Q&A Hero

Q: The substitution effect of a price increase causes a decrease in the quantity demanded of an inferior good.

Q: The income effect of a price increase causes a decrease in the quantity demanded of a normal good.

Q: The economic model of consumer behavior explains how consumers' tastes and preferences are formed.

Q: A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Q: When diminishing marginal utility sets in, total utility must be negative.

Q: If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Q: A change in the price of a good has two effects on the quantity consumed. What are these effects? A) the income effect and the substitution effect B) the utility effect and the budget effect C) the total utility effect and marginal utility effect D) the consumption effect and expenditure effect

Q: The income effect of a decrease in the price of legal services, a normal good, results in A) a decrease in the demand for legal services. B) a decrease in the quantity demanded of legal services. C) an increase in the quantity demanded of legal services. D) an increase in the demand for legal services.

Q: The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following? A) income effect only or substitution effect only but not both effects B) income and substitution effects C) price effect D) consumption effect

Q: The substitution effect of an increase in the price of peaches is A) the change in the quantity demanded that results from a change in the price of peaches making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. B) the change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power. C) the change in the quantity demanded of peaches that results from the effect of the change in the price of peaches on the consumer's purchasing power. D) the change in the demand for peaches that results when the price of peaches increases.

Q: The income effect of an increase in the price of peaches is A) the change in the quantity demanded of peaches that results from the price increase making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power. B) the change in the demand for peaches as a result of the change in the price of peaches, holding all other factors constant. C) the change in the quantity demanded of other fruit that results from the impact of the price change on purchasing power, holding all other factors constant. D) the change in the quantity demanded of peaches that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.

Q: The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good) results in A) a decrease in the demand for macaroni and cheese. B) an increase in the quantity demanded of macaroni and cheese. C) a decrease in the quantity demanded of macaroni and cheese. D) an increase in the demand for macaroni and cheese.

Q: The substitution effect of a decrease in the price of movie tickets results in A) an increase in the quantity demanded of movie tickets. B) a decrease in the quantity demanded of movie tickets. C) an increase in the demand for movie tickets. D) a decrease in the demand for movie tickets.

Q: Which of the following correctly describes the result of a price increase for an inferior good? A) Both the substitution effect and the income effect cause the consumer to buy less of the good. B) The substitution effect causes the consumer to buy less of the good and the income effect causes the consumer to buy more of the good. C) The substitution effect causes the demand for the good to decrease; the income effect causes the demand for the good to increase. D) The substitution effect causes the demand for the good to increase; the income effect causes the demand for the good to decrease.

Q: Which of the following describes the substitution effect of a price change? A) The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. B) The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. C) The change in quantity demanded of a good that results from the change in the price of a substitute for the good. D) The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.

Q: The income effect of a price change refers to A) the change in demand that occurs when consumer income changes. B) the change in the quantity demanded that results from a change in price, making the good more or less expensive relative to other goods, holding everything else constant. C) the change in demand that occurs when both income and price change. D) the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.

Q: If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk, then when Lisa maximizes her utility she will buy A) both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. B) three times as many veggie burgers as pints of soy milk. C) three times as many pints of soy milk as veggie burgers. D) both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers.

Q: Table 10-7Quantity of Beer (glasses)Total UtilityQuantity of Pizza (slices)Total Utility125120245235360345465450569552670652Table 10-7 shows Antonio's utility from beer and pizza.Refer to Table 10-7. Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice. How many of each good will he consume when he maximizes his utility?A) 2 glasses of beer, 1 slice of pizzaB) 2 glasses of beer, 3 slices of pizzaC) 3 glasses of beer, 2 slices of pizzaD) 4 glasses of beer, 5 slices of pizza

Q: Table 10-7Quantity of Beer (glasses)Total UtilityQuantity of Pizza (slices)Total Utility125120245235360345465450569552670652Table 10-7 shows Antonio's utility from beer and pizza.Refer to Table 10-7. What is Antonio's marginal utility from consuming the fifth beer?A) 4 utilsB) 13.6 utilsC) 69 utilsD) 134 utils

Q: Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video. Which of the following is true? A) The marginal utility of video rentals is negative. B) The marginal utility per dollar spent on books exceeds that of video rentals. C) The marginal utility of the last book consumed exceeds the marginal utility of the last video rental consumed. D) The marginal utility of the last video rental consumed exceeds the marginal utility of the last book consumed.

