EC 201 Study Guide - Midterm Guide: Marginal Utility, Opportunity Cost, Demand Curve

153 views5 pages

orchidoyster359

2 Feb 2017

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

The marginal utility of the first hot dog is 15 utils, the marginal utility of the second hot dog is 12 utils and the third hot dog brings your total utility up to 35 utils. The price of beer is and the price of pretzels is , and tim is spending all of his money. 5 60 5 30: table 7. 4 presents bruce"s marginal utilities of sweaters and t-shirts. Suppose that the price of sweaters is and the price of a t-shirt is . Bruce has to purchase sweaters and t-shirts. The slope of the budget line shows the market tradeoff between two goods. The budget line represents the consumer"s preferences or tastes: the budget line shows all the combinations of two goods that exhaust the, i and ii only, i and iii only, ii and iii only, refer to figure 7. 1.

Related Questions

1. Use the table below for the following question. Suppose you have a budget of $6 and that brownies and Twizzlers cost $1 each. What is the consumer optimum?

Number of Brownies	Total Utility of Brownies	Marginal Utility of Brownies	Number of Twizzlers	Total Utility of Twizzlers	Marginal Utility of Twizzlers
0	0	-	0	0	-
1	10	10	1	6	8
2	19	9	2	13	7
3	26	7	3	19	6
4	30	4	4	23	4
5	30	0	5	25	2
6	29	-1	6	25	0

6 brownies

3 brownies and 3 Twizzlers

4 brownies and 2 Twizzlers

any combination of 6 because they're both $1

2. Use the table below for the following question. What is the consumer equilibrium for a $6 budget if the price of brownies rises to $1.50 and the price of Twizzlers remains at $1.00?

Number of Brownies	Total Utility of Brownies	Marginal Utility of Brownies	Number of Twizzlers	Total Utility of Twizzlers	Marginal Utility of Twizzlers
0	0	-	0	0	-
1	10	10	1	6	8
2	19	9	2	13	7
3	26	7	3	19	6
4	30	4	4	23	4
5	30	0	5	25	2
6	29	-1	6	25	0

The consumer will buy all Twizzlers because they're cheaper.

4 brownies

3 Twizzlers and 2 brownies

3 brownies and 3 Twizzlers

3. At Nice Price for the Ice, an ice cream parlor, customers routinely buy a scoop of ice cream for $3. If consumers purchase one scoop of ice cream at $3, then why don't they keep buying more and more scoops for $3 until the store sells out?

People would not want more than one scoop of ice cream because then they would have less money to spend on other goods.

People do not want to consume all the scoops of ice cream because their total utility is higher the less they eat.

At some point, customers do not value an additional scoop at $3, so they will not pay $3 for a scoop after they reach that point.

4. Suppose you plan on eating 50 potato chips. As you start consuming potato chips, your marginal utility is very high, but it begins to fall slowly until you've eaten 10 chips. After you have eaten 10 chips, your marginal utility decreases even faster with each additional chip. The marginal utility continues to decline until you've eaten 49 chips. The fiftieth chip does not give you any additional utility. After 50 chips, your mouth gets so salty that it's unpleasant to eat anymore, so marginal utility is actually negative for those chips. How many chips should you eat in order to maximize your total utility?

5. As you start consuming potato chips, your marginal utility is very high, but it begins to fall slowly until you've eaten 10 chips. After you have eaten 10 chips, marginal utility decreases even faster with each additional chip. The marginal utility continues to decline until you've eaten 49 chips. The fiftieth chip does not give you any additional utility. After 50 chips, your mouth gets so salty that it's unpleasant to eat anymore, so marginal utility is actually negative for those chips. How many chips should you eat in order to maximize your marginal utility?

6. At current levels of consumption, Alice is spending her entire budget. If Alice gets 3 utils of satisfaction per dollar spent on ice cream and 2 utils per dollar spent on shampoo, then how should she adjust her consumption to get closer to the consumer optimum?

She is already at the consumer optimum, so no adjustment is necessary.

She should buy more ice cream and less shampoo.

She should buy more shampoo and less ice cream.

She should buy more of both goods.

7. Suppose you are at a restaurant and your favorite dish costs $20. You can get your next-favorite dish for $17. If your next-favorite dish gives you 100 utils, how many additional utils do you need from your favorite dish to spend the extra $3?

17.65

117.65

8. The diamond water paradox is the observation that water is essential to life and inexpensive, while diamonds are not essential and are highly-priced. Which of the other pairs of goods exhibit a pricing structure similar to water and diamonds?

economy & luxury cars

rice & truffles (very expensive mushrooms)

paper clips & gasoline

paper & textbooks

9. Rice is a cheap staple food eaten several times a day by many people all over the world. In Trufflelandia, residents also eat expensive mushrooms known as truffles once every year as a birthday celebration. Rice keeps the people alive and truffles are not necessary for sustaining their lives. Why is rice so cheap and truffles so expensive?

Truffles taste better, so they are worth more money.

Rice is easy to cook, so people buy a lot of it. If people are going to buy so much, then it has to be cheap.

Truffles are more nutritious, and healthy food is always more expensive than unhealthy food.

People eat so much rice that an additional serving of rice has little marginal value, but the marginal value of another serving of truffles is very high.

oliverat570

1. Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.

2. Sue likes brownies. However, Sue notices that the more brownies she eats the less satisfaction she receives from each extra brownie. We can say that Sue is experiencing ___________________ from each extra brownie.

sugar sickness

total utility

diminishing marginal utility

increasing marginal utility

3. When total utility is maximized, the marginal utility will be

4. Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?

