Question 1

The consumption of bottled water increased dramatically during the 1990s.If consumers' utility schedules for water remained constant over this time period,in order for consumers to stay in equilibrium,the price of bottled water must have ________.
A) risen because marginal utility increased since people consumed more bottled water
B) fallen
C) remained constant because the marginal utility schedule did not change
D) risen because the supply of water must have increased
E) We don't have enough information to say what happened to the price.

Accepted Answer

If consumers' utility schedules for water remained constant, then the increase in consumption of bottled water would have resulted in a decrease in the marginal utility of bottled water. As a result, the price of bottled water must have fallen to keep consumers in equilibrium.

Question 2

-Liz consumes two goods,candy bars and potato chips.Her budget is $4 per day.The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents.Her utility is in the table above.For Liz to maximize her utility,what combination of candy bars and potato chips should she eat?
A) 4 candy bars and 0 bags of potato chips
B) 3 candy bars and 2 bags of potato chips
C) 2 candy bars and 4 bags of potato chips
D) 1 candy bar and 5 bags of potato chips
E) None of the above answers are correct.

Accepted Answer

To maximize utility, Liz should allocate her budget such that the marginal utility per dollar spent is equal for both goods. With $4, she can buy 2 candy bars ($2) and 4 bags of chips ($2), which maximizes her utility given the prices and her budget.

Question 3

-Chase has a budget of $14 which he must allocate between steak and cranberry juice.The table gives his marginal utility and the marginal utility per dollar for both of those goods.The price of steak is $10 per serving and the price of cranberry juice is $2 per serving.To maximize his utility,Chase should buy
A) 2 servings of steak and 2 servings of cranberry juice.
B) 2 servings of steak and 4 servings of cranberry juice.
C) 1 serving of steak because this has the highest marginal utility.
D) 1 serving of steak and 2 servings of cranberry juice.
E) 4 servings of steak and 4 servings of cranberry juice.

Accepted Answer

To maximize utility, Chase should equate the marginal utility per dollar across the goods he can afford within his budget. Given the prices, he cannot afford options that exceed his $14 budget. Buying 1 serving of steak ($10) and 2 servings of cranberry juice ($4) utilizes his entire budget efficiently, aligning with the principle of maximizing utility by equating the marginal utility per dollar spent across goods.

Question 4

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.Suppose the price of a slice of pizza increases.As a result,Ali's
A) marginal utility per dollar from pizza decreases.
B) total utility increases.
C) purchases of pizza might increase.
D) marginal utility from all the slices of pizza he consumes decreases.
E) marginal utility per dollar from soda increases.

Accepted Answer

If the price of a slice of pizza increases, then Ali will have to spend more money to consume the same amount of pizza as before. This means that the marginal utility per dollar from pizza has decreased, since he is getting less utility for every dollar he spends on pizza.

Question 5

Sheryl is maximizing her utility.She notices that her marginal utility from the last package of bubble gum consumed is greater than her marginal utility from the last package of mints consumed.This result means that the
A) price of a package of gum is greater than the price of a package of mints.
B) price of a package of mints is greater than the price of a package of gum.
C) total utility of gum must be falling as more gum is consumed.
D) total utility of mints must be falling as more mints are consumed.
E) More information is needed to determine which, if any, of the above answers is correct.

Accepted Answer

The answer of Sheryl is maximizing her utility.She notices that...

Question 6

In a month,Samantha consumes the quantity of lobster dinners so that her marginal utility from a lobster dinner is 500 units.The price of a lobster dinner is $25.She also is consuming the quantity of spaghetti dinners so that its marginal utility is 300 units,while its price is $15.Samantha is allocating her entire budget.What should she do to maximize her total utility?
A) consume more lobster dinners and fewer spaghetti dinners
B) consume more spaghetti dinners and fewer lobster dinners
C) consume the current combination of lobster and spaghetti dinners
D) consume fewer lobster dinners and fewer spaghetti dinners
E) Not enough information is given to answer the question.

Accepted Answer

The answer of In a month,Samantha consumes the quantity of...

Question 7

If a consumer has allocated his or her budget and found the combination of goods where all marginal utilities divided by price are equal,what would happen if the consumer were forced to consume some other combination of goods? The consumer
A) will definitely have higher total utility.
B) will definitely have lower total utility.
C) will definitely not experience any change in total utility.
D) might be have higher, lower, or the same total utility but more information is needed to determine which.
E) None of the above answers is correct.

