Microeconomics 6-8

Assume Anna is consuming two goods, movies and books, and at her current level of consumption, the marginal utility of the last movie is 60 and the marginal utility of the last book is 30. The price of a movie is $12 and the price of a book is $4. In order to maximise her utility, what should Anna do?

• Increase her consumption of both movies and books

• Decrease her consumption of both movies and books

• Do nothing—she’s maximizing her utility

• Increase her consumption of movies and decrease her consumption of books

• Decrease her consumption of movies and increase her consumption of books

If David buys more coffee and less ice cream, the ______________ of coffee will ______________ , and the _______ of ice cream will ______________.

• marginal utility; fall; marginal utility; rise

• marginal utility; rise; marginal utility; fall

• total utility; fall; marginal utility; rise

• marginal utility; rise; total utility; rise

If the price of a normal good increases, the income effect ______________ the quantity demanded of that good.

• increases

• decreases

Frank is willing to pay $1,000 for the first class he takes this semester, $850 for the second, $700 for the third and $500 for the fourth. If the price of a class is $750, how many classes will he take?

• 1

• 2

• 3

• 4

Marcus has four employees. The four employees produce 55 floral arrangements in a day. Marcus hires a fifth employee. The five employees produce 60 floral arrangements in a day. The fifth employee’s marginal product is __________.

• 60 floral arrangements in a day

• 5 floral arrangements in a day

• 11 ¾ floral arrangements in a day

• 12 floral arrangements in a day

Currently, the marginal product of labor is 45 units per week. The average product of labor at the current level of output is 32 units per week. If the employer hires one more worker, the marginal product of labor will be 47 units per week. The average product of labor will ______________.

• equal the marginal product of labor

• fall

• rise

• stay the same

If labor is the only variable input a firm owner uses and the wage rate is $200 per week, what is the firm owner’s variable cost per week if she hires 12 workers?

• $200

• $1,200

• $2,400

• It depends on the level of output.

If the average product of labor is 12 units of output per worker per day when eight workers are hired, eight workers will be able to produce ______________ units per day.

• 12

• 8

• 10

• 96

Frank’s Fajitas can produce 45 fajitas per hour with five workers and one grill. One more worker will increase output by 6 fajitas per hour. If one more worker is hired, the average product of labor at Frank’s Fajitas will:

• increase

• decrease

• stay the same

• be inderteminant until you know the wage rate

If marginal productivity of labor is falling, by hiring another unit of labor (all else held the same) we know that:

• marginal cost must be falling.

• marginal cost must be rising.

• average cost must be falling.