utility received from consuming the third unit of good Z is

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MU_L = 40 and MU_E = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition

The theory of consumer choice assumes that consumers attempt to maximize

To an economist, utility refers to the

To resolve the diamond-water paradox, it is important to note that under most circumstances,

The law of diminishing marginal utility helps to explain

Suppose that a consumer purchases a combination of X and Y such that MU_X/P_X = 15 utils per dollar and MU_Y /P_Y = 10 utils per dollar. To maximize utility, the consumer should buy

Suppose a consumer is purchasing Coke (c) and pretzels (p) in quantities such that he is achieving consumer equilibrium. Then the price of Coke increases. Which of the following will be true?

Suppose a consumer is purchasing Coke and pretzels in quantities such that she is achieving consumer equilibrium. Then the price of Coke decreases. The consumer will likely her consumption of Coke and the marginal utility of Coke will while the total utility from Coke will __.

Quiz 20: Consumer Choice and Behavioral Economics

According to the traditional theory of marginal utility as presented in the textbookbook, as more units of a good are acquired, the consumer's marginal utility

Which of the following statements is true?

Given two goods, X and Y, their prices, PX and PY, a consumer is in equilibrium when the last dollar spent on X yields

Diamonds are more expensive than water because

If the marginal utility of a good is negative, then

Given that MUX/PX < MUY/PY, consumers who spend all their income on these two goods

Given two goods, X and Y, and their prices, PX and PY a consumer will maximize total utility by allocating expenditures such that

A consumer is in equilibrium if he or she derives the same

Suppose that the total utility from consuming one unit of good X is 87 utils, the total utility of two units of good X is 150 utils, and the total utility of three units of good X is 180 utils. The marginal utility of the third unit is

Suppose that the total utility from consuming one unit of good Z is 80 utils, the total utility from consuming two units of good Z is 125 utils, and the total utility from consuming three units of good Z is 160 utils. The marginal utility received from consuming the third unit of good Z is

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MUL = 40 and MUE = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition

The theory of consumer choice assumes that consumers attempt to maximize

To an economist, utility refers to the

To resolve the diamond-water paradox, it is important to note that under most circumstances,

The law of diminishing marginal utility helps to explain

Suppose that a consumer purchases a combination of X and Y such that MUX/PX = 15 utils per dollar and MUY /PY = 10 utils per dollar. To maximize utility, the consumer should buy

Suppose a consumer is purchasing Coke (c) and pretzels (p) in quantities such that he is achieving consumer equilibrium. Then the price of Coke increases. Which of the following will be true?

Given two goods, X and Y, their prices, P_X and P_Y, a consumer is in equilibrium when the last dollar spent on X yields

Given that MU_X/P_X < MU_Y/P_Y, consumers who spend all their income on these two goods

Given two goods, X and Y, and their prices, P_X and P_Y a consumer will maximize total utility by allocating expenditures such that

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MU_L = 40 and MU_E = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do?

Suppose that a consumer purchases a combination of X and Y such that MU_X/P_X = 15 utils per dollar and MU_Y /P_Y = 10 utils per dollar. To maximize utility, the consumer should buy