Question 1

Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good x, a normal good?

Accepted Answer

According to the utility-optimizing model, consumers will increase consumption of a normal good if the marginal utility of the good increases. Therefore, an increase in the marginal utility of good x would induce a consumer to increase consumption of good x. Choices B and C would not necessarily impact the consumer's consumption of good x. Choice D would actually lead to a decrease in the consumer's ability to purchase all goods, including good x.

Question 2

Consumers do not buy as many units of each good as they want because

Accepted Answer

Consumers have limited incomes, which means that they can only afford to buy a certain amount of goods. Therefore, they prioritize their spending and do not buy as many units of each good as they may want.

Question 3

The price of good "a" is $5 and the price of good "b" is $15. If the marginal utility of good "a" is 20 then the marginal utility of good "b" must be ________ to have an optimum combination of goods purchased.

Accepted Answer

The answer of The price of good "a" is $5...

Question 4

-The price of a magazine is $2, the price of a paperback book is $5, and the consumer has $33. According to the above table, the rational consumer will purchase

Accepted Answer

The answer of 
-The price of a magazine is $2,...

Question 5

-Refer to the above table. Assume the consumer spends his entire income. If the consumer's optimum at the current price of a movie is at 4 hamburgers and 4 movies, and the price of a hamburger is $1, what is the consumer's income?

Accepted Answer

The answer of 
-Refer to the above table. Assume the...

Question 6

A consumer has spent all of his funds on hamburgers and movies. The price of a hamburger is $1 and the price of a movie is $5. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 40. This consumer has

Accepted Answer

The answer of A consumer has spent all of his...

Question 7

Assume that the marginal utility from good x is 10 units and that the price of good x is $5 per unit. The marginal utility from good y is 15 units and its unit price is $7. In this situation, a utility-maximizing consumer should

Accepted Answer

Since the marginal utility per dollar spent on good y is higher (15/7=2.14) than that of good x (10/5=2), the consumer should consume more of good y to maximize their overall utility.

Question 8

When the marginal utility per dollar of good x exceeds the marginal utility per dollar of good y,

Accepted Answer

When the marginal utility per dollar of good x exceeds the marginal utility per dollar of good y, it means that the consumer is getting more satisfaction from each dollar spent on good x than on good y. Therefore, the consumer should consume more of good x to maximize their utility.

Question 9

-Refer to the above table. If a consumer's optimum consists of 3 magazines and 6 books, then

Accepted Answer

The answer of 
-Refer to the above table. If a...

Question 10

When Stephanie increases the consumption of pizza and decrease the consumption of soda, her marginal utility of

Accepted Answer

According to the law of diminishing marginal utility, as Stephanie increases consumption of a particular good, its marginal utility will eventually start to decrease. Therefore, her marginal utility of pizza will fall as she consumes more of it. On the other hand, as she decreases consumption of soda, its marginal utility will increase due to the same law.

Question 11

The consumer optimum (for two goods, a and b)is reached when

Accepted Answer

The consumer optimum is reached when the marginal utility per dollar spent is equal for both goods. This means that the ratio of the marginal utility of each good to its price is equal for both goods. Therefore, the correct answer is D, MUa/Pa = MUb/Pb.

Question 12

In a restaurant we can observe people consuming coffee, tea, and soft drinks. All are priced the same. If Sally consumes coffee and Ali consumes soft drinks, we can conclude that

Accepted Answer

The fact that Sally chooses to consume coffee over tea or soft drinks and Ali chooses to consume soft drinks over tea or coffee suggests that they derive more utility from their respective choices. Since all three beverages have the same price, we can assume that Sally and Ali are making their choices based on personal preference rather than affordability. Therefore, we can conclude that Sally derives more utility from coffee than from tea or soft drinks, and Ali derives more utility from soft drinks than from tea or coffee. Choice A is incorrect because there is no information given about Bill's choice. Choice B may or may not be true, but it cannot be concluded from the given information. Choice D is incorrect because there is no information given about the intensity of utility derived from each beverage, and therefore we cannot conclude that the utilities are equal.

Question 13

According to utility theory, consumer purchase decisions are made such that

Accepted Answer

Utility theory posits that consumers allocate their spending so that the last unit of currency spent on each good provides the same marginal utility per unit of currency, hence the ratio of marginal utility to price is equalized across goods.

Question 14

The price of a hamburger is $1, the price of a movie is $5, and the consumer has $13. A consumer has purchased 3 hamburgers and two movies, receiving 10 units of utility for the last hamburger and 10 units of utility for the last movie. The set of goods

Accepted Answer

The answer of The price of a hamburger is $1,...

