Homework 6 In Tutorial Library

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TITLE: Homework 6

UNIVERSITY / INSTITUTE: Purdue University

CLASS / COURSE: ECON 25100: Microeconomics

QUESTION DESCRIPTION:

Homework 6 (Chapter 6)
 
1. Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth: 
 
A. is relatively unappreciative of the arts.  
B. obtains more marginal utility from the play than from the hockey game.  
 C. has a higher "marginal utility to price ratio" for the hockey game than for the play.    
D. has recently attended several other Broadway plays.  
 
2. The diamond-water paradox arises because: 
 
A. essential goods may be cheap while nonessential goods may be expensive.    
 B. the marginal utility of certain products increases, rather than diminishes.  
C. essential goods are always higher priced than nonessential goods.  
D. we sometimes fail to use money as a standard of value.  
 
3. While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only receive 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that: 
 
 A. Alex may have to lower the price to convince Kara to buy a second slice.    
B. Kara will not eat a second slice, even if it is given to her at no charge.  
C. Kara will definitely want to buy a second slice of pizza.  
D. even if Kara buys a second slice, she will not buy a third slice.  
 
4. The utility of a good or service: 
 
A. is synonymous with usefulness.  
 B. is the satisfaction or pleasure one gets from consuming it.    
C. is easy to quantify.  
D. rarely varies from person to person.  
 
5. Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is: 
 
A. zero.  
 B. positive, but declines rapidly. 0%  
C. negative.    
D. positive, but less than the ticket price.  
 
6. Refer to the above data. The value for Y is: 
 
A. 25.  
B. 30.  
C. 40.  
 D. 45.    
 
7. Refer to the above data. The value for W is: 
 
A. 15.  
 B. 20.    
C. 25.  
D. 30.  
 
8. The above data illustrate the: 
 
A. law of comparative advantage.  
B. utility-maximizing rule.  
 C. law of diminishing marginal utility.    
D. law of increasing opportunity costs.  
 
9. Marginal utility is the: 
 
A. sensitivity of consumer purchases of a good to changes in the price of that good.  
 B. change in total utility obtained by consuming one more unit of a good.    
C. change in total utility obtained by consuming another unit of a good divided by the change in the price of that good.  
D. total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.  
 
10. If total utility is increasing, marginal utility: 
 
 A. is positive, but may be either increasing or decreasing.    
B. must also be increasing.  
C. may be either positive or negative.  
D. will be increasing at an increasing rate.  
 
11. Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that: 
 
A. the two commodities are substitute goods.  
B. Mrs. Arnold should spend more on pretzels and less on soda.  
 C. Mrs. Arnold should spend more on soda and less on pretzels.    
D. Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.  
 
12. Answer the question on the basis of the following two schedules which show the amounts of additional satisfaction (marginal utility) which a consumer would get from successive quantities of products J and K.
   
Refer to the above data. What level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $52 and the prices of J and K are $8 and $4 respectively? 
 
 A. 156 utils  
B. 124 utils  
C. 276 utils    
D. 36 utils  
 
13. Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase: 
 
A. more of A and less of B.  
 B. more of B and less of A.    
C. more of both A and B.  
D. less of both A and B.  
 
14. Diminishing marginal utility explains why: 
 
A. the income effect exceeds the substitution effect.  
B. the substitution effect exceeds the income effect.  
C. supply curves are upsloping.  
 D. demand curves are downsloping.    
 
15. Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18.
   
Refer to the above data. What level of total utility will the utility-maximizing consumer realize? 
 
A. 96 utils    
B. 108 utils  
 C. 72 utils  
D. 142 utils  
 
16. Marginal utility can be: 
 
A. positive, but not negative.  
B. positive or negative, but not zero.  
 C. positive, negative, or zero.    
D. decreasing, but not negative.  
 
17. The law of diminishing marginal utility states that: 
 
A. total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed.  
 B. beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.    
C. price must be lowered to induce firms to supply more of a product.  
D. it will take larger and larger amounts of resources beyond some point to produce successive units of a product.  
 
18. Where total utility is at a maximum, marginal utility is: 
 
A. negative.  
B. positive and increasing.  
 C. zero.    
D. positive but decreasing.  
 
19. Which of the following is correct? 
 
A. There is no firm mathematical relationship between marginal utility and total utility.  
B. Total utility is equal to the change in marginal utility from consuming an additional unit of a product.  
 C. If marginal utility is diminishing and is a positive amount, total utility will increase.    
D. If marginal utility is diminishing, total utility must also be diminishing.  
 
20. To maximize utility a consumer should allocate money income so that the: 
 
A. elasticity of demand on all products purchased is the same.  
 B. marginal utility obtained from the last dollar spent on each product is the same.    
C. total utility derived from each product consumed is the same.  
D. marginal utility of the last unit of each product consumed is the same.  

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SUBJECTS / CATEGORIES:
1. Business Economics
2. Economics
3. Microeconomics

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