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1

The campus pizzeria sells a large pizza for $14. When you buy a second large pizza, however, its price is only $10. How does this relate to marginal utility?

A. Increases in total utility from the consumption of a large pizzas become larger as more is consumed so consumers will pay more.

B. Since marginal utility falls as additional units of the good are consumed, consumers are only willing to purchase more as the price falls.

C. As more is consumed, the marginal utility increases so consumers are willing to purchase more at higher prices.

D. The cost of a large pizza becomes cheaper as more are consumed.

B. Since marginal utility falls as additional units of the good are consumed, consumers are only willing to purchase more as the price falls.

2

What is the difference between total utility and marginal utility?

A. Total utility represents the consumer optimum while marginal utility gives the total utility per dollar spend on the last unit.

B. Marginal utility is subject to the law of diminishing marginal utility while total utility is not.

C. Total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good.

D. Marginal utility represents the consumer optimum while total utility gives the total utility per dollar spent on that last unit.

C. Total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good.

3

In consumer theory, utility is

A. the worth of a good as a team member in combination with other goods.

B. the usefulness of a good or service in performing several different functions.

C. the want-satisfying power of a good or service.

D. the relation a good or service has to gas, electric and water services.

C. the want-satisfying power of a good or service.

4

Tristan is buying DVDs. He receives 100 utils from his first DVD, 50 utils from his second DVD, and 25 utils from his third DVD.

Tristan's marginal utility from his third DVD is ______

Tristan's total utility from consuming three DVDs is _________

25
175

5

If the commercial is correct that every additional bite tastes as good as the first, the marginal utility from consuming more of the advertised product must be

A. increasing

B. zero

C. decreasing

D. constant

D. constant

6

Typically, an individual takes only one newspaper from the bin because

A. of the low marginal utilty of additional newspapers

B. marginal utility increases with the first consumption of newspapers

C. there are limited amounts of newspapers in the bin.

D. total utility will rise with consumption of more than one newspaper

A. of the low marginal utility of additional newspapers.

7

Teri is currently spending all of her weekly income purchasing the two goods that she likes hamburgers and fries. She is currently purchasing 10 hamburgers and 5 large fries.

She receives 30 utils from her 10th hamburger and 15 utils from her 5th large fry. The price of hamburgers is $12, and the price of fries is $4. Is Teri maximizing her utility, and if not, what should she do?

Teri should buy fewer burgers and more fries.

8

Suppose Isaac's marginal utility from attending his 5th White Sox game was 40 and the marginal utility from attemding his 1st U2 concert was 200. Assume that the price of a Sox ticket is $20 and the price of a U2 ticket is $120. Which of the following would be true?

A. Isaac would attend more Sox games and less U2 concerts.

B. Isaac would attend more U2 concerts and less Sox games.

Isaac would attend less of both Sox games and U2 concerts.

D. Isaac would not alter his behavior.

A. Isaac would attend more Sox games and less U2 concerts.

9

Why is the price of diamonds usually so much higher than the price of water even though people cannot survive long without water?

A. This is an unsolved mystery.

B. There are no good substitutes for diamonds while there are good substitutes for water.

C. Marginal utility, not total utility, determines how much a person is willing to pay for a good.

D. A price change affects the purchasing power of an individual's available income.

C. Marginal utility, not total utility, determines how much a person is willing to pay for a good.

10

The diamond-water paradox illustrates the idea that ______ dtermines what consumers are willing to pay for a particular good.

A. total utility

B. the real-income effect

C. marginal utility

D. the substitution effect

C. marginal utility

11

Along the indifference curve

A. total utility decreases at a decrasing rate.

B. total utility is constant.

C. marginal utility is constant.

D. marginal utility falls.

B. total utility is constant

12

The slope of the indeifference curv3e is

A. negative.

B. postivive.

C. not enough information

D. positive then negative

A. negative

13

An indifference curve provides the set of consumptoin alternatives that

A. yield the same marginal utility for the last unit consumed of each good

B. can be purchased for the same amount of money.

C. yield the same total amoutn of satisfaction.

D. maximize the utility of the consumer.

C. yield the same total amount of satisfaction

14

If the marginal utility of each good is constatn as consumption increases, the indifference curves are

A. positively sloped

B. straight lines

C. horizontal

D. vertical

B. straight lines

15

Which of the following violates the properties of indifference curves?


A. Indifference curves are downward-sloping

B. Indifference curves are upward-sloping

C. Indifference curves are convex to the origin

D. None of the above

B. Indifference curves are upward-sloping

16

Indifference curves are

A. either convex or concave to the origin

B. concave to the origin

C. convex to the origin

D. no specific shape

C. convex to the origin

17

The marginal rate of substitution is measured along

A. a given budget line

B. a given indifference curve

C. the total utility curve

D. the demand curve

B. a given indifference curve

18

The marginal rate of substitution is the

A. change in the quantity of one good that just offsets a one-unit change in the consumption of another good such that the total satisfaction remains constant.

B. change in the quantity of one good that changes the utility received by one unit

C. rate at which the consumer can exchange one good for the other.

D. same thing as the marginal utility of a good.

A. change in the quantity of one good that just offsets a one-unit change in the consumption of another good such that the total satisfaction remains constant.

19

If income fall, then

A. there is no relationship between the budget constraint and income.

B. the budget constraint shifts inward.

C. there is no change in the budget constraint.

D the budget constraint shift out.

B. the budget constraint shifts inward.

20

Using indifference curve analysis, the consumer optimum occurs

A. at the point of tangent between an indifference curve and a budget line.

B. on the upward-sloping portion of the indifference curve.

C. where the marginal rate of substitution is the greatest.

D. on the midpoint of the budget constraint.

A. at the point of tangency between an indifference curve and a budget line.

21

A person's income is $100, the price of a video is $4, and the price of deluxe pizza is $10. At. equilibrium,

A. the consumer is buying three times more videos than pizzas.

B. the marginal rate of substitution is equal to -2.5.

C. the consumer is buying three times more pizzas than videos.

D. the marginal rate of substitution is equal to the slope of the price consumption curve.

B. the marginal rate of substitution is equal to -2.5.

22

Suppose Ryan has a budget of $200, and the price of good X is $25 and the price of good Y is $25

Ryan can buy ___ units of good X, and ___ units of good Y.

When the price of good X falls to $20, Ryan can now buy ___ units of good X and ____ units of good Y.

These price-quantity pairs are good X are two points on the _______ curve.

8,8
10,8
demand

23

To drive the demand curve for good X, all the following are constant EXCEPT

A. the price of good X.

B. income.

C. tastes and preferences.

D. the price of good Y.

A. the price of good X.