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7-21
4
24
4
20
5
20
5
12
6
16
6
10
7
12
7
8
If the consumer's money income were cut from $52 to $28, and the prices of J and K remain at
$8 and $4, respectively, she would maximize her satisfaction by purchasing
A. 3 units of J and 3 units of K.
36. 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.
37. The marginal utility of the last unit of apples consumed is 12, and the marginal utility of the
last unit of bananas consumed is 8. What set of prices for apples and bananas, respectively,
would be consistent with consumer equilibrium?
38. Suppose you have a limited money income and you are purchasing products A and B, whose
prices happen to be the same. To maximize your utility, you should purchase A and B in such
amounts that
39. A consumer is maximizing her utility with a particular money income when
7-23
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.
C. MUa = MUb = MUc = . . . = MUn.
D. Pa = Pb = Pc = . . . = Pn.
40. Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units
of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units
of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson
41. If a rational consumer is in equilibrium, which of the following conditions will hold true?
A. MUa = MUb = MUc = . . . = MUn.
7-24
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
D i f f i c u l t y : 0 2 M e d i u m
G r a d a b l e : a u t o m a t i c
Learning Objective: 07-02 Describe how rational consumers maximize utility by
comparing the marginal utility-to-price ratios of all the products they could possibly
purchase.
Test Bank: I
Topic: Theory of Consumer Behavior
42. Assume MUc and MUd represent the marginal utility that a consumer gets from products C
and D, the respective prices of which are Pc and Pd. The consumer will increase his total utility
from a specific money outlay by spending more on C and less on D if initially
43. A consumer who has a limited budget will maximize utility or satisfaction when the
7-25
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 07-02 Describe how rational consumers maximize utility by
comparing the marginal utility-to-price ratios of all the products they could possibly
purchase.
Test Bank: I
Topic: Theory of Consumer Behavior
44. If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and
C in consumer equilibrium
45. Answer the question on the basis of the following total utility data for products L and M.
Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income
is $18
Units of
L
Total
Utility
Units of
M
Total
Utility
1
9
1
16
2
15
2
28
3
18
3
36
4
20
4
40
5
21
5
42
How many units of the two products will the rational consumer purchase?
7-26
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. 2 of L and 3 of M
46. Answer the question on the basis of the following total utility data for products L and M.
Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income
is $18.
Units of
L
Total
Utility
Units of
M
Total
Utility
1
9
1
16
2
15
2
28
3
18
3
36
4
20
4
40
5
21
5
42
What level of total utility does the rational consumer realize in equilibrium?
7-27
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Theory of Consumer Behavior
Type: Table
47. Other things equal, an increase in the price of product A will
48. Frank is purchasing products C and D in utility-maximizing amounts. If the price of C is $4
and the price of D is $2, then
49. The theory of consumer behavior assumes that consumers attempt to maximize
7-28
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. average utility.
D. marginal utility.
50. When a consumer shifts purchases from product X to product Y, the marginal utility of
51. Which of the following best explains why most people don’t consume units of goods to the
point that their marginal utility falls to zero?
7-29
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
G r a d a b l e : a u t o m a t i c
Learning Objective: 07-02 Describe how rational consumers maximize utility by
comparing the marginal utility-to-price ratios of all the products they could possibly
purchase.
Test Bank: I
Topic: Theory of Consumer Behavior
52. 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
53. Diminishing marginal utility explains why
7-30
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
Utility Maximization and the Demand Curve
54. What do the income effect, the substitution effect, and diminishing marginal utility have in
common?
55. A consumer's demand curve for a product is downsloping because
56. 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.
7-31
Units of
X
Marginal
Utility, X
Units of
Y
Marginal
Utility, Y
1
20
1
16
2
16
2
14
3
12
3
12
4
8
4
10
5
6
5
8
6
4
6
6
What quantities of X and Y should be purchased to maximize utility?
57. 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.
Units of
X
Marginal
Utility, X
Units of
Y
Marginal
Utility, Y
1
20
1
16
7-32
2
16
2
14
3
12
3
12
4
8
4
10
5
6
5
8
6
4
6
6
What level of total utility will the utility-maximizing consumer realize?
