chapter 7

Question 1

law of diminishing marginal utility

Answer 1

The principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases

Question 2

utility

Answer 2

the satisfaction or pleasure a consumer obtains from the consumption of a good or service

Question 3

total utility

Answer 3

total mount of satisfaction or pleasure a person derives from consuming specific quantity

Question 4

marginal utility

Answer 4

extra satisfaction a consumer realizes from an additional unit of that product

Question 5

Marginal utility can be….

Answer 5

positive, negative, and 0

Question 6

Marginal utility is the change in total utility

Answer 6

fact

Question 7

rational behavior

Answer 7

Human behavior based on comparison of marginal costs and marginal benefits; behavior designed to maximize total utility

Question 8

utility-maximizing rule

Answer 8

The principle that to obtain the greatest total utility, a consumer should allocate money income so that the last dollar spent on each good or service yields the same marginal utility (MU)

Question 9

substitution effect

Answer 9

impact that a change in a products prices has on its expensive relative to other product and consequently o its quantity demanded

Question 10

income effect

Answer 10

is the impact that a change in a product price has on a consumer’s real income and consequently on the quantity demanded of that good.

Question 11

why are marginal utilities must be put on a dollar spent basis

Answer 11

to make the amounts of extra utility derived from different priced goods comparable

Question 12

if marginal utility becomes negative, then total utility

Answer 12

falls

Question 13

according to the utility-maximizing rule, consumers achieve the greatest amount of satisfaction by doing which of the following

Answer 13

purchasing a combinations of goods or services whereby the last dollar spent on each yields the same amount of marginal utility

Question 14

consumer equilibrium

Question 15

the price of goods combined with the fat that consumer financial resources are limited, means that consumers must do which of the following

Answer 15

compromise on spending

Question 16

the price of goods combined with the fat that consumer financial resources are limited, means that consumers must do which of the following

Answer 16

compromise on spending