Economics Homework 3 Recap

The principle of diminishing marginal utility?

•   Refers to the tendency of total utility to decrease until an individual's budget is no longer constrained.

• Refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases.

•     Indicates that, if a good is normal, more of it will be purchased when income falls.

•     Assumes that all goods can be purchased in equal quantities.

  Frederique has eaten three burritos at the county fair, and if she eats another, she will get sick on the roller coaster. Knowing this, and ignoring any impact price might have on her decision, we can say that, for the fourth burrito, the?

• Total utility is less than zero.

•   Marginal utility is less than zero.

• Total utility curve is still increasing.

•     Marginal utility curve is still increasing.

Assuming that diminishing marginal utility applies to both goods, if a consumer buys more plastic storage containers from Ikea and fewer hangers from Costco, the _____ utility of storage containers will _____, and the _____ utility of hangers will _____?

• Marginal; Fall; Marginal; Rise

• Marginal; Fall; Marginal; Fall

• Total; Fall; Marginal; Rise

• Marginal; Rise; total; Rise

  Topher spends all of his income on chimichangas and prickly pear margaritas. His income is $100, the price of chimichangas is $10, and the price of prickly pear margaritas is $2. If the price of each good doubles, and Topher's income doubles?

• Topher's budget line will be unaffected.

•     Topher's budget line will shift out.

•     Topher's budget line will shift in.

•     Topher will be able to buy more of both goods.

    Eve has a monthly income of $20 that can be spent on brie (B) and plums (P). The price of a wheel of brie is $5, and the price of a plum is $0.50. Which bundle of brie and plums is affordable for Eve but does not use all her income?

• 1 wheel of brie and 30 plums

•  No brie and 40 plums

•     2 wheels of brie and 20 plums

•     1 wheel of brie and 22 plums

Andrea is a chef at Knife restaurant in Dallas, Texas. She has been offered a position just down the road as head chef at Rapscallion, a move that would double her income. From this, we can surmise that, for every normal good Andrea now buys, her?

•   Marginal utility per dollar will be greater than before her income increase.

•     Marginal utility per dollar will be smaller than before her income increases

•   Marginal utility per dollar will stay the same as before her income increase.

•     Total utility will be smaller than before her income increase.

  Elizabeth spends all of her income on high-tech gadgets and cappuccinos. She knows that she is maximizing her utility because she is on her budget constraint and?

• Her consumption of high-tech gadgets equals her consumption of cappuccinos.

• What she spends on high-tech gadgets equals what she spends on cappuccinos.

• MU_gadgets/P_gadgets = MU_cappuccinos/P_cappuccinos.

•     MU_gadgets = MU_cappuccinos.

_____ cappuccinos and _____ baseball tickets?Assume that diminishing marginal utility applies to both cappuccinos and baseball tickets and that the consumer is spending all of her income. If she purchases a combination of cappuccinos and baseball tickets such that MU_capp/P_capp = 20 and MU_tickets/P_tickets = 10, to maximize utility, she should buy

•     Fewer; More

   

•   More; Fewer

• More; More

•     Fewer; Fewer

    Jill, a careful utility maximizer, consumes peanut brittle and frozen yogurt. Assume that both peanut brittle and frozen yogurt are normal goods. Right after she achieves the utility-maximizing level of consumption of the two goods, the price of peanut brittle increases. As she adjusts to this event, the marginal utility of peanut brittle _____, and that of frozen yogurt _____?

• rises; rises

• falls; falls

•   Falls; Rises

•   Rises; Falls

  Suppose the price of teacups falls, and the consumer decides to buy more teacups solely because they are less expensive, This describes the?

•     Income Effect.

• Substitution Effect.

• Consumer surplus Effect.

•     Marginal-Maximizing Rule.