D. 142 utils
58. 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.
Units of
X
Marginal
Utility, X
Units of
Y
Marginal
Utility, Y
1
20
1
16
2
16
2
14
3
12
3
12
4
8
4
10
5
6
5
8
6
4
6
6
If the price of X decreases to $2, then the utility-maximizing combination of the two products is
59. 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.
Units of
X
Marginal
Utility, X
Units of
Y
Marginal
Utility, Y
1
20
1
16
2
16
2
14
3
12
3
12
4
8
4
10
5
6
5
8
6
4
6
6
Which of the following represents the demand schedule for X?
7-34
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D.P Qd
$4 2
2 5
60.
Units of X
MUx
MUx/Px = $2
MUx/Px = $1
Units of Y
MUy
MUy/Py = $4
1
20
-
-
1
48
-
2
18
-
-
2
40
-
3
16
-
-
3
36
-
4
14
-
-
4
32
-
5
12
-
-
5
24
-
6
11
-
-
6
12
-
If the prices of X and Y are $2 and $4 per unit, respectively, and this consumer has $10 in
income to spend, to maximize total utility, this consumer should buy
7-35
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 07-03 Explain how a demand curve can be derived by observing
the outcomes of price changes in the utility-maximization model.
Test Bank: I
Topic: Theory of Consumer Behavior
Topic:
Utility Maximization and the Demand Curve
Type: Table
61.
Units of
X
MUx
MUx/Px (if P =
$2)
MUx/Px (if P =
$1)
Units of
Y
MUy
MUy/Py (if P =
$4)
1
20
-
-
1
48
-
2
18
-
-
2
40
-
3
16
-
-
3
36
-
4
14
-
-
4
32
-
5
12
-
-
5
24
-
6
11
-
-
6
12
-
Refer to the table and graph. Suppose that the price of X falls from $2 to $1, while the price of
Y remains at $4. Which of the following represents the demand curve for X if the consumer has
money income of $10 to spend on X and Y?
7-36
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. D2
C. D3
D. D4
62. Susie buys two goods: rounds of golf and massages. Suppose that the price of a round of
golf is $20 and the price of a massage is $30. In a typical week, Susie will play two rounds of
golf, getting 20 utils of satisfaction from the second round. She normally buys three massages
each week, with the third giving her 30 utils of satisfaction. If she were to buy a fourth massage
in a week, it would give her 20 utils of satisfaction. If the price of massages is reduced to $15,
which of the
following outcomes might we expect to occur?
A. Susie would leave her consumption choices unchanged because of diminishing marginal
utility in the consumption of massages.
63. In introducing the opportunity cost of time into the theory of consumer behavior, we find
that, all else equal,
64. Assume you are spending your full budget and purchasing such amounts of X and Y that the
marginal utility from the last units consumed is 40 and 20 utils, respectively. Assume (a) the
prices of X and Y are $8 and $4 respectively; (b) it takes 3 hours to consume a unit of X and 1
hour to consume a unit of Y; and (c) your time is worth $2 per hour. You
A. should substitute X for Y until the marginal utility per hour is the same for both products.
65. Which of the following has been a significant factor in the ability of iPads to compete
effectively against laptop and desktop computers?
7-38
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
computers.
C. Many consumers perceive that iPads are superior to laptops and desktop computers for the
consumption of digital media.
D. The prices of laptops and desktop computers have increased dramatically.
66. How did Apple overcome consumers' diminishing marginal utility for iPads?
67. The diamond-water paradox arises because
7-39
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 07-05 Give examples of several real-world phenomena that can
be explained by applying the theory of consumer behavior.
Test Bank: I
Topic: Applications and Extensions
68. The diamond-water paradox occurs because
69. "Essential" water is cheaper than "nonessential" diamonds because
70. The fact that most medical care purchases are financed through insurance
7-40
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
payment method.
B. reduces the amount of health care consumed by raising the price of additional units of care.
C. has decreased health care costs and therefore reduced aggregate health care expenditures.
D. increases the amount of health care consumed by reducing the price of additional units of
care.
71. Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants
where each item is purchased separately?
72. Most economists contend that
