-Select a specific consumer behavior and construct that highlights the workings of marginal utility and how it affects the consumption pattern for goods and services.
-Using the Diamond-Water Paradox as a guide and two other goods of your choice, illustrate the paradox of value.
-Explain the roles total utility and marginal utility play to understand this paradox.
-Select a specific consumer behavior and construct that highlights the workings of marginal utility and how it affects the consumption pattern for goods and services.
-Using the Diamond-Water Paradox as a guide and two other goods of your choice, illustrate the paradox of value.
-Explain the roles total utility and marginal utility play to understand this paradox.
Related textbook solutions
Related questions
1. Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.
| Ā | consumer happiness |
| Ā | utility |
| Ā | a happiness index |
| Ā | a satisfaction index |
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.
| Ā | sugar sickness |
| Ā | total utility |
| Ā | diminishing marginal utility |
| Ā | increasing marginal utility |
3. When total utility is maximized, the marginal utility will be
| Ā | positive. |
| Ā | zero. |
| Ā | negative. |
| Ā | none of these. |
4. Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?
| Ā | Dirk and Lee both receive 10 utils from eating pizza. |
| Ā | Dirk and Lee both receive the same level of satisfaction from eating pizza. |
| Ā | Dirk gets more twice as much satisfaction as Lee from eating pizza. |
| Ā | It is difficult to determine because the utility is subjective. |
5. For many products, the total utility curve is
| Ā | strictly increasing because of increasing marginal utility. |
| Ā | strictly decreasing because of diminishing marginal utility. |
| Ā | increasing initially because of increasing marginal utility, but eventually decreases. |
| Ā | 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
| Ā | used the loudest gun in hunting season. |
| Ā | reached a consumer optimum. |
| Ā | minimized consumer satisfaction. |
| Ā | maximized marginal utility. |
7. By choosing to consume at the consumer optimum, consumers will
| Ā | maximize their total utility. |
| Ā | minimize their total utility. |
| Ā | maximize the amount they spend on each good. |
| Ā |
minimize the amount they spend on each good. |
8. A consumer is in equilibrium when consuming two goods when which of the following holds?
| Ā | MUa/ Pa = MUb/ Pb |
| Ā | MUa/ Ph =MUb/ Pa |
| Ā | Pa/ MUa = Pb/ MUb |
| Ā | MUa x Pa = MUbxPb |
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
| Ā | has achieved a consumer optimum. |
| Ā | should increase his or her consumption of good 1. |
| Ā | should increase his or her consumption of good 2. |
| Ā | 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)?
| Ā | the substitution effect only |
| Ā | the real-income effect only |
| Ā | the substitution effect and real-income effect, if there is a noticeable change in purchasing power |
| Ā | the substitution effect and real-income effect, if there isnĆ¢ĀĀt a noticeable change in purchasing power |
11. The ______________ paradox was described by Adam Smith in 1776.
| Ā | diamond-carbon |
| Ā | diamond-water |
| Ā | diamond-life |
| Ā | water-utility |
12. What is the key to solving the diamond-water paradox?
| Ā | more water and fewer diamonds |
| Ā | marginal utility |
| Ā | total utility |
| Ā | consumer demand |
13. When solving the diamond-water paradox we notice that the marginal utility of
| Ā | diamonds are equal to the marginal utility of water. |
| Ā | diamonds are greater than the marginal utility of water. |
| Ā | diamonds are less than the marginal utility of water. |
| Ā | water is equal to its price, and therefore lower than the marginal utility of diamonds. |
14. The consumer surplus for water is
| Ā | greater than that for diamonds because water is nonessential. |
| Ā | greater than that for diamonds because water is essential. |
| Ā | less than that for diamonds because water is nonessential. |
| Ā | 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 consumerĆ¢ĀĀs marginal utility for diamonds
| Ā | decreases and the marginal utility for water stays the same. |
| Ā | increases and the marginal utility for water decreases. |
| Ā | decreases and the marginal utility for water increases. |
| Ā | increases and the marginal utility for water stays the same. |
