Question 1

Exhibit 6-6 Marginal utility for data for clothes and amusement

Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?

Accepted Answer

The answer of Exhibit 6-6 Marginal utility for data for...

Question 2

If a consumer wishes to maximize satisfaction given limited income and MU_x/P_x

Accepted Answer

To maximize satisfaction, the consumer should equalize the marginal utility per dollar spent across goods. If MUx/Px is less than the marginal utility per dollar of Y, the consumer should buy more of Y and less of X.

Question 3

Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:

Accepted Answer

Since Greg's MU/P of pizza is higher than his MU/P of video games, he is getting more satisfaction per dollar spent on pizza than on video games. This means that he would be better off spending more on pizza and less on video games in order to maximize his total utility. Therefore, choice C is the best option.

Question 4

Exhibit 6-6 Marginal utility for data for clothes and amusement

Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is:

Accepted Answer

The answer of Exhibit 6-6 Marginal utility for data for...

Question 5

If Allison's marginal utility of her 100th dollar of income is greater than Brad's marginal utility of his 10th dollar, then we can conclude:

Accepted Answer

Marginal utility refers to the additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a good or service. The concept of marginal utility is subjective and varies from person to person, making it difficult to directly compare the utility levels of different individuals. Therefore, stating that one person's utility is greater than another's does not allow for a direct comparison of their well-being or financial status, as utility is inherently personal and subjective.

Question 6

Consumer equilibrium exists when:

Accepted Answer

Consumer equilibrium is achieved when the consumer allocates their income in such a way that the ratio of the marginal utility to price for all goods and services is equal. This is known as the law of equi-marginal utility. It ensures that the consumer is getting the maximum satisfaction possible from their limited budget. Choice A is incorrect because the marginal utility of each good need not be equal, as long as the ratios are equal. Choice B is incorrect because total utility cannot be compared across goods with different prices. Choice C is incorrect because the marginal utility need not equal the price, as long as the ratio is equal.

Question 7

Consider a consumer who spends all income on only two goods: pizza and soda. An extra slice of pizza would give the consumer 60 extra utils, while an extra can of soda would give the consumer 20 extra utils. Pizza costs $3 per slice, and soda costs $1 per can. In this situation, the consumer:

Accepted Answer

To maximize total utility, the consumer should allocate their spending in a way that the marginal utility per dollar spent on each good is equal. In this case, the marginal utility per dollar spent on pizza is 20 (60 utils/ $3), and the marginal utility per dollar spent on soda is 20 (20 utils/ $1). This means that the consumer is already maximizing total utility by spending equal proportions on both goods. Any shift in spending toward one of the goods would decrease total utility as marginal utility would decrease. Therefore, the consumer has already maximized their total utility by allocating their spending equally between pizza and soda.

Question 8

Exhibit 6-7 Marginal utility for sandwiches and sodas

Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy ____ sandwiches and ____ sodas.

Accepted Answer

The answer of Exhibit 6-7 Marginal utility for sandwiches and...

Question 9

Exhibit 6-7 Marginal utility for sandwiches and sodas

Refer to Exhibit 6-7. Diminishing marginal utility for sandwiches sets in after the ____ sandwich.

Accepted Answer

The answer of Exhibit 6-7 Marginal utility for sandwiches and...

Question 10

Michael spends $10 a month on Pez dispensers and Superman action figures. His marginal-utility-to-price ratio for the Pez dispensers is 40, while his marginal-utility-to-price ratio for Superman action figures is 47. Explain why Michael is not maximizing his utility and how can he change his behavior to increase his utility?

Accepted Answer

The answer of Michael spends $10 a month on Pez...

Question 11

Which of the following statements is true ?

