Question 1

Bananas Apples
 
-According to the principle of diminishing marginal utility, as an individual consumes more and more of a good or service, the total utility increases while the marginal utility decreases.

Accepted Answer

The principle of diminishing marginal utility states that as a person consumes additional units of a good, the additional satisfaction (marginal utility) from each additional unit decreases, although total utility may still increase.

Question 2

Tom's marginal utility from a Sobe exceeds his marginal utility of crackers. Therefore, his total utility of Sobe must exceed his total utility of crackers.

Accepted Answer

Marginal utility refers to the additional satisfaction from consuming one more unit of a good, not the total satisfaction. Total utility depends on the quantity consumed, not just marginal utility.

Question 3

Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer.

Accepted Answer

The answer of Suppose Jenny's marginal utility of fish is...

Question 4

If Mark's marginal utility per dollar spent on the last taco is 15 and his marginal utility per dollar spent on the last burrito is 20 units, what should Mark do to increase his total utility?

Accepted Answer

The answer of If Mark's marginal utility per dollar spent...

Question 5

Bananas Apples
 
-Total utility is the benefit received from consuming an extra unit of a good.

Accepted Answer

Total utility refers to the overall satisfaction or benefit received from consuming all units of a good, not just an extra unit. The benefit from consuming an extra unit is called marginal utility.

Question 6

For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer.

Accepted Answer

The answer of For a consumer, the marginal utility of...

Question 7

Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar from the tenth slice of pizza and 200 units of utility per dollar from his second soda. Is Abe maximizing his utility? Should Abe change his consumption of pizza and soda?

Accepted Answer

The answer of Suppose Abe is allocating his entire income...

Question 8

If Tom's total utility from watching one more minute of television increases but the increase for each additional minute is smaller than the previous minute, he has diminishing marginal utility.

Accepted Answer

Diminishing marginal utility occurs when the additional satisfaction (utility) gained from consuming an additional unit of a good or service decreases as more of it is consumed.

Question 9

Bananas Apples
 
-The table above gives Sam's marginal utility schedule for bananas and apples. Sam's fruit budget is $10.
a) If bananas cost $1 per pound and apples cost $2 per bag, what is Sam's marginal utility per dollar for all quantities of both goods?
b) What is the utility maximizing combination of bananas and apples for Sam?
c) If the price of bananas increases to $2 per pound, how does Sam's marginal utility per dollar for bananas change?
d) At the banana price of $2 per pound, what is the new utility maximizing combination of bananas and apples for Sam?
e) List two points on Sam's demand curve for bananas.

Accepted Answer

The answer of Bananas Apples
 
-The table above gives Sam's...

Question 10

Ice cream Romance novels
 
-The table above shows Danielle's utility from ice cream and romance novels.
a) What is Danielle's marginal utility from the 4th novel?
b) The price of ice cream is $5 per gallon and a novel is $10. If Danielle's budget for these two goods is $50 and she buys 2 gallons of ice cream, how many novels can she buy? If she buys 6 gallons of ice cream, what is her marginal utility per dollar spent on novels?
c) Which combination of the two goods is better: 4 gallons of ice cream and 3 novels or 6 gallons of ice cream and 2 novels?

Accepted Answer

The answer of Ice cream Romance novels
 
-The table above...

Question 11

If Dana spends all her income on ice cream and Mountain Dew and her marginal utility per dollar from ice cream is greater than her marginal utility per dollar from Mountain Dew, she should buy more ice cream and less Mountain Dew.

Accepted Answer

To maximize utility, Dana should allocate her spending such that the marginal utility per dollar is equal across all goods. If the marginal utility per dollar from ice cream is greater, she should buy more ice cream and less Mountain Dew until they are equal.

Question 12

A consumer's total utility is maximized when the total utility per dollar from all goods is equalized.

Accepted Answer

A consumer's total utility is maximized when the marginal utility per dollar spent on each good is equalized, not the total utility per dollar.

Question 13

A consumer will maximize utility when all income is spent and the marginal utility is equal for all goods.

Accepted Answer

A consumer maximizes utility when the marginal utility per dollar spent is equal across all goods, not when the marginal utility is equal for all goods.

Question 14

Pants Belts
 
-Tris is shopping for pants and belts. He has a budget of $100. The price of a pair of pants is $20 and the price of a belt is $5. His marginal utility schedules are above. What combination of pants and belts does Tris buy? Explain your answer.

Accepted Answer

The answer of Pants Belts
 
-Tris is shopping for pants...

Question 15

Ice cream Romance novels
 
-Ricardo likes to rent DVDs and attend concerts. The DVDs cost $4 and the concerts cost $40. Ricardo's marginal utility from the last DVD is 20 units. Ricardo is maximizing his utility. What is his marginal utility from the last concert he attended?

Accepted Answer

The answer of Ice cream Romance novels
 
-Ricardo likes to...

Question 16

Marginal utility diminishes as consumption of a good decreases.

Accepted Answer

Marginal utility typically diminishes as consumption of a good increases, not decreases, due to the law of diminishing marginal utility.

Question 17

As a person consumes more and more slices of pizza, the marginal utility of each extra slice diminishes.

Accepted Answer

This statement is an example of the law of diminishing marginal utility, which states that as a person consumes more units of a good, the additional satisfaction (utility) gained from consuming each additional unit decreases.

Question 18

When Kathryn spends her entire budget and equates marginal utility per dollar across all goods, then Kathryn's total utility is maximized.

Accepted Answer

When the marginal utility per dollar is equal across all goods, it means Kathryn is allocating her budget efficiently, maximizing her total utility given her budget constraint.

Question 19

If it costs $6.00 to go to the movies and $25.00 to go to a hockey game, Tom is maximizing his utility between movies and hockey if his marginal utility of movies is 12 units and his marginal utility from hockey is 50.

Accepted Answer

The marginal utility per dollar spent is higher for movies (12/6 = 2) than for hockey (50/25 = 2). Therefore, Tom is maximizing his utility by spending more money on movies.

Question 20

If it costs $12.00 to go to the movies and $30.00 to go to a hockey game, Tom is maximizing his utility between movies and hockey if his marginal utility of movies is 12 units and his marginal utility from hockey is 25.

Accepted Answer

Tom is not maximizing his utility because the marginal utility per dollar spent on movies (1 unit per dollar) is higher than that for hockey (0.833 units per dollar), indicating he should spend more on movies to maximize utility.

Quiz 8: Utility and Demand

Bananas Apples -According to the principle of diminishing marginal utility, as an individual consumes more and more of a good or service, the total utility increases while the marginal utility decreases.