ECN 104 Lecture Notes - Normal Good, Inferior Good, Marginal Utility

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pinkcheetah883

28 Mar 2013

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Assignment 2 (each question is worth of 3. 5 points) Suppose that the price of wine she buys is equal to the price of cheese she buys. Refer to the diagram above where xy is the relevant budget line and i1, i2, and i3 are indifference curves. The equilibrium position for the consumer is at: any point on xy, point m, point k, point j, refer to the diagram above where xy is the relevant budget line and i1, i2, and i3 are indifference curves. Point m: is the consumer"s equilibrium position, is unobtainable, is inferior to point n, entails the highest attainable level of total utility, suppose x is a normal good. The marginal utility of alpha is 40 and the marginal utility of beta is 20. A consumer is in equilibrium and is spending income in such a way that the marginal utility of product x is.

Related Questions

Which of the following statements is correct?

i. utility refers to the satisfaction or fuzzy glow derived from consumption of goods

ii. a good may yield utility when acquired but not be functionally useful

iii. utility and usefulness are synonymous (i.e., they have equivalent meanings)

iv. the marginal utility from consuming an additional unit of a good will be positive, whereas the marginal utility of consuming an additional unit of a bad will be negative

tanwildebeest482

When deciding consumption levels of more than one good, the utility-maximizing rule states that you are maximizing utility when

		the marginal utility o two goods are equal
		the marginal utility of two goods are zero
		the ratio of marginal utility to price of two goods is zero
		the ratio of marginal utility to price for the two goods are equal

10 points

QUESTION 2

My brother says the law of diminishing marginal utility is nonsense because he is way happier after his sixth beer than after his first one. Pick the best response.

		He has a point, maybe this is something behavioral economists should take a look at.
		True, but marginal utility refers only to the utility gained (or lost) by drinking that last beer, not to his total utility
		There are always exceptions, but in general this law will hold.
		True, but the law of diminishing marginal utility is really just saying that eventually he will prefer a glass of wine to another beer.

10 points

QUESTION 3

Frank spends $75 on 10 magazines and 25 newspapers. The magazines cost $5 each and the newspapers cost $2.50 each. Suppose that his marginal utility from the final magazine is 10 utils while his marginal utility from the final newspaper is also 10 utils. According to the utility-maximizing rule, Frank should:

		Reallocate spending from magazines to newspapers
		Reallocate spending from newspapers to magazines
		Be satisfied because he is already maximizing his total utility
		None of the above

10 points

QUESTION 4

Marginal utility can be:

		Positive, negative, or zero
		Decreasing but not negative
		Positive or negative, but not zero
		Positive, but not negative

10 points

QUESTION 5

In economics, a product provides utility if it:

is useful

violates the law of demand

takes more and more resources to produce successive units of it

satisfies consumer wants

Which of the following is true of an indifference curve?

		Along an indifference curve utility is fixed.
		If a consumer is rational then indifference curves may cross.
		Indifference curves further from the origin are associated with lower levels of utility than those that are closer to the origin.
		Because they are indifference curves, microeconomics students should be indifferent towards them.

ECN 104 Lecture Notes - Normal Good, Inferior Good, Marginal Utility

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