Accepted Answer

Options A and B are incorrect as they are wrongly defined. Total utility is the overall satisfaction obtained from the consumption of a good or service, while marginal utility is the extra satisfaction derived from consuming an additional unit of a good or service. Option C is partially correct, as the law of diminishing marginal utility states that as more of a good or service is consumed, the marginal utility decreases. However, total utility may still increase even though the marginal utility decreases. Option D is the correct statement as consumer equilibrium refers to the combination of goods and services consumed that maximizes the total utility from a given budget.

Question 12

Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.

Accepted Answer

The answer of Use the idea of interpersonal comparisons of...

Question 13

Justin stopped at the gas station on the way to campus and bought four candy bars, two 20-ounce bottles of juice, and 10 gallons of gas. His marginal-utility-to-price ratios are 3.2 for the candy bars, 4.8 for the juice, and 5.7 for the gas. Explain why this set of purchases did not maximize Ryan's utility and how could he have increased his utility.

Accepted Answer

The answer of Justin stopped at the gas station on...

Question 14

If a consumer is maximizing his/her utility for a given income, the:

Accepted Answer

When a consumer is maximizing their utility for a given income, they are spending their money in a way that maximizes the satisfaction they receive from each dollar spent. This means that they will allocate their spending so that the marginal utility per dollar spent for all goods is equal. Any other allocation of spending would result in either less overall utility or less utility per dollar spent.

Question 15

Exhibit 6-5 Marginal utility data for desserts

Refer to Exhibit 6-5. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?

Accepted Answer

To maximize utility, the consumer should allocate their spending so that the marginal utility per dollar is equal for each good. In this case, the marginal utility per dollar for brownies and ice cream is highest initially, but decreases as more units are consumed. The marginal utility per dollar for pie, on the other hand, is lower initially but does not decrease as quickly as for brownies and ice cream. Therefore, the consumer should purchase a combination of all three goods such that the marginal utility per dollar is equal for each good. The combination of 4 units of brownies, 4 units of ice cream, and 2 units of pie achieves this balance and maximizes utility.

Question 16

Eric is maximizing his total utility through his choices of two goods: clothes and food. His marginal utility of clothes is 60 and his marginal utility of food is 12. The price of clothes is $20. What must be the price of food?

Accepted Answer

To maximize total utility, the consumer should allocate his budget in such a way that the marginal utility per dollar spent on each good is equal. This means that the marginal utility of clothes divided by the price of clothes should equal the marginal utility of food divided by the price of food. Thus, 60/20 = 12/Price of Food, which simplifies to 3 = 12/Price of Food. Solving for the Price of Food gives us $4.

Question 17

If a consumer is choosing the optimal combinations of two goods X and Y, and then the price of good Y decreases, this causes:

Accepted Answer

When the price of good Y decreases, its MU/P increases, making it a better value for the consumer. This will cause them to want to consume more of good Y in order to reach a new optimal combination. Therefore, the consumer must buy more Y to find the new optimal combination. The answer is not A, B, or D because they do not accurately describe the situation caused by the decrease in price of good Y.

Question 18

Exhibit 6-6 Marginal utility for data for clothes and amusement

Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true ?

Accepted Answer

When the price of clothes falls to $4, the marginal-utility-to-price ratio for clothes will increase. This is because the marginal utility of clothes remains constant at 10 as the price falls from $5 to $4, while the price decreases. Therefore, the marginal-utility-to-price ratio for clothes will increase. As the marginal-utility-to-price ratio for clothes increases, consumers will demand more clothes until that ratio equalizes. This may lead to an increase in the quantity demanded of clothes. The quantity demanded for amusement goods will remain constant since their price has not changed.

Question 19

Exhibit 6-7 Marginal utility for sandwiches and sodas

Refer to Exhibit 6-7. If the price of a sandwich is $1 and the price of a soda is $1, Marian should spend her first dollar on a ____ and her second dollar on a ____.

Accepted Answer

The answer of Exhibit 6-7 Marginal utility for sandwiches and...

