RES-ECON 102 Study Guide - Midterm Guide: Gdp Deflator, Marginal Product, Comparative Advantage

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4 Oct 2018

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The slope of the indifference curve is the mrs: it is the trade-off he is willing to make between free time and percentage points. A budget line shows combinations of two goods a consumer is able to consume, given a budget constraint. An indifference curve shows combinations of two goods that yield equal satisfaction. To maximize utility, a consumer chooses a combination of two goods at which an indifference curve is a tangent to the budget line. At the utility-maximizing solution, the consumer"s marginal rate of substitution (the absolute value of the slope of the indifference curve) is equal to the price ratio of the two goods. The slope of the frontier is the mrt: it is the trade-off that he is constrained to make between free time and percentage points because it is not possible to go beyond the feasible frontier.

Related Questions

Question 16

Points outside the production possibility frontier are

		producible.
		unattainable.
		endowment points.
		consumer equilibrium points.

5 points

Question 17

Pareto points in the Edgeworth Box are

		found when utility curves are tangent
		found when MRS are equal.
		found when one person cannot be made better off without making another person worse off.
		all of the above.

5 points

Question 18

The marginal rate of substitution is

		The absolute value of the slope of the indifference curve.
		the slope of the contract curve.
		the slope of the utility possibilities curve.
		none of the above.

5 points

Question 19

The absolute value of the slope of the production possibilities curve is the

		marginal rate of substitution
		contract curve.
		marginal rate of transformation.
		Engel curve.

5 points

Question 20

The First Fundamental Theorem of Welfare Economics requires

		producers and consumers to be price takers.
		that there be a market for every commodity.
		that the economy operate at some point on the utility possibility curve.
		all of the above.

bronzetermite465

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.

Microeconomics Four-part multiple choice question with an explanation. Give a short explanation for each part regarding how your answer is computed or why your answer is correct.

Part A.

Para mi volunteers at a homeless shelter. It takes a lot of her time, and thus she sometimes takes off time from her job to do the volunteer work. Parami's behavior can be explained by:

	overconfidence.
	a framing bias.
	altruism.
	overvaluing the present relative to the future.

Part B.

Indifference curves cannot be concave to the origin because:

	consumers generally will prefer to have more of a good than less of a good.
	the satisfaction consumers get from consuming additional units of a good decline.
	the substitution effect holds across indifference curves.
	consumers must give up more of one good to obtain more of another good.

Part C.

Marginal utility analysis and indifference curve analysis are both used to:

	compute comparative advantage.
	derive supply curves.
	derive demand curves.
	analyze the total revenue.

Part D.

Indifference curves:

	represent a set of product bundles to which a consumer is indifferent.
	slope up and to the right.
	show the difference between the marginal utilities of two different goods.
	are concave to the origin.

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RES-ECON 102 Study Guide - Midterm Guide: Gdp Deflator, Marginal Product, Comparative Advantage

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