Utility Maximization and Economic Principles

Assuming that he wishes to maximize his utility, what combination of Winston Cup Races and Broadway musicals will Bob purchase?

• Only Winston Cup Races

• Only Broadway musicals

• A combination of both

• Neither

Hector wants to maximize his utility. At his current level of consumption, Hector's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is 3 and the price of a can of soda is 2, Hector should

• reallocate his spending away from coffee and towards soda.

• reallocate his spending away from soda and towards coffee.

• not change his consumption of either coffee or soda.

• decrease his spending on both coffee and soda.

Which of the following best describes the primary goal of most firms in a market economy?

• Maximizing employee satisfaction

• Promoting environmental sustainability

• Profit maximization

• Expanding government influence

Which of the following best explains how time and income constraints affect utility maximization for consumers?

• A) Consumers can achieve maximum utility without considering their budget or available time.

• B) Time and income constraints force consumers to make trade-offs when choosing how to allocate resources.

• C) Utility is only affected by income, not by time constraints.

Which of the following statements correctly compares sole proprietorships, partnerships, and corporations?

• A) Sole proprietorships and partnerships both offer limited liability, unlike corporations.

• B) Corporations are easier and cheaper to form than sole proprietorships.

• C) Partnerships involve multiple owners sharing responsibility and profits, while corporations offer limited liability to owners.

• D) Sole proprietorships are owned by multiple people, while corporations are owned by a single individual.

Lena enjoys consuming books and streaming subscriptions. She has a monthly entertainment budget of 120. Books cost 20 each, and a streaming subscription costs $30 per month. The following table shows her total utility from each: How many books and streaming subscriptions should Lena purchase to maximize her utility without exceeding her budget?

• 2 books and 2 streaming subscriptions

• 1 book and 1 streaming subscription

• 4 books and 0 streaming subscriptions

• 1 book and 3 streaming subscriptions

At her current level of consumption, Tina gets 40 utils from an additional bowl of ramen and 60 utils from an additional burrito. If the price of a bowl of ramen is 5 and the price of a burrito is 10, Tina should:

• a. Buy more ramen and fewer burritos

• b. Buy more burritos and fewer ramen

• c. Not change her consumption

• d. Reduce consumption of both

The primary constraint that consumers face when trying to maximize utility is:

• Lack of product variety

• Government regulation

• Limited income and time

• Increasing utility at higher quantities

Which of the following best describes a corporation compared to a partnership?

• Corporations are generally more difficult and costly to form but offer limited liability.

• Corporations are usually owned by only one individual.

• Partnerships allow owners to avoid all personal financial risk.

• Corporations do not aim to earn profits for shareholders.

Which of the following best reflects a consumer equilibrium condition?

• The total utility from all goods is equal.

• The marginal utility per dollar spent is equal across all goods.

• The consumer spends all income on one good.

• Marginal utility is the same for every unit of a good.