Question 1

You have five hours left to study for two exams tomorrow.The relationship between hours of study and test scores is as follows:

Use the rule for determining optimal purchases to allocate your time, where each point is one "util" of utility.

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Question 2

Plot the demand for caviar given the following information on quantity consumed and total utility; then explain why caviar sells for such a high

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Question 3

Suppose the price of butter falls because milk price supports are removed.Will people's tastes shift away from margarine and toward butter?

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Question 4

Use consumer indifference curves and budget lines to show the optimal consumption curves for a normal good and for an inferior good.(Use two graphs.) Be sure your graphs are completely and correctly labeled.

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Question 5

Draw the point of consumer equilibrium from an indifference map and budget line.Explain why this is the point of optimization.Be sure your diagram is fully and correctly labeled.

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Question 6

Table 5-3 
-Using Table 5-3, graph the marginal utility curve.

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-Using Table 5-3, graph the...

Question 7

What is the relationship between marginal utility and an individual demand curve?

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Question 8

Bob values the utility of a single scoop of Baskin-Robbins ice cream at $1.50.A double scoop gives total utility of $2.25, while a triple scoop yields $2.60.Baskin-Robbins charges $1.35 for a single, $1.95 for a double, and $2.35 for a triple.How many scoops will Bob buy?

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Question 9

How do you calculate consumer's surplus? What happens to consumer's surplus when the price of a commodity rises?

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Question 10

Alice has $10 to spend on wine and cheese.If wine is $2.50 a glass and cheese $2, draw the corresponding budget line.Then draw three indifference curves, one showing the amount of wine and cheese Alice would choose, one showing less preferred combinations of wine and cheese, and the last showing preferred but unaffordable combinations.

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Question 11

Figure 5-1
 
-In Figure 5-1 from the text, if the price of pizzas is $8:
a.how many pizzas will the consumer purchase?
b.what is the payment for the optimal number of pizzas?
c.how much consumer surplus will the consumer receive?

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-In Figure 5-1 from the...

Question 12

If marginal net utility is positive, the consumer must be buying too small a quantity to maximize total net utility.Why?

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Question 13

What is marginal analysis?

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Question 14

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

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Question 15

Use consumer indifference curves and budget lines to illustrate the effects of an increase in income for a normal good and an inferior good (use two graphs).Be sure your diagrams are fully and correctly labeled.

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Question 16

Draw individual demands for caviar for Al, Barbara, Chuck, and Denise where Al's demand is relatively inelastic, Barbara's is elastic, Chuck's is upward sloping, and Denise refuses to eat caviar at any price.Then draw the corresponding market demand.

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Question 17

If I use 1,000 gallons of water a month at a price of $.01 a gallon, is my consumer surplus likely to be large or small?
 Explain.

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Question 18

Define the following terms.Give a complete and precise definition in one sentence.
a.total utility
b.marginal utility
c.consumer's surplus
d."law" of demand

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Question 19

Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?

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Question 20

Use the law of diminishing marginal utility to explain why Domino's and Pizza Hut allow the purchase of a second pizza for only $4 when one pays full price (around $10) for the first pizza.Why not simply charge $7 a pizza instead?

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Quiz 5: Consumer Choice: Individual and Market Demand

You have five hours left to study for two exams tomorrow.The relationship between hours of study and test scores is as follows: Use the rule for determining optimal purchases to allocate your time, where each point is one "util" of utility.

Plot the demand for caviar given the following information on quantity consumed and total utility; then explain why caviar sells for such a high price