Question 1

Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a pound and the price of shrimp is $5 a pound. Casey can buy a maximum of ________ pounds of fish or a maximum of ________ pounds of shrimp.
A)30; 50
B)50; 30
C)15; 30
D)30; 15

Accepted Answer

If Casey spent the entire $150 on fish, he could buy 50 pounds ($150/$3 = 50)and if he spent the entire $150 on shrimp, he could buy 30 pounds ($150/$5 = 30).

Question 2

Cory gets 18, 23, and 25 units worth of total utility from consuming 10, 11, and 12 raw oysters, respectively, and the price per oyster is 25 cents. Thus, one can infer that Cory:
A)is not maximizing his utility.
B)is experiencing diminishing marginal utility.
C)should not consume any more oysters.
D)has consumed too many oysters.

Accepted Answer

The marginal utility of consuming an additional oyster gets smaller as more oysters are consumed. The marginal utility is 5 for the 11th oyster (total utility goes from 18 to 23)and 2 for the 12th oyster (total utility goes from 23 to 25), which is consistent with the law of diminishing marginal utility.

Question 3

Refer to the accompanying table. The marginal utility of consuming apples is: $$\begin{array} { | c | c | } 
\hline \text { Number of Apples } & \begin{array} { c } 
\text { Tatal } \
\text { Utility }
\end{array} \
\hline 1 &20 \
\hline 2 & 35 \
\hline 3 & 45 \
\hline 4 & 50 \
\hline 5 & 45 \
\hline
\end{array}$$
A)constant.
B)first increasing, but decreasing after the fourth apple.
C)decreasing after the first apple.
D)constantly increasing.

Accepted Answer

The marginal utility, which is the additional satisfaction or utility gained from consuming an additional unit of a good, decreases after the first apple. This is evident from the total utility increasing by smaller amounts with each additional apple consumed, indicating diminishing marginal utility.

Question 4

Refer to the accompanying figure. When Jeff goes from watching 3 to 4 movies a day, his total utility: 
A)increases.
B)decreases.
C)does not change.
D)gets close to zero.

Accepted Answer

Since Jeff's marginal utility from the 4ᵗʰ movie is positive, Jeff's total utility will increase when he goes from watching 3 to 4 movies.

Question 5

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Dusty can buy a maximum of ________ loaves of bread or a maximum of ________ jars of peanut butter.
A)20; 10
B)15; 15
C)10; 20
D)10; 5

Accepted Answer

If Dusty spent all of his income on bread, he could buy 20 loaves ($30/$1.50 = 20)and if he spent all of his income on peanut butter, he could buy 10 jars ($30/$3 = 10).

Question 6

According to the law of diminishing marginal utility:
A)as you consume less of something, your total utility will decrease.
B)as you consume less of something, your marginal utility from consuming that good will increase.
C)you should never consume more of something if your marginal utility is decreasing.
D)if your total utility is increasing as you consume more of something, then your marginal utility must be increasing as well.

Accepted Answer

The laws of diminishing marginal utility indicates that there is a negative relationship between consumption and marginal utility, so that as less of something is consumed, marginal utility increases.

Question 7

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. At the original income of $30, if the price of a loaf of bread decreased to $1 and the price of a jar of peanut butter increased to $5, then Dusty could buy a maximum of ________ loaves of bread or a maximum of ________ jars of peanut butter.
A)20; 5
B)5; 20
C)30; 6
D)6; 30

Accepted Answer

If Dusty spent the entire $30 on bread, he could buy 30 loaves ($30/$1 = 30)and if he spent the entire $30 on peanut butter, he could buy 6 jars ($30/$5 = 6).

Question 8

Refer to the accompanying figure. The marginal utility of the 5?? apple is:  
$$\begin{array} { | c | c | } 
\hline \text { Number of Apples } & \begin{array} { c } 
\text { Tatal } \
\text { Utility }
\end{array} \
\hline 1 & 20\
\hline 2 & 35 \
\hline 3 & 45 \
\hline 4 & 50 \
\hline 5 & 45 \
\hline
\end{array}$$
A)-5.
B)0.
C)5.
D)45.

Accepted Answer

The marginal utility of the 5th apple is calculated by subtracting the total utility of 4 apples from the total utility of 5 apples, which is 45 - 50 = -5.

Question 9

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Suppose that at the original income of $30, the price of a loaf of bread increased to $3 and the price of a jar of peanut butter decreased to $2. Dusty can buy a maximum of ________ loaves of bread or a maximum of ________ jars of peanut butter.
A)10; 15
B)15; 10
C)20; 15
D)15; 20

Accepted Answer

If Dusty spent the entire $30 on bread, he could buy 10 loaves ($30/$3 = 10)and if he spent the entire $30 on peanut butter, he could buy 15 jars ($30/$2 = 15).

Question 10

Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Alex should:
A)reallocate his spending away from coffee and towards soda.
B)reallocate his spending away from soda and towards coffee.
C)not change his consumption of either coffee or soda.
D)decrease his spending on both coffee and soda.

Accepted Answer

Since Alex's marginal utility per dollar spent on coffee is 15/3 = 5 utils, while his marginal utility per dollar spent on soda is 11/2 = 5.5 utils, Alex should reallocate his spending away from coffee and towards soda to maximize his utility.

Question 11

Refer to the accompanying figure. For Jeff, the consumption of movies reflects the law of: 
A)demand.
B)diminishing marginal utility.
C)total utility maximization.
D)marginal utility maximization.

Accepted Answer

As Jeff consumes (or, watches)more movies, his marginal utility decreases, consistent with the law of diminishing marginal utility.

