Chapter 5 questions Flashcards
As living standards improve,
a. things that were once luxuries become needs.
b. things that were once wants become needs.
c. needs are eliminated, leaving only wants.
d. needs remain the same, but wants increase
d. needs remain the same, but wants increase
Higher education is a _____ and assigned textbooks are a ______.
a. need; needs
b. want; wants
c. need; wants
d. want; needs
b. want; wants
Any consumer trying to decide whether to buy a given good or service will base the decision on his or her reservation price and the existing market price.
- When making this decision, the buyer’s reservation price measures the
a. marginal benefit: what the buyer is willing to pay
b. marginal benefit: the value of the resources used in production
c. marginal cost: the lowest amount the buyer is willing to pay
d. marginal cost: the cost of production - The market price measures the
a. marginal cost: the amount the buyer will actually have to pay
b. marginal benefit: what the buyer is willing to pay
c. marginal cost: the lowest amount the buyer is willing to pay
d. marginal cost: the cost of production - The consumer will purchase the good or service only if the buyer’s
a. reservation price is exactly equal to the market price
b. reservation price is lower than the market price
c. reservation price is higher than the market price
d. reservation price is equal to or higher than the market price
- a. marginal benefit: what the buyer is willing to pay
- a. marginal cost: the amount the buyer will actually have to pay
- d. reservation price is equal to or higher than the market price
If marginal utility is positive, then as consumption increases:
a. the consumer will not experience diminishing marginal utility.
b. total utility will not change.
c. total utility will increase.
d. the demand curve will have a positive slope.
c. total utility will increase.
Toby’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is 200 utils per ounce. If peanuts cost $0.10 per ounce and cashews cost $0.25 per ounce, is Toby maximizing his total utility from the kinds of nuts?
A. At the current level of peanut consumption, Toby receives: _____ utils per dollar.
B. At the current level of cashew consumption, Toby receives: _____ utils per dollar.
C. Therefore, Toby _____ maximizing his total utility because MUp/Pp is ______ MUc/Pc.
A. 1000 (100/.10)
B. 800 (200/.25)
C. is not; not equal to
Purchasing goods such that the ratio of marginal utility to price is equal across all goods results in the:
a. greatest total utility.
b. lowest expenditure.
c. greatest marginal utility.
d. same expenditure on all goods.
a. greatest total utility.
Suppose that Fiona spends all of her income on 10 units of good X and 14 units of good Y. Fiona’s marginal utility from the 10th unit of good X is 24 utils, and her marginal utility from the 14th unit of good Y is 20 utils. If the price of good X is $8 per unit and the price of good Y is $5 per unit, then to comply with the rational spending rule, Fiona should
a. purchase fewer than 10 units of good X and fewer than 14 units of good Y.
b. purchase fewer than 10 units of good X and more than 14 units of good Y.
c. purchase more than 10 units of good X and more than 14 units of good Y.
d. purchase more than 10 units of good X and fewer than 14 units of good Y.
b. purchase fewer than 10 units of good X and more than 14 units of good Y.
Since MUX/PX= 3 and MUY/PY= 4, to comply with the rational spending rule, Fiona should purchase fewer than 10 units of good X and more than 14 units of good Y.
If a consumer reallocates his or her spending away from Good B and towards Good A, then the consumer’s total utility will increase if:
a. MUA/PA > MUB/PB.
b. MUA/PA < MUB/PB.
c. MUA/PA > 0 and MUB/PB > 0.
d. MUA/PA < 0 and MUB/PB < 0.
a. MUA/PA > MUB/PB.
Let MUc denote the marginal utility that Pablo receives from a cup of coffee, and let Pc denote the price of a cup of coffee. We typically expect that as Pablo buys more coffee
a. MUc/Pc will rise.
b. MUc/Pc will fall.
c. MUc/Pc will not change.
d. MUc and Pc will both fall.
b. MUc/Pc will fall.
When the price of a good falls, marginal utility per dollar spent on that good ______, prompting consumers to purchase ______ of that good.
a. rises; more
b.falls; more
c. rises; less
d. falls; less
a. rises; more
When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good.
a. rises; more
b. falls; more
c. rises; less
d. falls; less
d. falls; less
Moe’s reservation price for his economics textbook is $100. The week before the semester begins, Moe finds a copy of his textbook online for $75. Moe’s consumer surplus from buying the textbook online is:
a. $125.
b. $100.
c. $75.
d. $25.
d. $25.
100-75=25
