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21) Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good x, a normal good?

A) An increase in the marginal utility of x

B) A decrease in the total utility of y

C) An increase in the marginal utility of good y

D) A decrease in income

22) In a restaurant we can observe people consuming coffee, tea, and soft drinks. All are priced the same. If Sally consumes coffee and Ali consumes soft drinks, we can conclude that

A) Bill will be drinking tea.

B) Sally likes coffee more than Ali does, and Ali likes soft drinks more than Sally does.

C) Sally derives more utility from coffee than from tea or soft drinks, and Ali derives more utility from soft drinks than from tea or coffee.

D) the utility Sally receives from coffee consumption equals the utility that Ali receives from consuming soft drinks.

23) Consumers do not buy as many units of each good as they want because

A) of the law of diminishing marginal utility.

B) they have limited incomes.

C) they do not know what they want in all situations.

D) eventually marginal utility equals zero.

24) The consumer optimum is the set of goods and services, subject to the limited income of the consumer, that

A) the consumer can afford to buy.

B) is characterized by zero marginal utility on each good and service.

C) maximizes the level of satisfaction for each consumer.

D) is characterized by increasing marginal utility.

25) A consumer with unlimited income will continue consuming goods until

A) the marginal utility of each is equal to zero.

B) the marginal utility of each is negative.

C) total utility rises.

D) marginal utility equals total utility.

26) The price of a hamburger is $1, the price of a movie is $5, and the consumer has $13. A consumer has purchased 3 hamburgers and two movies, receiving 10 units of utility for the last hamburger and 10 units of utility for the last movie. The set of goods

A) is an optimum since the entire income is spent and the marginal utility is the same for the last unit of each good.

B) is an optimum because the consumer has maximized her utility given the limited income she had.

C) is not an optimum because the marginal utility per dollar spent is greater for the hamburger than for the movie.

D) is not an optimum because the marginal utility for the second hamburger was less than the marginal utility for the first hamburger.

27) A consumer has spent all of his funds on hamburgers and movies. The price of a hamburger is $1 and the price of a movie is $5. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 40. This consumer has

A) not maximized utility. To maximize utility, he should cut back on movies and buy more hamburgers.

B) not maximized utility. To maximize utility, he should cut back on hamburgers and buy more movies.

C) not maximized utility. To maximize utility, he should cut back consumption of each.

D) maximized utility.

28) Refer to the above table. Assume the consumer spends his entire income.  If the consumer's optimum at the current price of a movie is at 4 hamburgers and 4 movies, and the price of a hamburger is $1, what is the consumer's income?

A) $28

B) $20

C) $16

D) $40

29) Refer to the above table. Assume the consumer spends his entire income.  The price of a hamburger is $1, the price of a movie is $6, and the consumer has $15. What is the consumer's optimum?

A) 2 hamburgers and 2 movies

B) 3 hamburgers and 2 movies

C) 4 hamburgers and 4 movies

D) 0 hamburgers and 2.5 movies

30) When Stephanie increases the consumption of pizza and decrease the consumption of soda, her marginal utility of

A) pizza falls and the marginal utility of soda will increase.

B) both pizza and soda will decrease.

C) pizza increases and the marginal utility of soda will fall.

D) both pizza and soda will increase.

 

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