Q: Terence has $50 per week to spend on Subway sandwiches and milkshakes. The price of a Subway sandwich is $5 and the price of a milkshake is $4. He buys 6 sandwiches and 5 milkshakes. The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th milkshake = 24. Which of the following is true? A) He is not maximizing his utility and should buy more milkshakes. B) He is maximizing his utility. C) He is not maximizing his utility and should buy more Subway sandwiches. D) He is not maximizing his utility because he is not spending all of his income.

Q: Suppose Barry is maximizing his utility from consuming used paperback novels and audio books. The price of a used novel = $4 and the price of an audio book = $8. If the marginal utility of the last novel was 32 units of utility (utils) what was the marginal utility of the last audio book purchased? A) 2 utils B) 12 utils C) 16 utils D) 64 utils

Q: Table 10-6Quantity of BurgersMarginal UtilityQuantity of PepsiMarginal Utility12013021421031037434551516-5607-107-4Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will he consume?A) 7 burgersB) 6 burgersC) 5 burgersD) 3 burgers

Q: Table 10-6Quantity of BurgersMarginal UtilityQuantity of PepsiMarginal Utility12013021421031037434551516-5607-107-4Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.Refer to Table 10-6. What is Jay's optimal consumption bundle?A) 1 burger and 2 PepsisB) 2 burgers and 3 PepsisC) 3 burgers and 1 PepsiD) 3 burgers and 2 Pepsis

Q: Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge? A) No. We need to know her preferences for CDs and DVDs. B) Yes. C) No. We need to know the prices of the CDs and DVDs. D) No. If this was the optimal combination, the marginal utility per dollar of the 5th CD and the 7th DVD would be equal.

Q: Refer to Table 10-5Italian SubItalian SubTacoTacoTacoQuantityMUMU/$4MUMU/$2MU/$1140103015302328241224320516816412312612561.5848620.5424which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of the sub sandwiches is $4 and the price of tacos is $2. When Harry's income is $14 he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of tacos decreases to $1. Complete this statement: As a result of the change in price, the marginal utility of each taco Harry consumes increases andA) the substitution effect of the price change will cause Harry to buy more tacos and fewer subs.B) the substitution effect of the price change will cause Harry to buy more tacos if they are a normal good, and fewer tacos if they are an inferior good.C) the substitution effect will cause Harry to buy another sub because his purchasing power has increased.D) the substitution effect will cause Harry to buy fewer tacos.

Q: Table 10-5Italian SubItalian SubTacoTacoTacoQuantityMUMU/$4MUMU/$2MU/$1140103015302328241224320516816412312612561.5848620.5424Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of the sub sandwiches is $4 and the price of tacos is $2. When Harry's income is $14 he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of tacos decreases to $1. Complete this statement: As a result of the change in priceA) Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change.B) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change.C) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change.D) Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change

Q: There are two conditions necessary for a consumer to maximize her utility. One is that the marginal utilities per dollar spent on each good and service consumed are equal. What is the other condition? A) Total spending on all goods and services must equal the amount available to be spent. B) The consumer must be satisfied with the choices she makes. C) The total spent on each good and service is the same. D) The prices of each good and service consumed must not be too high.

Q: The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears. To maximize his utility, what should Harold do? A) He should acquire more income so that he can afford to buy more oranges and pears. B) He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. C) He should buy fewer pears and more oranges. D) He should buy fewer oranges and more pears.

Q: Table 10-4Steak & CheeseSteak & CheeseGrilled ChickenGrilled ChickenQuantityMUMU/PMUMU/P1401030152328241232051684123126561.584620.542Refer to Table 10-4. For steak and cheese and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches. Which of the following statements istrue?A) If Mabel maximizes her utility she will buy three steak and cheese sandwiches and two grilled chicken sandwiches.B) If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich.C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches.D) To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches.

Q: Table 10-4Steak & CheeseSteak & CheeseGrilled ChickenGrilled ChickenQuantityMUMU/PMUMU/P1401030152328241232051684123126561.584620.542Refer to Table 10-4. For steak and cheese and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches. Which of the following statements is false?A) The price of steak and cheese sandwiches is $4. The price of grilled chicken sandwiches is $2.B) If Mabel maximizes her utility she will buy three grilled chicken sandwiches.C) If Mabel maximizes her utility she will buy two steak and cheese sandwiches.D) We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility.

