Marginal Utility

Harry's marginal utility for 2 bananas is ?

• 23

• 32

• 25

• 26

Chris spent his entire income on two goods. At his current consumption, the marginal utility of Y is 12 and the marginal utility of Z is 4. If the price of Y is $2.00 and the price of Z is $1, then to what should he do to maximize utility?

• consume more Y and Z

• consume more Z and less Y

• consumer more Y and less Z

• maintain his consumption

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 MU of the 1st unit is 20

• the MU of the 2nd unit is 80

• the MU of the 2nd unit is 120

• the total utility of consuming 2 units is 120

Assume the price of a candy bar is $2 and the price of a bag of chips is $3. Assume Lilly’s marginal utility from consuming an additional candy bar is 10 utils and her marginal utility from consuming an additional bag of chips is 12 utils. If Lilly is spending her fixed weekly allowance on candy bars and bags of chips, which of the following actions will maximize Lilly’s total utility?

• Buying more candy bars and bags of chips

• Buying more candy bars and fewer bags of chips

• Buying fewer candy bars and more bags of chips

• Buying fewer candy bars and bags of chips

• Buying the same number of candy bars and bags of chips

Answer explanation

To maximize utility, Lilly must allocate her income so that the marginal utility per dollar spent on the last unit of each good is equal. The marginal utility per dollar spent on the last candy bar is 5 utils per dollar (10 utils divided by $2), and the marginal utility per dollar spent on the last bag of chips is 4 utils per dollar (12 utils divided by $3). Given Lilly’s fixed weekly allowance, Lilly should buy more candy bars and fewer bags of chips.

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

• consume more sodas and fewer hot dogs regardless of the prices

• consume more hot dogs and fewer sodas regardless of the prices

• maintain his current level of consumption of sodas and hot dogs regardless of the prices

• maintain his current level of consumption if the price of a soda is $1 and the price of a hot dog is $2

• maintain his current level of consumption if the price of a soda is $2 and the price of a hot dog is $1

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

A little bit more or a little bit less

• sunk cost

• opportunity cost

• unintended consequence

• marginal

If the marginal utility of a good decreases as more of it is consumed, this is an example of which economic principle?

• Law of Diminishing Marginal Utility

• Law of Increasing Returns

• Law of Supply

• Law of Demand

Which of the following best describes marginal utility?

• The additional satisfaction gained from consuming one more unit of a good

• The total satisfaction gained from consuming a good

• The cost of producing one more unit of a good

• The price of a good in the market

If a consumer experiences a decrease in marginal utility, what should they do to maximize their total utility?

• Consume more of the good

• Consume less of the good

• Maintain current consumption

• Switch to a different good