Diminishing Marginal Utility

Consumers will maximize satisfaction when;

• Marginal utility is equal to average utility

• The price of each good is exactly equal to the price of every other good consumed

• The price of each good is exactly equal to the total utility derived from the consumption of every other good

• The marginal utility of the last dollar spent on each good is exactly equal to the marginal utility of the last dollar spent on any other good

Utility curve is the same as indifference curve

• True

• False

Ryan spends Ᵽ250 week on apples and oranges. It the price of both goods is Ᵽ50 per unit, how many apples and oranges, respectively does he purchase per week if he wants to maximize his utility?

• 2 and 3

• 3 and 2

• 1 and 4

• 0 and 5

The substitution effect explains that when the price of a good increases, consumers will consume;

• Less of the good because their real incomes are lower after the price increase

• More of the more expensive good and less of some other good

• Less of the more expensive good and more of some other good

• More of the good because their real incomes are lower after the price increase

When offered another helping of stewed chicken at dinner, your dinner guest passes but asks for a second can of coke. We can conclude that your guest’s;

• Marginal utility of stewed chicken is decreasing but marginal utility of coke is increasing

• Marginal utility of coke is positive but marginal utility if stewed chicken is zero or negative

• Total utility of stewed chicken mashed potatoes exceeds her total utility of coke

• Total utility of stewed chicken is less than her total utility of coke

Which of the following best expresses the law of diminishing marginal utility?

• The less a person consumes of a product, the smaller becomes the total utility that he receives from its consumption

• The more a person consumes of a product the smaller becomes the total utility that he receives from its consumption

• The more a person consumes of a product, the smaller becomes the additional utility that he receives from consuming each additional unit

• The less a person consumes of a product, the smaller becomes the additional utility that he receives from consuming each additional unit

The income effect explains that when the price of a good increases, consumers will consume;

• Less of the more expensive good and more of some other good

• More of the good because their real incomes are lower after the price increase

• Less of the good because their real incomes are lower after the price increase

• More of the more expensive good and less of some other good

Jake enjoys having either a chicken Bolognese or prawn aglio olio for his dinner. A drop in the price of prawn increases the marginal utility per dollar or prawn and causes Jake to buy more prawn and less chicken to restore maximum utility, this best illustrates the

• Law of diminishing marginal utility

• Income effect

• Law of increasing total utility

• Substitution effect

Marginal utility refers to;

• The additional utility that a consumer derives from consuming one additional unit of a good

• The additional product produced as the firm ads one additional unit of an input

• The amount of utility divided by the number of units produced

• All of the above

Which of the following is true if consuming one unit of good yields 100 utils and consuming the second unit of the good increase satisfaction by 20 utils?

• The total utility of consuming two units us 120

• The marginal utility if the second unit is 120

• The marginal utility of the first unit is 20

• The marginal utility of the second unit is 80