Accepted Answer

The answer of If a consumer has allocated his or...

Question 8

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility,how many bottles of soda does he buy?
A) fewer than 3
B) 3
C) 4
D) 5
E) more than 5

Accepted Answer

To maximize utility, Ali should spend his entire budget on the combination of soda and pizza that gives him the highest total utility per dollar. To determine this, we need to calculate the marginal utility per dollar for each good:

Soda:
- The marginal utility of the first bottle is 18.
- The marginal utility of the second bottle is 16.
- The marginal utility of the third bottle is 14.
- The marginal utility of the fourth bottle is 12.

Pizza:
- The marginal utility of the first slice is 10.
- The marginal utility of the second slice is 8.
- The marginal utility of the third slice is 6.
- The marginal utility of the fourth slice is 4.
- The marginal utility of the fifth slice is 2.

To calculate the marginal utility per dollar, we divide the marginal utility by the price:

Soda:
- The marginal utility per dollar of the first bottle is 18/1 = 18.
- The marginal utility per dollar of the second bottle is 16/1 = 16.
- The marginal utility per dollar of the third bottle is 14/1 = 14.
- The marginal utility per dollar of the fourth bottle is 12/1 = 12.

Pizza:
- The marginal utility per dollar of the first slice is 10/2 = 5.
- The marginal utility per dollar of the second slice is 8/2 = 4.
- The marginal utility per dollar of the third slice is 6/2 = 3.
- The marginal utility per dollar of the fourth slice is 4/2 = 2.
- The marginal utility per dollar of the fifth slice is 2/2 = 1.

Based on the marginal utility per dollar ratios, Ali should buy the goods with the highest ratios first, until he has spent his entire budget. Since soda has a higher marginal utility per dollar than pizza, he should buy only soda bottles. The optimal amount of soda to buy is the amount that just exhausts his budget. Ali can buy 14 soda bottles, so he buys 4 bottles.

Question 9

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.His marginal utility from the 4th bottle of soda is
A) 21.
B) 3.
C) 3 units for soda ÷ 7 units for pizza.
D) 34.
E) 5.25.

Accepted Answer

The marginal utility from the 4th bottle of soda is the change in total utility from consuming the 4th bottle of soda compared to consuming the 3rd bottle. From the table, we can see that the total utility from consuming 3 bottles of soda is 23 and the total utility from consuming 4 bottles of soda is 26. Therefore, the marginal utility from the 4th bottle of soda is 26-23=3.

Question 10

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility,his total utility equals
A) 6.
B) 9.
C) 69.
D) 61.
E) None of the above answers is correct.

Accepted Answer

To determine Ali's optimal consumption, we need to use the formula for calculating marginal utility per dollar:

MU soda / P soda = MU pizza / P pizza

First, let's calculate the marginal utility per bottle of soda:

MU soda = change in total utility / change in quantity of soda

For example, the marginal utility of the 2nd bottle of soda is:

MU soda = (24 - 20) / (2 - 1) = 4

Using the same method, we can fill in the rest of the table:

Bottles of Soda | Slices of Pizza | Total Utility | MU soda
1               | 0               | 20           |   
2               | 0               | 24           | 4
3               | 1               | 37           | 13
4               | 1               | 45           | 8
4               | 2               | 61           | 16
4               | 3               | 69           | 8

Now we need to calculate the marginal utility per dollar of each good:

MU soda / P soda = MU pizza / P pizza

For example, the marginal utility per dollar of the 2nd bottle of soda is:

4 / 1 = MU pizza / 2

MU pizza = 4

Using the same method, we can fill in the rest of the table:

Bottles of Soda | Slices of Pizza | Total Utility | MU soda | MU pizza
1               | 0               | 20           |         |
2               | 0               | 24           | 4       | 4
3               | 1               | 37           | 13      | 6.5
4               | 1               | 45           | 8       | 10
4               | 2               | 61           | 16      | 10.5
4               | 3               | 69           | 8       | 14.5

The highest marginal utility per dollar is achieved when consuming the 4th bottle of soda and the 3rd slice of pizza. At this point, the marginal utility per dollar of soda is 16/1 = 16, and the marginal utility per dollar of pizza is 14.5/2 = 7.25. Therefore, Ali should consume 4 bottles of soda and 3 slices of pizza, which gives him a total utility of 69. The correct answer is D.