Q: During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume. Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct? A) Peter described one of the conditions necessary for utility maximization. The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola. B) Peter's statement is correct. C) Peter's statement is correct but we must also assume that the consumer is rational. D) Peter describes one of the conditions necessary for utility maximization. The second condition is that total spending on both goods must equal the amount available to be spent.

Q: Table 10-3Ice Cream ConesLime Fizz SodaQuantityMUMU1304022535320264151851015657Refer to Table 10-3. The table above shows Lee's marginal utility from consuming ice cream cones and cans of Lime Fizz Soda. Select the phrase that completes the following statement. "We can determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utilityA) if we know what Lee's income is."B) if we know what Lee's income is and the price of an ice cream cone and the price of a can Lime Fizz Soda."C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda."D) if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda."

Q: Table 10-3Ice Cream ConesLime Fizz SodaQuantityMUMU1304022535320264151851015657Refer to Table 10-3. The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda. The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1. Use this information to select the correct statement.A) We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his income is.B) To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda.C) We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity.D) If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda.

Q: Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save. Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50. The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20. Marv has only $50 to spend, but has not yet paid for his groceries. How can Marv increase his total utility without spending more than $50? A) Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices. B) Marv should buy more boxes of cereal and fewer bottles of soft drink. C) Marv should buy fewer boxes of cereal and more bottles of soft drink. D) Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then spend more on other items.

Q: Which of the following is explained by the law of diminishing marginal utility? A) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola. B) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel. C) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel. D) The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola.

Q: The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as A) maximizing behavior. B) economizing behavior. C) the price constraint. D) the budget constraint.

Q: A budget constraint A) represents the bundles of consumption that make a consumer equally happy. B) refers to the limited amount of income available to consumers to spend on good and services. C) reflects the desire by consumers to increase their income. D) shows the prices that a consumer chooses to pay for products he consumes.

Q: The amount of income a consumer has to spend on goods and services is known as A) purchasing power. B) effective demand. C) a budget constraint. D) wealth.

Q: In making decisions about what to consume, a person's goal is to A) allocate her limited income among all the products she wishes to buy so that she receives the highest total utility. B) buy low-priced goods rather than high-priced goods. C) maximize her marginal utility from the goods and services she wishes to buy using her limited income. D) consume as many necessities as possible and then, if there is money left over, to buy luxuries.

Q: Total utility is maximized in the consumption of two goods by A) equating the marginal utility for each good consumed. B) equating the marginal utility per dollar for each good consumed. C) equating the total utility of each good divided by its price. D) maximizing expenditure on each good.

Q: Optimal decisions are made A) in the marketplace. B) if information about prices and marginal utilities is known. C) when marginal utility is minimized. D) at the margin.

Q: If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then A) his total utility from eating hot dogs is negative. B) the marginal utility from the next hot dog Joey eats will be negative. C) the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. D) Joey is maximizing the marginal utility per dollar he receives from eating hot dogs.

Q: If the marginal utility Ida Mae receives from eating chicken wings is negative then A) her total utility from eating chicken wings has fallen. B) her total utility from eating chicken wings is negative as well. C) Ida Mae definitely does not like chicken wings. D) her total utility has risen, but by less from the last chicken wing than from the next to last chicken wing.

Q: If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance, we can conclude that A) the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal utility per dollar spent on Blue Man Group. B) Paul's demand for a ticket to see Cirque du Soleil is more elastic than his demand for a ticket to see Blue Man Group. C) Paul is not making a rational choice. D) the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group.

Q: If marginal utility of apples is diminishing and is a positive amount, consuming one more apple will cause A) total utility to decrease. B) a consumer to get no satisfaction from consuming apples. C) a consumer's total utility to increase. D) a consumer to go beyond her optimal consumption of apples.

Q: Marginal utility is A) the change in total utility divided by the price of the last unit of a good or service consumed. B) the change in total utility a person receives from consuming an additional unit of a good or service. C) the utility from consuming a given quantity of a good or service. D) the decrease in total utility from consuming more and more units of a good or service.

Q: The additional utility that George receives from consuming one more slice of pizza is called A) average utility. B) marginal utility. C) total utility. D) diminishing utility.

