Question 1

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility)that a consumer would get from successive quantities of products J and K.  If the consumer has money income of $36 and the prices of J and K are $4 and $4 respectively, the consumer will maximize her utility by purchasing
A)2 units of J and 7 units of K.
B)6 units of J and 3 units of K.
C)5 units of J and 4 units of K.
D)4 units of J and 5 units of K.

Accepted Answer

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Question 2

Refer to the table. What is the marginal utility of the sixth unit?
A)42
B)102
C)252
D)226

Accepted Answer

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Question 3

It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.

Accepted Answer

When the budget line shifts outward, it indicates that the consumer's purchasing power has increased. While this generally allows for the purchase of more goods, the consumer may choose to buy less of a product if they decide to allocate more of their increased budget towards other goods that they prefer more, reflecting a change in their consumption bundle based on their preferences and the relative prices of goods.

Question 4

Indifference curves and budget lines can be used to derive an individual's demand curve for a product.

Accepted Answer

Indifference curves represent combinations of goods that provide the same level of utility to the consumer, while budget lines represent the combinations of goods that a consumer can afford given their income and the prices of goods. By examining how the point of tangency between an indifference curve and a budget line changes as the price of a good changes, one can derive the individual's demand curve for that good, showing the relationship between the price of the good and the quantity demanded.

Question 5

The consumer will select that point on the budget line which puts him or her on the highest attainable indifference curve.

Accepted Answer

This is because the point where the budget line is tangent to the highest attainable indifference curve represents the combination of goods that maximizes the consumer's utility given their budget constraint.

Question 6

If the total utility from consuming six units of a product is 43 and the marginal utility of a seventh unit is 6, then the total utility from consuming seven units would be
A)37.
B)49.
C)7.
D)42.

Accepted Answer

Total utility from consuming seven units is the sum of the total utility from consuming six units (43) and the marginal utility of the seventh unit (6), which equals 49.

Question 7

The table shows the utility schedule for a consumer of candy bars.  Based on the data in the table, you can conclude that the
A)marginal utility of the fourth unit is 96.
B)total utility of 5 units is 88.
C)total utility of 2 units is 16.
D)marginal utility of the sixth unit is 5.

Accepted Answer

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Question 8

The first Pepsi yields Craig 15 units of utility and the second yields him an additional 13 units of utility. His total utility from threecans of Pepsi is 40 units of utility. The marginal utility of the third Pepsi is
A)27 units of utility.
B)28 units of utility.
C)12 units of utility.
D)40 units of utility.

Accepted Answer

The marginal utility of the third Pepsi is calculated by subtracting the total utility of the first two Pepsis (15 + 13 = 28) from the total utility of three Pepsis (40). Thus, 40 - 28 = 12 units of utility.

Question 9

A consumer maximizes total utility when she or he purchases the combination of the two products at which her or his budget line is tangent to an indifference curve.

Accepted Answer

This condition represents the point where the consumer achieves the highest level of satisfaction possible within their budget constraints, as the marginal rate of substitution between the two goods (indicated by the slope of the indifference curve) equals the ratio of their prices (indicated by the slope of the budget line).

Question 10

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $3 and $4, respectively. The marginal utility of the last units of A and B are 15 and 24, respectively. These data suggest that Ms. Thomson
A)has preferences that are at odds with the principle of diminishing marginal utility.
B)considers A and B to be complementary goods.
C)should buy more A and less B.
D)should buy more B and less A.

Accepted Answer

To maximize utility, the consumer should allocate spending so that the marginal utility per dollar spent is equal across all goods. Here, the marginal utility per dollar for A is 15/3 = 5, and for B is 24/4 = 6. Since the marginal utility per dollar is higher for B, Ms. Thomson should buy more B and less A to reach an optimal allocation of her income.

Question 11

An increase in the price of a product normally enables a consumer to reach a higher indifference curve.

Accepted Answer

An increase in the price of a product typically reduces a consumer's purchasing power, making it harder for them to reach higher indifference curves, which represent higher levels of satisfaction.

Question 12

Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $6 and $2, respectively, and that the consumer's income is $22  How many units of the two products will the rational consumer purchase?
A)3 of L and 3 of M
B)4 of L and 2 of M
C)2 of L and 4 of M
D)2 of L and 5 of M

Accepted Answer

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Question 13

The table shows the utility schedule for a consumer of candy bars.  Based on the data in the table, you can conclude that the
A)marginal utility of the fourth unit is 96.
B)marginal utility of the third unit is 18.
C)total utility of 2 units is 16.
D)total utility of 6 units is 35.

Accepted Answer

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Question 14

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ P_c = 100/?, the prices of products B and C in consumer equilibrium A)cannot be determined from the information given. B)are $10.5 and $15, respectively. C)are $12 and $20, respectively. D)are $15 and $10.5, respectively.

