978-1259723223 Test Bank TBChap007 Part 2

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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

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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.

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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

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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?

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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?

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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

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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?

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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

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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.

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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

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

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2

16

2

14

3

12

3

12

4

8

4

10

5

6

5

8

6

4

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

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

Which of the following represents the demand schedule for X?

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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

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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?

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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?

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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

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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

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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