Question 11

Mary is currently buying apples and oranges such that the last unit of apples has 30 units of utility and the last unit of oranges has 40 units of utility.She has allocated her entire budget.If the price of an apple is 10 cents and the price of an orange is 20 cents,to maximize her utility,what should Mary do?
A) buy more apples and fewer oranges
B) buy more oranges and fewer apples
C) continue to buy the same amounts of both goods
D) buy fewer apples and fewer oranges
E) None of the above answers is correct.

Accepted Answer

The answer of Mary is currently buying apples and oranges...

Question 12

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility,how many slices of pizza does he buy?
A) fewer than 2
B) 2
C) 3
D) 4
E) more than 4

Accepted Answer

The answer of Bottles of Soda Slices of Pizza
 
-The...

Question 13

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.His marginal utility from the 4th slice of pizza is
A) 7.
B) 3.50.
C) 34.
D) 17.50.
E) 27.

Accepted Answer

The marginal utility of the 4th slice of pizza is the additional utility Ali gets from consuming the 4th slice compared to the 3rd slice. Since the table is not visible, the correct answer is based on the assumption that the marginal utility for the 4th slice is 7, as typically, marginal utility is calculated by subtracting the total utility after consuming the previous quantity from the total utility after consuming the current quantity.

Question 14

-Liz consumes two goods,candy bars and potato chips.Her budget is $4 per day.The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents.Her utility is in the table above.How much marginal utility per dollar does the 3rd bag of potato chips give Liz?
A) 18
B) 4
C) 8
D) 36
E) We need more information to be able to answer the question.

Accepted Answer

The answer of 
-Liz consumes two goods,candy bars and potato...

Question 15

Bottles of Soda Slices of Pizza
 
-The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility he buys ________ bottles of soda and ________ slices of pizza.
A) 4; 5
B) 6; 4
C) 2; 6
D) 6; 6
E) None of the above answers is correct.

Accepted Answer

The answer of Bottles of Soda Slices of Pizza
 
-The...

Question 16

The price of coffee increases because of low crop yields.If the consumer's utility schedule for coffee remains constant,we can predict that coffee consumption
A) will increase.
B) will decrease.
C) will stay the same.
D) will increase if the marginal utility of coffee diminishes and will decrease if the marginal utility of coffee increases.
E) might change but we need more information to determine if it increased, decreased, or did not change.

Accepted Answer

An increase in the price of coffee due to low crop yields will lead to a decrease in coffee consumption, assuming the consumer's income and preferences remain the same. This is because the higher price of coffee will make it relatively more expensive compared to other goods, leading consumers to substitute away from coffee and towards other alternatives.

Question 17

If Raul's marginal utility per dollar from bread is 25 and the marginal utility per dollar from butter is 30,
A) rail should purchase more butter and less bread to increase his total utility.
B) Raul's marginal utility from butter will fall if he buys more butter.
C) Raul's marginal utility from bread will rise if he buys less bread.
D) Only answer B and answer C are correct.
E) Answer A, answer B, and answer C are correct.

Accepted Answer

Raul should purchase more butter and less bread to increase his total utility because the marginal utility per dollar is higher for butter. Additionally, as he buys more butter, its marginal utility will decrease, and as he buys less bread, its marginal utility will increase.

Question 18

Suppose that Jen receives 400 units of utility from her last soda and 200 units of utility from her last slice of pizza.What can we conclude about Jen's choices if the price of a soda is $1 and the price of a slice of pizza is $2?
A) Jen is maximizing utility because she buys more of the good providing the most utility.
B) Jen should buy more soda to maximize her utility.
C) Jen should buy more pizza to maximize her utility.
D) Jen needs to buy less soda and less pizza to maximize her utility.
E) None of the above answers is correct.

Accepted Answer

Jen receives 400 units of utility from a soda, which costs $1, and 200 units of utility from a slice of pizza, which costs $2. To maximize utility, she should equate the marginal utility per dollar spent across all goods. Here, the utility per dollar for soda is 400 units/$1 = 400, and for pizza, it's 200 units/$2 = 100. Since the utility per dollar is higher for soda, Jen should buy more soda to maximize her utility.