Dirk and Lee both receive 10 utils from eating pizza.

Dirk and Lee both receive the same level of satisfaction from eating pizza.

Dirk gets more twice as much satisfaction as Lee from eating pizza.

It is difficult to determine because the utility is subjective.

5. For many products, the total utility curve is

strictly increasing because of increasing marginal utility.

strictly decreasing because of diminishing marginal utility.

increasing initially because of increasing marginal utility, but eventually decreases.

increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

6. When consumers get the biggest bang for the buck, we say they

used the loudest gun in hunting season.

reached a consumer optimum.

minimized consumer satisfaction.

maximized marginal utility.

7. By choosing to consume at the consumer optimum, consumers will

maximize their total utility.

minimize their total utility.

maximize the amount they spend on each good.

minimize the amount they spend on each good.

8. A consumer is in equilibrium when consuming two goods when which of the following holds?

MU_a/ P_a = MU_b/ P_b

MU_a/ P_h =MU_b/ P_a

P_a/ MU_a = P_b/ MU_b

MU_a x P_a = MU_bxP_b

9. If the marginal utility of good 1 is 15 and its price is $3, and the marginal utility of good 2 is 12, and its price is $4, then the consumer

has achieved a consumer optimum.

should increase his or her consumption of good 1.

should increase his or her consumption of good 2.

should decrease his or her consumption of good 1.

10.Suppose the price of an iPod decrease and the price of HD TVs remains the same; what noticeable effect(s) occur(s)?

the substitution effect only

the real-income effect only

the substitution effect and real-income effect, if there is a noticeable change in purchasing power

the substitution effect and real-income effect, if there isnât a noticeable change in purchasing power

11. The ______________ paradox was described by Adam Smith in 1776.

12. What is the key to solving the diamond-water paradox?

more water and fewer diamonds

marginal utility

total utility

consumer demand

13. When solving the diamond-water paradox we notice that the marginal utility of

diamonds are equal to the marginal utility of water.

diamonds are greater than the marginal utility of water.

diamonds are less than the marginal utility of water.

water is equal to its price, and therefore lower than the marginal utility of diamonds.

14. The consumer surplus for water is

greater than that for diamonds because water is nonessential.

greater than that for diamonds because water is essential.

less than that for diamonds because water is nonessential.

less than that for diamonds because water is essential.

15. Suppose a consumer consumes only diamonds and water, and the price of diamonds increases. All else being equal, a consumerâs marginal utility for diamonds

decreases and the marginal utility for water stays the same.

increases and the marginal utility for water decreases.

decreases and the marginal utility for water increases.

increases and the marginal utility for water stays the same.

tansnake161

1. Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because:

A. luxury cars cost a lot more than non-luxury cars.

B. the total utility of less expensive cars is greater than that of luxury cars.

C. car buyers are irrational.

D. the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.

2. The labor market is considered as one of the more important markets in an economy because

A. most people typically earn the bulk of their income from wages and salaries.

B. the usual market forces do not hold in the labor market.

C. the labor market does not reach an equilibrium.

D. most people are concerned that wages determined in the labor market are unfair.

3. Table 17-1
Quantity of Labor Output (units)
1 80
2 170
3 240
4 300
5 350
6 390
7 420

Refer to Table 17-1. The marginal product of the fourth unit of labor is

A. 300.

B. 75.

C. 60.

D. 15.

4. Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys:

A. both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.

B. both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased.

C. four times as many magazines as CDs.

D. four times as many CDs as magazines.

5. Marginal utility is the:

A. average satisfaction received from consuming a product.

B. total satisfaction received from consuming a given number of units of a product.

C. extra satisfaction received from consuming one more unit of a product.

D. satisfaction achieved when a consumer has had enough of a product.

6. What is behavioral economics?

A. the study of how people behave in the face of scarcity

B. the study of how people make decisions at the margin

C. the study of situations in which people act in ways that are not economically rational

D. the study of how people make wealth-maximizing decisions

7. Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by three units per hour, then to maximize profits the firm should:

A. not hire an additional worker.

B. hire another worker.

C. not change the number of workers it currently hires.

D. There is not enough information to answer the question.

8. Consumers have to make tradeoffs in deciding what to consume because:

A. they are limited by a budget constraint.

B. there are not enough of all goods produced.

C. not all goods give them the same amount of satisfaction.

D. the prices of goods vary.

9. Table 17-1
Quantity of Labor Output (units)
1 80
2 170
3 240
4 300
5 350
6 390
7 420

Refer to Table 17-1. If the output price is $3, what is the marginal revenue product of the fifth unit of labor?

A. $1,050

B. $360

C. $210

D. $150

10. At low wages, the labor supply curve for most people slopes upward because:

A. as wages increase income also increases unless hours worked decrease.

B. the demand for labor is perfectly elastic at low wages.

C. as wages increase the opportunity cost of leisure increases.

D. the supply of labor is perfectly inelastic at low wages.

11. A negative externality exists if:

A. the marginal social cost of producing a good or service exceeds the private cost.

B. the marginal private cost of producing a good or service exceeds the social cost.

C. there are quantity controls in a market.

D. there are price controls in a market.

redsnake660

EC 201 Study Guide - Midterm Guide: Marginal Utility, Opportunity Cost, Demand Curve

Document Summary

Get access

Related Documents

ECON-2006EG Study Guide - Quiz Guide: Indifference Curve, Utility, Demand Curve

L11 Econ 1011 Chapter Notes - Chapter 5: Reservation Price, Demand Curve, Economic Surplus

ECO101H1 Lecture 5: Demand Supply and Market Price

Related Questions