WorksheetsConsumer Theory
Total questions: 13
Worksheet time: 9mins
What is the theory of consumer behavior?
How rational consumers maximize utility by comparing the marginal utilities per dollar of all products they can buy
How rational consumers react to changes in the price of different products
How rational consumers use their dollar votes show producers what they want
How rational consumers minimize costs by comparing the prices of all products they can buy
What is the marginal utility of the 3rd candy bar?
15
53
18
11
What is the utility maximizing rule?
In order to maximize utility, a consumer should allocate their income so that the last dollar spent on each product yields the same marginal utility
In order to maximize utility, a consumer should allocate their income spent on a product until its marginal utility per dollar equals 0
In order to maximize utility, a consumer should allocate their income spent on a product until its marginal utility per dollar is negative
In order to maximize utility, a consumer should allocate their income on the item with the highest marginal utility
What is the law of diminishing marginal utility?
As consumption of a product increases, each additional unit consumed yields a lower marginal utility.
As consumption of a product decreases, each additional unit consumed yields a lower marginal utility.
As consumption of a product increases, each additional unit consumed yields a higher marginal utility.
As consumption of a product increases, each additional unit consumed yields the same marginal utility.
Assume Soham spends all of his money on 4 apples & 4 candy bars. His MU of the 4th apple is 20 utils, and his MU of the 4th candy bar is 40 utils. If an apple costs $1.00 and a candy bar $0.50, to maximize utility Soham should:
Buy fewer apples and more candy bars
Maintain the current purchase of 4 of each
Buy more apples and fewer candy bars
Purchase more of both goods
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 marginal utility of the first unit is 20
The total utility of consuming two units is 120
The marginal utility of the second unit is 120
The marginal utility of the second unit is 80 utils
William Yuan 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, William should:
Consume more hot dogs & fewer sodas regardless of prices
Maintain current consumption if sodas are $2 each and hot dogs are $1 each
Consume more sodas & fewer hot dogs regardless of prices
Maintain current consumption if sodas are $1 each and hot dogs are $2 each
Which of the following is a key assumption of consumer choice theory?
Consumers try to maximize their utility
Consumers do not consider the opportunity costs of purchases
Marginal utility is always increasing
As income rises, consumers buy more of all goods
Edwin 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, Edwin should have:
bought more X and more Y
maintained his current consumption
bought less X and more Y
bought more X and less Y
According to the law of diminishing marginal utility, which of the following is true?
When marginal utility is decreasing, total utility is decreasing
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 increases
The additional satisfaction received from consuming extra units of a good decreases as consumption of the good decreases
Arvind spends all his weekly allowance to buy only two goods: soda and apples. According to the table above, if his preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct?
Arvind can buy more apples and the same amount of soda to maximize her utility
Arvind is maximizing her utility
Arvind can buy more soda and fewer apples to maximize her utility
Arvind can buy more apples and less 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 price per unit 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 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
When marginal utility is falling but positive, total utility will:
Increase at a decreasing rate
Decrease at an increasing rate
Increase at an increasing rate
Remain constant
