Question 1

Beginning at the vertical axis intercept,as a consumer moves down the budget line,she will find that
A)the marginal utility per dollar spent on the vertical axis good decreases
B)the marginal utility per dollar spent on the vertical axis good increases
C)the marginal utility per dollar spent on the horizontal axis good increases
D)the marginal utilities per dollar spent on both goods increase
E)the marginal utilities per dollar spent on both goods remain constant along that particular budget line

Accepted Answer

The answer of Beginning at the vertical axis intercept,as a...

Question 2

If all consumers satisfy economists' assumptions regarding utility,then
A)they will each choose a consumption bundle that is inside the budget line
B)everyone will choose the same consumption bundle
C)everyone will have the same budget line
D)all consumers will react in the same way to a price change
E)each person will choose a consumption bundle on his or her budget line

Accepted Answer

If all consumers satisfy economists' assumptions regarding utility, then they will maximize their utility subject to their budget constraint by choosing a consumption bundle on their budget line. Since each person will have their own income and preferences, each person's budget line and optimal consumption bundle will be different. Therefore, the best choice is E - each person will choose a consumption bundle on his or her budget line.

Question 3

A utility-maximizing consumer will choose a collection of goods
A)represented by a point below her budget line
B)represented by a point above her budget line
C)for which the marginal utility from each good is the same
D)for which the marginal utility divided by the price is the same or each good
E)for which the total utility from each good is the same

Accepted Answer

A utility-maximizing consumer will choose a collection of goods for which the marginal utility divided by the price is the same for each good. This is because the consumer will want to allocate their budget in a way that maximizes their utility per dollar spent. Therefore, they will continue to purchase goods until the marginal utility per dollar spent is equal across all goods. This is known as the principle of equal marginal utility per dollar spent.

Question 4

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/4.To maximize total utility,she should
A)buy more pizzas and fewer blouses
B)buy fewer pizzas and more blouses
C)continue to buy the same quantities of pizza and blouses
D)spend more time consuming pizza
E)spend more time buying blouses

Accepted Answer

To maximize total utility, Magda should equalize the marginal utility per dollar spent on each good. Currently, the marginal utility per dollar for pizza is higher than for blouses (1/4 vs 1/3), so she should buy more pizzas and fewer blouses.

Question 5

Beginning at the horizontal axis intercept,as a consumer moves upward along the budget line,he will find that
A)the marginal utility per dollar spent on the vertical axis good increases
B)the marginal utility per dollar spent on the horizontal axis good increases
C)the marginal utility per dollar spent on the horizontal axis good decreases
D)the marginal utilities per dollar spent on both goods increase
E)the marginal utilities per dollar spent on both goods remain constant along that particular budget line

Accepted Answer

As the consumer moves upward along the budget line, the amount of the vertical axis good decreases while the amount of the horizontal axis good increases. Since the consumer has a fixed income, he can only increase the horizontal axis good at the expense of the vertical axis good. Therefore, the marginal utility per dollar spent on the horizontal axis good increases because the consumer is getting more satisfaction from each additional dollar spent on that good. The marginal utility per dollar spent on the vertical axis good decreases because the consumer is getting less satisfaction from each dollar spent on that good.

Question 6

A utility-maximizing consumer will
A)consume at a point on her budget line
B)consume each good until its marginal utility is zero
C)adjust her consumption pattern so that the marginal utilities of all goods are equal
D)consume more of a good only if its price rises
E)stop consuming any good whose price rises

Accepted Answer

A utility-maximizing consumer will consume at a point on her budget line where the marginal utility per dollar spent on all goods is equal. This is achieved by comparing the marginal utility per dollar of each good and adjusting the consumption of each good until the optimal point is reached where the budget is fully consumed. Therefore, choice A is the best answer as it correctly reflects this optimal point. Choices B, C, D, and E do not reflect the optimal consumption pattern for a utility-maximizing consumer.

Question 7

The combination of two goods at which total utility is maximized must lie somewhere on the consumer's budget line.

Accepted Answer

This statement is true. The consumer's total utility will be maximized where the marginal utility per dollar spent on each good is equal. This point will be on the budget line, which represents all the combinations of the two goods that the consumer can afford. Any combination of goods outside the budget line will be beyond the consumer's budget constraint, while any combination inside the budget line will be inefficient as the consumer can consume more of at least one of the goods without sacrificing the other.