Question 15

A consumer with unlimited income will continue consuming goods until

Accepted Answer

The law of diminishing marginal utility states that as a consumer consumes more and more of a good, the additional satisfaction or utility they receive from each additional unit consumed diminishes. Therefore, a consumer with unlimited income will continue consuming goods until the marginal utility of each is equal to zero, as they will see no benefit in consuming any more than that.

Question 16

The marginal utility of good A is 6 and the marginal utility of good B is 15. The price of good A is $2. The price of good B must be ________ if the consumer is optimizing her utility.

Accepted Answer

To optimize utility, the consumer must allocate their spending in such a way that the marginal utility per dollar spent on all goods is equal. This means that for the given prices of A and B, the consumer will purchase more units of good A because its marginal utility per dollar ($3 = 6/2) is higher than that of good B ($0.67 = 15/x). To equalize the marginal utility per dollar spent on both goods, the price of good B must be $5, so that the marginal utility per dollar spent on both goods is $3.

Question 17

-Refer to the above table. Assume the consumer spends his entire income. The price of a hamburger is $1, the price of a movie is $6, and the consumer has $15. What is the consumer's optimum?

Accepted Answer

The answer of 
-Refer to the above table. Assume the...

Question 18

The consumer optimum is defined as

Accepted Answer

Consumer optimum refers to a situation where a consumer allocates their limited income in such a way that the last dollar spent on each product yields the same marginal utility. This means that the consumer maximizes total utility subject to their budget constraint. Therefore, the correct answer is D, the set of goods and services, subject to the limited income of the consumer, that maximizes the total utility of the consumer.

Question 19

The consumer optimum is the set of goods and services, subject to the limited income of the consumer, that

Accepted Answer

The consumer optimum is the combination of goods and services that maximizes the level of satisfaction for the consumer, subject to their limited income. Therefore, option C is correct. Option A may be partially correct in that the consumer can afford to buy the consumer optimum, but it does not fully capture the idea of maximization of satisfaction. Option B is incorrect because the consumer optimum does not have to be characterized by zero marginal utility on each good and service. Option D is also incorrect because the consumer optimum does not have to be characterized by increasing marginal utility.

Question 20

Consumers usually buy fewer units of a good than the quantity that would maximize total utility from consuming the good because

Accepted Answer

Consumers have limited incomes which restricts the amount they can spend on any given good. Therefore, they have to make a trade-off and prioritize which units of the good will give them the most satisfaction or utility for their limited budget. As they consume more units, the marginal utility tends to decrease, thus making it less desirable to consume additional units after a certain point. This is also known as the law of diminishing marginal utility. Therefore, consumers will not buy more units than they can afford or that provide them with diminishing marginal utility.

Quiz 20: Consumer Choice

Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good x, a normal good?

Consumers do not buy as many units of each good as they want because

The price of good "a" is $5 and the price of good "b" is $15. If the marginal utility of good "a" is 20 then the marginal utility of good "b" must be ________ to have an optimum combination of goods purchased.

-The price of a magazine is $2, the price of a paperback book is $5, and the consumer has $33. According to the above table, the rational consumer will purchase

-Refer to the above table. Assume the consumer spends his entire income. If the consumer's optimum at the current price of a movie is at 4 hamburgers and 4 movies, and the price of a hamburger is $1, what is the consumer's income?

A consumer has spent all of his funds on hamburgers and movies. The price of a hamburger is $1 and the price of a movie is $5. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 40. This consumer has

Assume that the marginal utility from good x is 10 units and that the price of good x is $5 per unit. The marginal utility from good y is 15 units and its unit price is $7. In this situation, a utility-maximizing consumer should

When the marginal utility per dollar of good x exceeds the marginal utility per dollar of good y,

-Refer to the above table. If a consumer's optimum consists of 3 magazines and 6 books, then

When Stephanie increases the consumption of pizza and decrease the consumption of soda, her marginal utility of

The consumer optimum (for two goods, a and b) is reached when

In a restaurant we can observe people consuming coffee, tea, and soft drinks. All are priced the same. If Sally consumes coffee and Ali consumes soft drinks, we can conclude that

According to utility theory, consumer purchase decisions are made such that

The price of a hamburger is $1, the price of a movie is $5, and the consumer has $13. A consumer has purchased 3 hamburgers and two movies, receiving 10 units of utility for the last hamburger and 10 units of utility for the last movie. The set of goods

A consumer with unlimited income will continue consuming goods until

The marginal utility of good A is 6 and the marginal utility of good B is 15. The price of good A is $2. The price of good B must be ________ if the consumer is optimizing her utility.

-Refer to the above table. Assume the consumer spends his entire income. The price of a hamburger is $1, the price of a movie is $6, and the consumer has $15. What is the consumer's optimum?

The consumer optimum is defined as

The consumer optimum is the set of goods and services, subject to the limited income of the consumer, that

Consumers usually buy fewer units of a good than the quantity that would maximize total utility from consuming the good because