Question 1

The goal of utility maximization is to allocate your ________ in order to maximize your ________.

Accepted Answer

Utility maximization is the process of allocating one's resources to obtain the greatest possible satisfaction (or, utility).

Question 2

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ________ utility from eating the fourth pie than from eating the second pie.

Accepted Answer

Since the fourth pie made you ill while you really enjoyed the second pie, the fourth pie must have yielded less utility.

Question 3

In some countries, medical care is provided free-of-charge to citizens and is paid for by the government. In those countries, medical care:

Accepted Answer

Medical care cannot be produced at zero cost, so if no price is charged for medical care, it must be rationed using some non-monetary method. However, in most markets, products are rationed among competing users using monetary prices.

Question 4

After subsistence levels of food, shelter, and clothing have been provided, economists refer to all other goods and services as:

Accepted Answer

Once subsistence levels of consumption have been achieved, economists refer to additional goods and services as "wants" rather than "needs".

Question 5

According to the law of demand, when the price of shoes ________, people will consume ________ shoes.

Accepted Answer

The law of demand states that people do less of what they want to do as the cost of doing it rises. This implies that there will be a negative relationship between the price of a product and the amount purchased.

Question 6

Joe is shopping for a new computer. A computer can be delivered to Joe's home for $1,200. Alternatively, Joe can pick up the same computer at the warehouse for $1,000. How should Joe buy the computer?

Accepted Answer

Joe should drive to the warehouse if the cost of doing so is less than the added $200 cost of having it delivered.

Question 7

According to economists, the satisfaction people get from their consumption activities is called:

Accepted Answer

For economists, utility represents the satisfaction people get from their consumption activities.

Question 8

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. After the third pie, your total utility:

Accepted Answer

Since the fourth pie made you ill, it must have reduced your total utility.

Question 9

Higher education is a ________ and assigned textbooks are ________.

Accepted Answer

Neither higher education nor textbooks are necessary to achieving a bare subsistence level of consumption, so they're both wants.

Question 10

Taking a limousine to a five-star restaurant in New York is a:

Accepted Answer

Since no one has to take a limousine to a five star restaurant in New York to sustain life, such a service is a want for anyone.

Question 11

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's total utility ________ with each hour that he skied.

Accepted Answer

While the additional utility Sven received from water skiing declined each day, his total utility must have increased otherwise he would not have gone water skiing.

Question 12

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. On the fifth day of Sven's vacation, he had decided that another hour of skiing would yield:

Accepted Answer

The fact that Sven went blueberry picking instead of skiing implies that he must have thought skiing would yield less utility than blueberry picking.

Question 13

In most markets, scarce goods or services are rationed among competing users using:

Accepted Answer

In most markets, products are rationed among competing users using monetary prices.

Question 14

Growing rice requires extensive irrigation in California. Economists consider water to be a ________ for rice farmers in California.

Accepted Answer

Since rice farmers could switch to growing other grains if the price of water increased, water is considered a want rather than a need.

Question 15

Shelter for homeless people is an example of:

Accepted Answer

Since shelter is fundamental to sustaining life, it is considered a need for anyone who lacks it.

Question 16

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ________ with the first three pies you ate.

Accepted Answer

Since you enjoyed the first three pies, they must have added to your total utility.

Question 17

As the price of computers falls, the quantity of computers demanded increases. This is an application of:

Accepted Answer

The law of demand states that people do less of what they want to do as the cost of doing it rises. This implies that there will be a negative relationship between the price of a good and the quantity demanded.

Question 18

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ________ utility from eating the first pie than from eating the third pie.

Accepted Answer

The information states that you really enjoyed the first two pies, but the third one was only okay, implying that it provided less utility.

Question 19

The law of demand indicates that as the cost of an activity:

Accepted Answer

The law of demand states that people do less of what they want to do as the cost of doing it rises.

Question 20

The tendency for consumers to purchase more of a good or service as its price falls is captured by the:

Accepted Answer

The negative relationship between price and quantity demanded is implied by the law of demand.

Quiz 5: Demand

The goal of utility maximization is to allocate your in order to maximize your .