Question 8

Ignoring all other goods,if Yong's marginal utility per pound of bread is 10 utils and per pound of cheese is 30 utils,his
A)total utility would be maximized if the price per pound of cheese is triple the price per pound of bread
B)total utility could be increased by buying more bread and less cheese
C)total utility could be increased by buying more cheese and less bread
D)total utility would be maximized if the price per pound of cheese is one-third the price per pound of bread
E)marginal utility would be maximized if the price per pound of cheese is one-third the price per pound of bread

Accepted Answer

To maximize total utility, the ratio of marginal utility to price should be equal for all goods. If the marginal utility of cheese is 30 utils and bread is 10 utils, the price of cheese should be three times the price of bread to equalize the utility per dollar spent.

Question 9

If MUₓ/Pₓ is less than MUᵧ/Pᵧ,then the consumer should consume more of X and less of Y.

Accepted Answer

If MUₓ/Pₓ is less than MUᵧ/Pᵧ, the consumer should consume more of Y and less of X to maximize utility, as the marginal utility per dollar spent is higher for Y.

Question 10

If bread costs $1 per pound and meat costs $4 per pound,a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utility only if the marginal utility per pound of bread equals
A)4 utils
B)5 utils
C)10 utils
D)20 utils
E)80 utils

Accepted Answer

The answer of If bread costs $1 per pound and...

Question 11

Lin is maximizing total utility while consuming food and clothing.Her marginal utilities of food and clothing are 50 utils and 25 utils,respectively.If clothing is priced at $10 per unit,the price of a unit of food
A)must be rising
B)must be falling
C)must equal $10 as well
D)must equal $20
E)cannot be determined without additional information.

Accepted Answer

To maximize utility, the ratio of marginal utility to price should be equal for all goods. Therefore, 50/P_food = 25/10, solving gives P_food = $20.

Question 12

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/2.To maximize total utility,she should
A)buy more pizzas and fewer blouses
B)buy fewer pizzas and more blouses
C)continue to buy the same quantities of pizza and blouses
D)spend more time consuming pizza
E)spend more time buying blouses

Accepted Answer

The answer of Suppose that the price of a pizza...

Question 13

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.What is her marginal utility per dollar spent on the fourth hamburger?
A)15
B)4
C)3
D)20
E)12

Accepted Answer

The marginal utility per dollar is calculated by dividing the marginal utility of the good by its price. If the marginal utility of the fourth hamburger is 15 (as implied by the choices), then the marginal utility per dollar is 15/5 = 3.

Question 14

If Sally maximizes her total utility by allocating time between two different activities,she will select the combination at which the marginal utility per hour spent is the same in both activities.

Accepted Answer

This is known as the principle of equal marginal utility per dollar. When a consumer allocates time or money between two different activities, they will achieve maximum total utility when the marginal utility per hour spent is the same in both activities.

Question 15

Suzy spends all of her income on potato chips and textbooks.To maximize her total utility,she should
A)allocate her income so that the marginal utilities of potato chips and textbooks are equal
B)allocate her income so that the marginal utilities per dollar spent on potato chips and textbooks are equal
C)change her eating habits
D)choose a consumption point that is inside her budget constraint
E)allocate her income so that the total utilities of potato chips and textbooks are equal

Accepted Answer

In order to maximize her total utility, Suzy should allocate her income in such a way that she gets the same marginal utility per dollar spent on both potato chips and textbooks. This ensures that she is getting the maximum satisfaction per dollar spent on each good, and therefore maximizing her overall satisfaction. Allocating her income in a way that just gives her the same marginal utility for each good (Option A) does not take into account the price of each good, which is important for making budgetary decisions. Option C is not a relevant choice for maximizing utility, as it does not relate directly to the allocation of income. Option D is not correct, as the optimal consumption point will generally lie on the budget constraint itself, not inside of it. Option E is not a relevant choice for maximizing utility, as total utilities cannot be directly compared across goods without normalization.

Question 16

The marginal utility per dollar spent on a good represents the
A)satisfaction received for each dollar spent on the last unit consumed
B)total satisfaction received from consuming a certain number of units of that good
C)dollar value of average utility
D)change in price due to a one-unit increase in total utility
E)price paid for the last unit of utility

Accepted Answer

Marginal utility per dollar spent on a good represents the additional satisfaction that a consumer gets from spending one more dollar on the last unit of the good they consume. It is calculated by dividing the marginal utility of the good by its price. Therefore, option A, satisfaction received for each dollar spent on the last unit consumed, is the best choice for this definition.