Accepted Answer

The correct prices of products B and C can be determined using the given marginal utilities (MU) and prices. The formula for consumer equilibrium is MUa/Pa = MUb/Pb = MUc/Pc. Given MUa/Pa = 20/$3, MUb = 70, and MUc = 100, we can solve for Pb and Pc. For product B, 20/$3 = 70/Pb, solving for Pb gives $10.5. For product C, 20/$3 = 100/Pc, solving for Pc gives $15. Therefore, the prices of products B and C are $10.5 and $15, respectively.

Question 15

If the marginal utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be
A)168.
B)27.
C)156.
D)972.

Accepted Answer

The total utility from consuming four units is found by subtracting the marginal utility of the fifth unit from the total utility of all five units. Therefore, 162 - 6 = 156.

Question 16

The marginal utility of the last unit of apples consumed is 10, and the marginal utility of the last unit of bananas consumed is 15. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?
A)$3 and $2
B)$2 and $3
C)$15 and $10
D)$25 and $30

Accepted Answer

In consumer equilibrium, the ratio of the marginal utilities of two goods should equal the ratio of their prices. Thus, $ \frac{MU_{apples}}{MU_{bananas}} = \frac{Price_{apples}}{Price_{bananas}} $. Given $ MU_{apples} = 10 $ and $ MU_{bananas} = 15 $, the price ratio that maintains consumer equilibrium is $ \frac{10}{15} = \frac{2}{3} $, which corresponds to the prices in option B, $2 for apples and $3 for bananas.

Question 17

Ben is exhausting his money income consuming products A and B in such quantities that MU a/ Pₐ = 7 and MU b/ Pᵦ = 9. Ben should purchase
A)more of A and less of B.
B)more of B and less of A.
C)more of both A and B.
D)less of both A and B.

Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Since MU b/ Pᵦ is greater than MU a/ Pₐ, Ben should buy more of B and less of A to increase the marginal utility per dollar spent on A until it equals the marginal utility per dollar spent on B.

Question 18

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility)that a consumer would get from successive quantities of products J and K.  What level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $26 and the prices of J and K are $8 and $2, respectively?
A)190 utils
B)168 utils
C)220 utils
D)60 utils

Accepted Answer

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Question 19

The table shows a consumer's utility schedule.  Based on the data in the table, you can conclude that the
A)marginal utility of the second unit is 14.
B)total utility of 3 units is 54.
C)total utility of 4 units is 5.
D)marginal utility of the fifth unit is 2.

Accepted Answer

The answer of The table shows a consumer's utility schedule....

Question 20

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 75 utils and the marginal utility of the last bag is 100 utils. The prices of soda and pretzels are $0.5 per bottle and $0.6 per bag, respectively. It can be concluded that
A)the two commodities are substitute goods.
B)Mrs. Arnold should spend less on pretzels and more on soda.
C)Mrs. Arnold should spend less on soda and more on pretzels.
D)Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.

Accepted Answer

The marginal utility per dollar spent on soda is 75/0.5 = 150 utils per dollar, and for pretzels, it is 100/0.6 = 166.67 utils per dollar. Since the marginal utility per dollar is higher for pretzels, Mrs. Arnold should spend more on pretzels and less on soda to maximize utility.

Quiz 7: Utility Maximization

Refer to the table. What is the marginal utility of the sixth unit?

It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.

Indifference curves and budget lines can be used to derive an individual's demand curve for a product.

The consumer will select that point on the budget line which puts him or her on the highest attainable indifference curve.

If the total utility from consuming six units of a product is 43 and the marginal utility of a seventh unit is 6, then the total utility from consuming seven units would be

The table shows the utility schedule for a consumer of candy bars. Based on the data in the table, you can conclude that the

The first Pepsi yields Craig 15 units of utility and the second yields him an additional 13 units of utility. His total utility from threecans of Pepsi is 40 units of utility. The marginal utility of the third Pepsi is

A consumer maximizes total utility when she or he purchases the combination of the two products at which her or his budget line is tangent to an indifference curve.

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $3 and $4, respectively. The marginal utility of the last units of A and B are 15 and 24, respectively. These data suggest that Ms. Thomson

An increase in the price of a product normally enables a consumer to reach a higher indifference curve.

Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $6 and $2, respectively, and that the consumer's income is $22 How many units of the two products will the rational consumer purchase?

The table shows the utility schedule for a consumer of candy bars. Based on the data in the table, you can conclude that the

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ Pc = 100/?, the prices of products B and C in consumer equilibrium

If the marginal utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

The marginal utility of the last unit of apples consumed is 10, and the marginal utility of the last unit of bananas consumed is 15. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?

Ben is exhausting his money income consuming products A and B in such quantities that MU a/ Pₐ = 7 and MU b/ Pᵦ = 9. Ben should purchase

The table shows a consumer's utility schedule. Based on the data in the table, you can conclude that the

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ P_c = 100/?, the prices of products B and C in consumer equilibrium