Question 1

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 answer of Stanley receives the following marginal utilities from...

Question 2

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

Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/2, which means that she gets less satisfaction from each additional pizza than she does from each additional blouse. To maximize her total utility, she should buy fewer pizzas and more blouses until the ratio of marginal utility of pizza to marginal utility of blouses equals the price ratio (1/3). This will allow her to allocate her spending in a way that maximizes her overall satisfaction.

Question 3

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 spending so that the last dollar spent on each good provides the same marginal utility per dollar. Since the price of a warm-up suit is four times the price of a pair of running shoes, the marginal utility of a warm-up suit should be four times the marginal utility of a pair of running shoes to equalize the marginal utility per dollar spent on each.

Question 4

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 satisfaction received for each dollar spent on the last unit consumed. It helps the consumers to make rational choices and maximize their utility by comparing the additional satisfaction they get from consuming an extra unit to the price they pay for it.

Question 5

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

To maximize total utility, Suzy should allocate her income so that the marginal utility per dollar spent on potato chips and textbooks are equal. This means she should keep buying potato chips and textbooks until the marginal utility per dollar spent on each category is equal. At that point, she cannot increase her total utility any further without increasing her income. This strategy is based on the principle of diminishing marginal utility, which states that as you consume more of a product, the marginal utility (additional satisfaction) decreases. By allocating her income in this way, Suzy is maximizing her overall satisfaction while using her income efficiently.

Question 6

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 a consumer moves upward along the budget line, they are buying more of the good on the vertical axis and less of the good on the horizontal axis. This means the marginal utility per dollar spent on the good on the horizontal axis increases because as you consume less of a good, the additional satisfaction (marginal utility) you get from consuming an additional unit of that good increases, according to the law of diminishing marginal utility.

Question 7

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 8

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 or each good. This is because the consumer will allocate their budget in a way that maximizes their total utility per dollar spent. When the marginal utility per dollar spent is equal for each good, the consumer has reached the point of maximizing utility.

Question 9

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, the ratio of the marginal utility of a good to its price should be equal across all goods. Here, the marginal utility per dollar spent on pizza is higher than that on blouses (1/10 for pizza vs. 1/4 * 1/30 for blouses), so Magda should buy more pizzas and fewer blouses to equalize the marginal utility per dollar spent across both goods.

Question 10

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 the principle of equimarginal utility, which states that a consumer will select an allocation of resources that maximizes total utility when the marginal utility per dollar (or per hour, in this case) is the same for each activity.

Question 11

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 each choose a consumption bundle that maximizes their utility given their budget constraint. This will result in each person choosing a consumption bundle on his or her budget line, which is represented by the points where the budget line intersects with the highest possible indifference curve (i.e. the indifference curve that represents the highest level of utility that is attainable given the budget constraint). Therefore, choice E is the best answer.

Question 12

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 each good is equal. This means that the consumer is maximizing utility while also staying within her budget constraint. It does not necessarily mean that the marginal utilities of all goods are equal, as stated in option C. Option B is incorrect because a consumer will continue to consume a good as long as its marginal utility is positive, not just until it becomes zero. Option D and E are also incorrect as a consumer may choose to consume more or less of a good depending on its price without necessarily completely stopping consumption or consuming more of another good.

Question 13

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

The answer of Ignoring all other goods,if Yong's marginal utility...

Question 14

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...

Question 15

If MU_x/P_x is less than MU_y/P_y,then the consumer should consume more of X and less of Y.

Accepted Answer

The given expression compares the marginal utility per price (MUS/P) of consuming goods X and Y. If MU_x/P_x is less than MU_y/P_y, it means the marginal utility per price of X is less than that of Y, suggesting the consumer should consume more of Y and less of X to maximize utility.

Question 16

-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 answer of 
-Figure 6-7 shows the marginal utilities Kate...

Question 17

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

The answer of Lin is maximizing total utility while consuming...

Question 18

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 19

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

Accepted Answer

The combination of two goods at which total utility is maximized is called the optimal consumption bundle. Since the consumer's budget line represents all possible combinations of goods that the consumer can afford, the optimal consumption bundle must lie somewhere on the budget line.

Question 20

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 combination that maximizes total utility for a consumer facing a budget constraint is the one that equates the marginal utilities per dollar spent on each good. This ensures that the consumer is allocating their budget in the most efficient way possible to maximize satisfaction, given the prices of goods and the budget constraint.

Quiz 6: Consumer Choice

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

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

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

The marginal utility per dollar spent on a good represents the

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

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

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

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

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.

If all consumers satisfy economists' assumptions regarding utility,then

A utility-maximizing consumer will

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

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

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

-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?

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

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

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

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

If MU_x/P_x is less than MU_y/P_y,then the consumer should consume more of X and less of Y.