Question 17

Among all the combinations of goods attainable by a consumer facing a budget constraint,the one that maximizes total utility is the one that
A)maximizes marginal utility per dollar spent on each good
B)maximizes marginal utility per pound,or other physical quantity,of each good
C)equates the marginal utilities per dollar spent on each good
D)equates the marginal utilities per pound,or other physical quantity,of each good
E)drives the marginal utility of each good to zero

Accepted Answer

The consumer maximizes total utility by allocating their budget such that the marginal utility per dollar spent is equal across all goods. This ensures that the last dollar spent on each good provides the same additional utility, optimizing the overall satisfaction within the budget constraint.

Question 18

Stanley receives the following marginal utilities from the first four car washes that he buys each year,respectively: 20,15,10,and 5.If each car wash sells for $10,then the marginal utility per dollar spent on the third car wash is
A)10
B)4.5
C)1
D)45
E)5

Accepted Answer

The marginal utility per dollar spent is calculated by dividing the marginal utility by the price. For the third car wash, the marginal utility is 10, and the price is $10, so the marginal utility per dollar is 10/10 = 1.

Question 19

Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a warm-up suit is four times the price per pair of shoes.Then,in order to maximize total utility,Jeffrey should
A)buy four times as many warm-up suits as pairs of running shoes
B)buy four times as many pairs of running shoes as warm-up suits
C)divide his income equally between warm-up suits and running shoes
D)buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes
E)buy both items until the marginal utility of a pair of running shoes is four times the marginal utility of a warm-up suit

Accepted Answer

To maximize total utility, Jeffrey should allocate his income in a way that equalizes the marginal utility per dollar spent on both warm-up suits and running shoes. Let's assume that the price of a pair of running shoes is $x. According to the problem, the price of a warm-up suit is $4x.

Jeffrey should continue buying both items until the marginal utility per dollar spent on warm-up suits is four times the marginal utility per dollar spent on running shoes. At that point, buying an additional unit of a warm-up suit will provide four times more utility than buying an additional pair of running shoes.

Therefore, option D is the best choice since it states that Jeffrey should buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes.

Question 20

For dessert,Mac has the choice between cheesecake and apple pie.The cheesecake has a marginal utility of 50 and a price of $5,and the apple pie has a marginal utility of 30 and a price of $3.Therefore,Mac should buy
A)the cheesecake since the marginal utility is greater
B)the apple pie because its price is lower
C)two servings of apple pie and no cheesecake
D)four servings of cheesecake
E)either the apple pie or the cheesecake,it makes no difference

Accepted Answer

The answer of For dessert,Mac has the choice between cheesecake...

Quiz 6: Consumer Choice

Beginning at the vertical axis intercept,as a consumer moves down the budget line,she will find that

If all consumers satisfy economists' assumptions regarding utility,then

A utility-maximizing consumer will choose a collection of goods

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/4.To maximize total utility,she should

Beginning at the horizontal axis intercept,as a consumer moves upward along the budget line,he will find that

A utility-maximizing consumer will

The combination of two goods at which total utility is maximized must lie somewhere on the consumer's budget line.

Ignoring all other goods,if Yong's marginal utility per pound of bread is 10 utils and per pound of cheese is 30 utils,his

If MUₓ/Pₓ is less than MUᵧ/Pᵧ,then the consumer should consume more of X and less of Y.

If bread costs $1 per pound and meat costs $4 per pound,a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utility only if the marginal utility per pound of bread equals

Lin is maximizing total utility while consuming food and clothing.Her marginal utilities of food and clothing are 50 utils and 25 utils,respectively.If clothing is priced at $10 per unit,the price of a unit of food

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/2.To maximize total utility,she should

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.What is her marginal utility per dollar spent on the fourth hamburger?

If Sally maximizes her total utility by allocating time between two different activities,she will select the combination at which the marginal utility per hour spent is the same in both activities.

Suzy spends all of her income on potato chips and textbooks.To maximize her total utility,she should

The marginal utility per dollar spent on a good represents the

Among all the combinations of goods attainable by a consumer facing a budget constraint,the one that maximizes total utility is the one that

Stanley receives the following marginal utilities from the first four car washes that he buys each year,respectively: 20,15,10,and 5.If each car wash sells for $10,then the marginal utility per dollar spent on the third car wash is

Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a warm-up suit is four times the price per pair of shoes.Then,in order to maximize total utility,Jeffrey should

For dessert,Mac has the choice between cheesecake and apple pie.The cheesecake has a marginal utility of 50 and a price of $5,and the apple pie has a marginal utility of 30 and a price of $3.Therefore,Mac should buy