Question 20

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

Accepted Answer

The consumer is currently maximizing utility, which means that the marginal utility per dollar spent on A and B must be equal. 
MU per dollar spent on A = MU of A/P of A = 50/25 = 2
MU per dollar spent on B = MU of B/P of B = MU of B/10 
Since they are equal, we can set them equal to each other: 
2 = MU of B/10
MU of B = 20. 
Therefore, the MU of the last unit of B consumed is 20.

The best choice for the consumer depends on their total income and the quantities they are currently consuming of A and B. Without knowing this information, we cannot determine the best choice.

Quiz 6: Consumer Choice Theory

Exhibit 6-6 Marginal utility for data for clothes and amusement Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?

If a consumer wishes to maximize satisfaction given limited income and MU_x/P_x

Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:

Exhibit 6-6 Marginal utility for data for clothes and amusement Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is:

If Allison's marginal utility of her 100th dollar of income is greater than Brad's marginal utility of his 10th dollar, then we can conclude:

Consumer equilibrium exists when:

Consider a consumer who spends all income on only two goods: pizza and soda. An extra slice of pizza would give the consumer 60 extra utils, while an extra can of soda would give the consumer 20 extra utils. Pizza costs $3 per slice, and soda costs $1 per can. In this situation, the consumer:

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy sandwiches and sodas.

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. Diminishing marginal utility for sandwiches sets in after the ____ sandwich.

Which of the following statements is true ?

Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.

If a consumer is maximizing his/her utility for a given income, the:

Exhibit 6-5 Marginal utility data for desserts Refer to Exhibit 6-5. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?

Eric is maximizing his total utility through his choices of two goods: clothes and food. His marginal utility of clothes is 60 and his marginal utility of food is 12. The price of clothes is $20. What must be the price of food?

If a consumer is choosing the optimal combinations of two goods X and Y, and then the price of good Y decreases, this causes:

Exhibit 6-6 Marginal utility for data for clothes and amusement Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true ?

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. If the price of a sandwich is $1 and the price of a soda is $1, Marian should spend her first dollar on a and her second dollar on a .

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

Quiz 6: Consumer Choice Theory

Exhibit 6-6 Marginal utility for data for clothes and amusement Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?

If a consumer wishes to maximize satisfaction given limited income and MUx/Px

Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:

Exhibit 6-6 Marginal utility for data for clothes and amusement Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is:

If Allison's marginal utility of her 100th dollar of income is greater than Brad's marginal utility of his 10th dollar, then we can conclude:

Consumer equilibrium exists when:

Consider a consumer who spends all income on only two goods: pizza and soda. An extra slice of pizza would give the consumer 60 extra utils, while an extra can of soda would give the consumer 20 extra utils. Pizza costs $3 per slice, and soda costs $1 per can. In this situation, the consumer:

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy ____ sandwiches and ____ sodas.

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. Diminishing marginal utility for sandwiches sets in after the ____ sandwich.

Which of the following statements is true ?

Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.

If a consumer is maximizing his/her utility for a given income, the:

Exhibit 6-5 Marginal utility data for desserts Refer to Exhibit 6-5. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?

Eric is maximizing his total utility through his choices of two goods: clothes and food. His marginal utility of clothes is 60 and his marginal utility of food is 12. The price of clothes is $20. What must be the price of food?

If a consumer is choosing the optimal combinations of two goods X and Y, and then the price of good Y decreases, this causes:

Exhibit 6-6 Marginal utility for data for clothes and amusement Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true ?

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. If the price of a sandwich is $1 and the price of a soda is $1, Marian should spend her first dollar on a ____ and her second dollar on a ____.

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

If a consumer wishes to maximize satisfaction given limited income and MU_x/P_x

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy sandwiches and sodas.

Exhibit 6-7 Marginal utility for sandwiches and sodas Refer to Exhibit 6-7. If the price of a sandwich is $1 and the price of a soda is $1, Marian should spend her first dollar on a and her second dollar on a .