Q: Suppose the marginal utilities for the first three cans of soda are 100, 80 and 60, respectively. The total utility received from consuming 2 cans is A) 20. B) 80. C) 90. D) 180.

Q: The word "util" has been used by economists in the past as an objective measure of utility. Today economists believe that A) utility cannot be measured objectively. B) utility can be measured objectively because people can use prices of different goods to measure utility. C) all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. D) the util truly is an objective, rather than a subjective, measure of utility.

Q: An economist observes two consumers in a supermarket. One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola. Both colas sell for the same price and the ages and incomes of the consumers are also the same. Based on this information, how would the economist explain the consumers' choices? A) One of the consumers made the wrong choice, but it is impossible to say which one. B) Both consumers should have considered buying other colas that had lower prices. C) Both consumers should have purchased less than a case because they would be able to buy more later. D) Apparently, the consumers had different tastes.

Q: The economic model of consumer behavior predicts that A) consumers will try to earn as much income as they can over their lifetimes. B) consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy. C) consumers will try to accumulate as many goods and services as they can before they die. D) consumers divide their time between consumption and leisure activities in order to maximize social welfare.

Q: The satisfaction a person receives from consuming goods and services is called A) contentment. B) psychic income. C) wealth. D) utility.

Q: Economists usually assume that people act in a rational, self-interested way. In explaining how consumers make choices this means that economists believe A) consumers will always buy goods and services at the lowest possible prices. B) consumers spend their incomes to order to accumulate the most goods and services. C) consumers make choices that will leave them as satisfied as possible given their incomes, tastes and the prices of goods and services available to them. D) consumers will spend their incomes and time on activities that benefit themselves as much as possible, without regard to the welfare of others.

Q: Adhira buys chocolates and almonds. She has 3 bars of chocolates and 4 bags of almonds. The marginal utility of the third chocolate bar is 18 units of utility and the marginal utility from the fourth bag of almonds is also 18. Is Adhira maximizing her utility? A) Yes, the marginal utility from the last unit of each good is equal. B) No, she must buy 1 more chocolate bar to equate her quantities of the two goods. C) No, she must buy cut back to 3 bags of almonds to equate her quantities of the two goods. D) No, without information on her income and the prices of the two goods, we cannot answer the question.

Q: Table 10-2Quantity of Soup (cups)Total UtilityQuantity of SandwichesTotal Utility1401452602753723102482412058851356906145Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23, what happens to her total utility and to the marginal utilities of the last cup of soup and the last sandwich purchased?A) Her total utility increases but the marginal utilities of the last cup of soup and the last sandwich consumed decrease.B) Her total utility, the marginal utility of the last cup of soup consumed and the marginal utility of the last sandwich consumed, all increase.C) Her total utility decreases but the marginal utilities of the last cup of soup and the last sandwich consumed increase.D) Her total utility and the marginal utility of the last cup of soup consumed increase but marginal utility of the last sandwich consumed decreases.E) Her total utility and the marginal utility of the last sandwich consumed increase but marginal utility of the last cup of soup consumed decreases.

Q: Grant has $200 to spend each month on restaurant meals and jazz performances at hisneighborhood jazz club. The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10. Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances. Suppose Grant still has $200 to spend, but the price of restaurant meal rises to $25, while the price of jazz performance ticket drops to $8. Is Grant better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.

Q: Table 10-2Quantity of Soup (cups)Total UtilityQuantity of SandwichesTotal Utility1401452602753723102482412058851356906145Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23, her utility maximizing bundle changed. Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches?A) Soup is an inferior good and sandwiches are a normal good.B) Soup is a normal good and sandwiches are an inferior good.C) Both soup and sandwiches are normal goods.D) Both soup and sandwiches are inferior goods.

Q: Farah has $100 to spend each month on bread and chicken. Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound. a. Draw her budget constraint and label it BC0. Put bread on the horizontal axis and chicken on the vertical axis. Be sure to identify the intercept values. b. Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken. On the same graph you drew in part (a), draw an indifference curve to identify her optimal bundle. Label this bundle "E." c. Is her budget exhausted? Verify your answer. d. Now suppose Farah's income falls to so that she can now devote $80 to the two goods. Prices however remain unchanged. In the same diagram, graph her new budget constraint and label it BC1. Be sure to identify any new intercept values. e. Following the change in income, can Farah consume the same bundle "E"? Explain your answer. f. What must happen to her total utility following the decrease in her income?

