ECON 101 Chapter 6: Appendix to Chapter 6.docx
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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?
|
budget line
marginal utility
complete property of preferences
market demand
consumption bundle
substitution effect
Giffen good
total effect
income effect
transitive property of preferences
indifference curves
utility
the marginal rate of substitution
utility function
1. |
_____ |
The satisfaction or benefit that consumers receive from consuming goods or services.
|
2. |
________________ _ |
A particular combination of specific quantities of goods or services |
3. |
________________ _ |
Consumers can rank all conceivable bundles of goods or services |
4. |
_____ |
If A is preferred to B, and B is preferred to C, then A is always preferred to C. |
5. |
_____ |
Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services. |
6. |
_____ |
A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility. |
7. |
_____ |
The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed. |
8. |
_____ |
The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant. |
9. |
_____ |
The line showing all bundles of goods that can be purchased at given prices if the entire income is spent. |
10. |
_____ |
The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes. |
11. |
_____ |
The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes. |
12. |
________________ _ |
The sum of the substitution and income effects. |
13. |
_____ |
A good for which quantity demanded varies directly with price, causing an upward sloping demand curve. |
14. |
_____ |
A list of prices and the corresponding quantity consumers are willing and able to purchase at each price. |