Question 12

If Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ________ Terry's total utility from owning 8 pairs.
A)greater than
B)equal to
C)less than
D)less than or equal to

Accepted Answer

If his total utility is maximized at 10 pairs of shoes, then each additional pair of shoes must add to his total utility (at least for the first 10 pairs), so the total utility from 7 pairs must be less than the total utility from 8 pairs.

Question 13

Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3.00, then Joaquin:
A)should reallocate his spending towards pumpkin pie and away from pecan pie.
B)should reallocate his spending towards pecan pie and away from pumpkin pie.
C)is maximizing his utility.
D)should spend more on pumpkin pie and more pecan pie.

Accepted Answer

Since Joaquin's marginal utility per dollar spent on pumpkin pie is 4/2.5 = 1.6 utils, while his marginal utility per dollar of pecan pie is 6/3 = 2 utils, Joaquin should reallocate his spending towards pecan pie and away from pumpkin pie to maximize his utility.

Question 14

Refer to the accompanying table. The marginal utility of consuming the 2?? apple is: $$\begin{array} { | c | c | } 
\hline \text { Number of Apples } & \begin{array} { c } 
\text { Tatal } \
\text { Utility }
\end{array} \
\hline 1 &20 \
\hline 2 & 35 \
\hline 3 & 45 \
\hline 4 & 50 \
\hline 5 & 45 \
\hline
\end{array}$$
A)35.
B)10.
C)15.
D)20.

Accepted Answer

Marginal utility is the change in total utility from consuming one more unit of a good. The marginal utility of consuming the 2nd apple is the change in total utility from consuming 1 apple to 2 apples, which is 35 - 20 = 15.

Question 15

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. If Dusty's income rises to $45, Dusty can now buy a maximum of ________ loaves of bread or a maximum of ________ jars of peanut butter.
A)5; 25
B)10; 40
C)15; 30
D)30; 15

Accepted Answer

If Dusty spent all of his income on bread, he could buy 30 loaves ($45/$1.50 = 30)and if he spent all of his income on peanut butter, he could buy 15 jars ($45/$3 = 15).

Question 16

Refer to the accompanying table. The marginal utility of the 4?? dinner out per week is:  
$\begin{array}{|c|c|c|}
\begin{array}{c}
\text { Number of Dinners } \
\text { Out Per Week }
\end{array} & \text { Total Utility } & \text { Marginal Utility } \
\hline 1 & 100 \
\hline 2 & & 75\
\hline 3 & 235 & \
\hline 4 & 250 & \
\hline
\end{array}$
A)75.
B)60.
C)250.
D)15.

Accepted Answer

The marginal utility of the 4th dinner out per week is the change in total utility from having the 3rd dinner to the 4th dinner, which is 250 - 235 = 15.

Question 17

The tendency for marginal utility to decline as consumption increases beyond some point is called:
A)the law of demand.
B)the law of diminishing marginal utility.
C)the rational spending rule.
D)utility maximization.

Accepted Answer

The tendency described in the question describes the law of diminishing marginal utility.

Question 18

Refer to the accompanying figure. As Jeff watches more movies, his marginal utility: 
A)gets larger
B)gets smaller
C)does not change
D)gets close to one

Accepted Answer

Jeff's marginal utility curve is negatively sloped, as is consistent with the law of diminishing marginal utility, indicating that his marginal utility declines as he watches more movies per day.

Question 19

Refer to the accompanying table. Total utility ________ as additional apples are consumed, but marginal utility ________ with each additional apple consumed. $$\begin{array} { | c | c | } 
\hline \text { Number of Apples } & \begin{array} { c } 
\text { Tatal } \
\text { Utility }
\end{array} \
\hline 1 &20 \
\hline 2 & 35 \
\hline 3 & 45 \
\hline 4 & 50 \
\hline 5 & 45 \
\hline
\end{array}$$
A)first decreases then increases; decreases
B)first increases then decreases; decreases
C)first decreases then increases; increases
D)first increases then decreases; increases

Accepted Answer

Total utility increases as more apples are consumed up to a point (from 1 to 4 apples), after which it decreases (from 4 to 5 apples). Marginal utility, which is the additional utility gained from consuming one more apple, decreases as more apples are consumed, as indicated by the diminishing increases in total utility.

Question 20

If the marginal utility of the 3ʳᵈ cup of coffee is 23 and the marginal utility of the 4ᵗʰ cup is 15, then:
A)it is optimal for the consumer to have 3 cups of coffee.
B)the price of a cup of coffee must be relatively low.
C)it is optimal for the consumer to have 4 cups of coffee.
D)there is evidence of diminishing marginal utility.

Accepted Answer

The fact that the marginal utility of the fourth cup is smaller than that of the third cup reflects diminishing marginal utility.

Quiz 5: Demand

Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a pound and the price of shrimp is $5 a pound. Casey can buy a maximum of pounds of fish or a maximum of pounds of shrimp.

Cory gets 18, 23, and 25 units worth of total utility from consuming 10, 11, and 12 raw oysters, respectively, and the price per oyster is 25 cents. Thus, one can infer that Cory:

Refer to the accompanying figure. When Jeff goes from watching 3 to 4 movies a day, his total utility:

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Dusty can buy a maximum of loaves of bread or a maximum of jars of peanut butter.

According to the law of diminishing marginal utility:

Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Alex should:

Refer to the accompanying figure. For Jeff, the consumption of movies reflects the law of:

If Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ________ Terry's total utility from owning 8 pairs.

Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3.00, then Joaquin:

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. If Dusty's income rises to $45, Dusty can now buy a maximum of loaves of bread or a maximum of jars of peanut butter.

The tendency for marginal utility to decline as consumption increases beyond some point is called:

Refer to the accompanying figure. As Jeff watches more movies, his marginal utility:

If the marginal utility of the 3ʳᵈ cup of coffee is 23 and the marginal utility of the 4ᵗʰ cup is 15, then: