Consumer Theory

When marginal utility is falling but positive, total utility will:

• Decrease at an increasing rate
• Remain constant
• Increase at an increasing rate
• Increase at a decreasing rate

Assume Pat spends all of her $ on 4 apples & 4 candy bars. Her MU of the 4th apple is 20 utils, and her MU of the 4th candy bar is 40 utils. If an apple costs $1.00 and a candy bar $0.50, to maximize utility Pat should: 

• Purchase more of both goods
• Maintain the current purchase of 4 of each
• Buy more apples and fewer candy bars
• Buy fewer apples and more candy bars

The table shows the dollar value of the total benefit Edward receives from buying various quantities of volleyballs. What is the marginal benefit received from buying the 3rd volleyball?

• $20

• $30

• $35

• $125

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

• The total utility of consuming two units is 120

• The marginal utility of the first unit is 20

• The marginal utility of the second unit is 120

• The marginal utility of the second unit is 80 utils

Butch is currently spending his entire lunch budget on 3 sodas and 4 hot dogs. At his current level of consumption, his marginal utility for sodas is 5 utils and his marginal utility for hot dogs is 10 utils. In order to maximize his total utility, Butch should:

• Consume more sodas & fewer hot dogs regardless of prices

• Consume more hot dogs & fewer sodas regardless of prices

• Maintain current consumption if sodas are $1 each and hot dogs are $2 each

• Maintain current consumption if sodas are $2 each and hot dogs are $1 each

Which of the following is a key assumption of consumer choice theory? 

• As income rises, consumers buy more of all goods
  
• Marginal utility is always increasing
  
• Consumers do not consider the opportunity costs of purchases
• Consumers try to maximize their utility
  

Oscar spent his entire income on only two goods: good X and good Y. At his current consumption of the two goods, the marginal utility of X is 8 and the marginal utility of Y is 2. If the price of X is $4.00 and the price of Y is $0.50, then to maximize his total utility, Oscar should have: 

• bought more X and more Y
  
• bought more X and less Y
  
• bought less X and more Y
  
• maintained his current consumption 

According to the law of diminishing marginal utility, which of the following is true? 

• The additional satisfaction received from consuming extra units of a good decreases as consumption of the good increases 
• Total satisfaction decreases as more units of a good are consumed 
• The additional satisfaction received from consuming extra units of a good decreases as consumption of the good decreases 
• When marginal utility is decreasing, total utility is decreasing 

Jane spends all her weekly allowance to buy only two goods: soda and apples. According to the table above, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct? 

• Jane is maximizing her utility
  
• Jane can buy more soda and fewer apples to maximize her utility
  
• Jane can buy more apples and less soda to maximize her utility
  
• Jane can buy more apples and the same amount of soda to maximize her utility
  

Which one of the following statements about maximizing consumer utility between the purchase of two different goods is true?

• The marginal utility of the last two units of each good consumed should be equal

• The marginal utility per dollar of the last two units of each good consumed should be equal

• The marginal utility per dollar of the last two units of each good consumed should be zero

• The price per unit of each good consumed should be equal