Chapter 8

Question 1

Consumption Possibilities

Answer 1

These are all the things you can afford to buy.

Question 2

Consumer’s Budget Line

Answer 2

The consumption possibilities are limited by income and by the prices of the two objects being bought.

Question 3

Budget Line

Answer 3

Marks the boundary between those combinations of goods and services that a household can and cannot afford to buy.

Question 4

Preferences

Answer 4

A description of her likes and needs

Question 5

Utility

Answer 5

The benefit of satisfaction that a person gets from the consumption of goods and services.

Question 6

Total Utility

Answer 6

The total benefit that a person gets from the consumption of all the different goods and services

Question 7

Marginal Utility

Answer 7

The change in total utility that results from one-unit increase in the quantity of a good consumed.

Question 8

Positive Marginal Utility

Answer 8

All the things that people enjoy and want more of have a positive marginal utility

Question 9

Diminishing Marginal Utility

Answer 9

The tendency for marginal utility to decrease as the consumption of a good increases.

Question 10

Consumer Equilibrium

Answer 10

A situation in which a consumer has allocated all of his or her total utility, given the prices of goods and services.

Question 11

Marginal Utility per Dollar

Answer 11

The marginal utility from a good that results from spending one more dollar on it.