Q: Table 10-2Quantity of Soup (cups)Total UtilityQuantity of SandwichesTotal Utility1401452602753723102482412058851356906145Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. Suppose Keira's income increases from $18 to $23 but prices have not changed. What is her utility maximizing bundle now?A) 6 cups of soup and 5 sandwichesB) 4 cups of soup and 5 sandwichesC) 5 cups of soup and 4 sandwichesD) 5 cups of soup and 5 sandwiches

Q: Gowri has $6 per day to purchase lunch. She spends all of her lunch money on pizza and iced tea. The price of pizza is $2.00 per slice and iced tea costs $1 per bottle. a. Draw Gowri's budget constraint and label it BC0. Put pizza on the horizontal axis and iced tea on the vertical axis. Be sure to identify the intercept values. b. If the price of iced tea rises to $1.20 per bottle, show what will happen to her budget constraint in your diagram. Be sure to indicate any new intercept values.

Q: Table 10-2Quantity of Soup (cups)Total UtilityQuantity of SandwichesTotal Utility1401452602753723102482412058851356906145Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. If Keira maximizes her utility, how many units of each good should she buy?A) 1 cup of soup and 5 sandwichesB) 3 cups of soup and 4 sandwichesC) 6 cups of soup and 2 sandwichesD) 4 cups of soup and 3.5 sandwiches

Q: What is an indifference curve? Why can indifference curves never cross?

Q: Table 10-2Quantity of Soup (cups)Total UtilityQuantity of SandwichesTotal Utility1401452602753723102482412058851356906145Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. What is Keira's marginal utility per dollar spent on the third cup of soup?A) 72 units of utilityB) 36 units of utilityC) 12 units of utilityD) 6 units of utility

Q: All consumption bundles along a given indifference curve are equally desirable.

Q: Consider a downward-sloping demand curve. When the price of a normal good decreases, the income and substitution effects A) work in the same direction to increase quantity demanded. B) work in the same direction to decrease quantity demanded. C) work in opposite directions and quantity demanded increases. D) work in opposite directions and quantity demanded decreases.

Q: An increase in income results in an outward shift of an indifference curve.

Q: Consider a downward-sloping demand curve. When the price of a normal good increases, the income and substitution effects A) work in the same direction to increase quantity demanded. B) work in the same direction to decrease quantity demanded. C) work in opposite directions and quantity demanded increases. D) work in opposite directions and quantity demanded decreases.

Q: Total utility is constant along a given indifference curve.

Q: Consider a downward-sloping demand curve. When the price of an inferior good decreases, the income and substitution effects A) work in the same direction to increase quantity demanded. B) work in the same direction to decrease quantity demanded. C) work in opposite directions and quantity demanded increases. D) work in opposite directions and quantity demanded decreases.

Q: A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Q: Consider a downward-sloping demand curve. When the price of an inferior good increases, the income and substitution effects A) work in the same direction to increase quantity demanded. B) work in the same direction to decrease quantity demanded. C) work in opposite directions and quantity demanded increases. D) work in opposite directions and quantity demanded decreases.

Q: A consumer's indifference curves can never cross.

Q: The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises A) the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded. B) the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded. C) both the income and substitution effects reinforce each other to decrease the quantity demanded. D) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas.

Q: The marginal rate of substitution is determined by the slope of an indifference curve.

Q: The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. C) both the income and substitution effects reinforce each other to increase the quantity demanded. D) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.

Q: Figure 10-9 Refer to Figure 10-9. If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC2? A) $8 B) $10 C) $20 D) $40

Q: If the price of muffins, a normal good you enjoy, rises A) the income and substitution effects offset each other but the price effect leads you to buy fewer muffins. B) both the income and substitution effects lead you to buy fewer muffins. C) the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased. D) the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.

Q: Figure 10-9 Refer to Figure 10-9. If the consumer has $240 to spend on DVDs and CDs, what is the price of a DVD if the budget constraint is BC1? A) $10 B) $20 C) $24 D) $40

Q: If the price of lattes, a normal good you enjoy, falls A) the income and substitution effects offset each other but the price effect leads you to buy more lattes. B) both the income and substitution effects lead you to buy more lattes. C) the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more latte purchased. D) the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more latte purchased.