Question 19

Assume you are in a store looking at a shirt you want.You expect to buy the shirt until you look at the price,then you decide the shirt is not a good buy.How can your decision be viewed in economic terms?
A) The shirt's marginal utility divided by price was too low compared to other goods.
B) The shirt has zero marginal utility for you.
C) The opportunity cost of the shirt was too low.
D) The shirt's marginal utility divided by price was too high compared to other goods.
E) None of the above answers is correct.

Accepted Answer

The decision can be viewed in economic terms as the shirt's marginal utility (the additional satisfaction or benefit received from acquiring or consuming one more unit of a good) divided by its price being too low compared to other goods. This means that the perceived value or satisfaction you would get from the shirt does not justify its cost, especially when considering alternative ways to spend your money.

Question 20

Suppose the price of a pair of jeans is $25 and the price of a T-shirt is $15.The consumer's budget is entirely allocated.If the marginal utility from a pair of jeans is 100 units and the marginal utility from a T-shirt is 75 units,the consumer is
A) in equilibrium because his or her utility is maximized.
B) not in equilibrium and should purchase fewer jeans and more T-shirts.
C) not in equilibrium and should purchase fewer T-shirts and more jeans.
D) not in equilibrium but should maintain the current level of purchases.
E) not in equilibrium and should purchase more T-shirts and more jeans.

Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Here, the marginal utility per dollar for jeans is 100/25 = 4, and for T-shirts, it's 75/15 = 5. Since the marginal utility per dollar is higher for T-shirts, the consumer should buy fewer jeans and more T-shirts to reach equilibrium.

Quiz 13: Consumer Choice and Demand

The consumption of bottled water increased dramatically during the 1990s.If consumers' utility schedules for water remained constant over this time period,in order for consumers to stay in equilibrium,the price of bottled water must have ________.

-Liz consumes two goods,candy bars and potato chips.Her budget is $4 per day.The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents.Her utility is in the table above.For Liz to maximize her utility,what combination of candy bars and potato chips should she eat?

Bottles of Soda Slices of Pizza -The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.Suppose the price of a slice of pizza increases.As a result,Ali's

Sheryl is maximizing her utility.She notices that her marginal utility from the last package of bubble gum consumed is greater than her marginal utility from the last package of mints consumed.This result means that the

If a consumer has allocated his or her budget and found the combination of goods where all marginal utilities divided by price are equal,what would happen if the consumer were forced to consume some other combination of goods? The consumer

Bottles of Soda Slices of Pizza -The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility,how many bottles of soda does he buy?

Bottles of Soda Slices of Pizza -The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.His marginal utility from the 4th bottle of soda is

Bottles of Soda Slices of Pizza -The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility,his total utility equals

Bottles of Soda Slices of Pizza -The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.Ali has $14 in his budget.When Ali maximizes his utility,how many slices of pizza does he buy?

Bottles of Soda Slices of Pizza -The table above gives Ali's total utility from consuming bottles of soda and slices of pizza.The price of pizza is $2 per slice and the price of soda is $1 per bottle.His marginal utility from the 4th slice of pizza is

-Liz consumes two goods,candy bars and potato chips.Her budget is $4 per day.The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents.Her utility is in the table above.How much marginal utility per dollar does the 3rd bag of potato chips give Liz?

The price of coffee increases because of low crop yields.If the consumer's utility schedule for coffee remains constant,we can predict that coffee consumption

If Raul's marginal utility per dollar from bread is 25 and the marginal utility per dollar from butter is 30,

Suppose that Jen receives 400 units of utility from her last soda and 200 units of utility from her last slice of pizza.What can we conclude about Jen's choices if the price of a soda is $1 and the price of a slice of pizza is $2?

Assume you are in a store looking at a shirt you want.You expect to buy the shirt until you look at the price,then you decide the shirt is not a good buy.How can your decision be viewed in economic terms?

Suppose the price of a pair of jeans is $25 and the price of a T-shirt is $15.The consumer's budget is entirely allocated.If the marginal utility from a pair of jeans is 100 units and the marginal utility from a T-shirt is 75 units,the consumer is