Based on taste and preference alone, which good does the child prefer?
188. A child is given $4 of pocket money to be spent on either hard candies or chocolates.
Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from
each product are as shown in the following table.
Number
of
Items
MU of
Chocolat
es
MU of
Hard
Candies
1
60
150
2
50
140
3
40
120
4
30
100
5
20
80
6
10
70
7
5
50
8
0
20
If the child buys either chocolates or hard candies one piece at a time, what will be his first two
purchases?
7-102
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Blooms: Understand
D i f f i c u l t y :
02 Medium
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: II
Topic:
Theory of Consumer Behavior
189. A child is given $4 of pocket money to be spent on either hard candies or chocolates.
Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from
each product are as shown in the following table.
Number
of
Items
MU of
Chocolat
es
MU of
Hard
Candies
1
60
150
2
50
140
3
40
120
4
30
100
5
20
80
6
10
70
7
5
50
8
0
20
Which combination would give the child the maximum utility out of spending $4?
7-103
190. Answer the question based on the table below showing the marginal utility schedules for
product X and product Y for a hypothetical consumer. The price of product X is $4, and the
price of product Y is $2. The income of the consumer is
$20.
Product X
Product Y
Quantit
y
M
UX
Quantit
y
M
UY
1
32
1
24
2
28
2
20
3
24
3
16
4
20
4
12
5
16
5
8
If the consumer buys product X or product Y one unit at a time, which of the following will the
consumer’s first two purchases be?
A. a first unit of X followed by a first unit of Y
191. Answer the question based on the table below showing the marginal utility schedules for
product X and product Y for a hypothetical consumer. The price of product X is $4, and the
price of product Y is $2. The income of the consumer is
$20.
Product X
Product Y
Quanti
ty
M
U
X
Quanti
ty
M
U
Y
7-104
1
32
1
24
2
28
2
20
3
24
3
16
4
20
4
12
5
16
5
8
If the consumer buys both product X and product Y, how much will the consumer buy of each in
order to maximize utility?
192. Answer the question based on the table below showing the marginal utility schedules for
product X and product Y for a hypothetical consumer. The price of product X is $4, and the
price of product Y is $2. The income of the consumer is
$20.
Product X
Product Y
Quantit
y
M
UX
Quantit
y
M
UY
1
32
1
24
2
28
2
20
3
24
3
16
4
20
4
12
5
16
5
8
When the consumer purchases the utility-maximizing combination of product X and product Y,
total utility will be
193. Answer the question based on the table below showing the marginal utility schedules for
product X and product Y for a hypothetical consumer. The price of product X is $4, and the
price of product Y is $2. The income of the consumer is
$30.
Product X
Product Y
Quanti
ty
M
U
X
Quanti
ty
M
U
Y
1
32
1
24
2
28
2
20
3
24
3
16
4
20
4
12
5
16
5
8
What would be the utility-maximizing combination of products X and Y that could be purchased
with $30?
7-106
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: II
Topic:
Theory of Consumer Behavior
194. A consumer is making purchases of products Alpha and Beta such that the marginal utility
of product Alpha is 30 and the marginal utility of product Beta is 40. The price of product
Alpha is $5, and the price of product Beta is $10. The utility-maximizing rule suggests that, to
stay within a given budget constraint, this consumer should
195. A consumer is in equilibrium and is spending income in such a way that the marginal
utility of product X is 40 units and that of Y is 16 units. If the unit price of X is $5, then the
price of Y must be
196. Assume that a consumer purchases a combination of products Y and Z and that the
MUy/Py = 25 and MUz/Pz = 20. To maximize utility, without spending more money, the
consumer should
197. Assume that a consumer purchases a combination of products Y and Z and that the
MUy/Py = 30/2 and MUz/Pz = 45/3. To maximize utility, without spending more money, the
consumer should
7-108
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. Sharon is maximizing her utility from the given fixed budget.
B. Sharon should buy more orange juice and less soda.
C. Sharon should buy more soda and less orange juice.
D. Sharon should buy less orange juice and soda.
199. Betty is maximizing her satisfaction from spending her budget on two items, movie rentals
and music downloads. If her marginal utility from the last movie rental is twice that from the
last music download, what is the price of a movie rental if the price of a music download is
$0.80?
200. Assume that A and B are both priced at $1 per unit and that Mary has $10 to spend on A
and B. She buys 6 units of A and 4 units of B. The marginal utility of the final unit of A bought
is 12, and that of B is 8. This indicates that
7-109
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
D i f f i c u l t y :
02 Medium
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: II
Topic:
Theory of Consumer Behavior
201. In spending all his income on beer and pizza, Fred finds that the marginal utility of the last
pizza he consumed is 8, and the marginal utility of the last bottle of beer is 4. The price of a
bottle of beer is $1.50. If Fred has maximized his utility, the price of pizza must be
202. Mr. Samuelson’s current rates of purchase are such that the marginal utility of slacks is 18
and the marginal utility of ties for him is 5. If slacks and ties are priced at $12 and $2,
respectively, it can be concluded that Mr. Samuelson
7-110
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
purchase.
Test Bank: II
Topic:
Theory of Consumer Behavior
203. The goal of a rational consumer is to maximize
204. In 2015 the federal government started requiring restaurants to print calorie counts next to
menu items. The intent was to persuade consumers to
D. compare marginal utility against calorie counts.
205. The table shows the marginal-utility schedules for goods A and B for a hypothetical
consumer. The price of good A is $1, and the price of good B is $2. The income of the
consumer is $8.
7-111
Good A
Good B
Quantit
y
M
UA
Quantit
y
M
UB
1
10
1
16
2
9
2
14
3
8
3
12
4
7
4
10
5
6
5
8
6
5
6
6
7
4
7
4
If the consumer spends the given budget and gets maximum utility out of it, then she is receiving
how much satisfaction from each dollar spent on the final unit of good A consumed?
A. 14 utils per dollar
206. The table shows the marginal-utility schedules for goods A and B for a hypothetical
consumer. The price of good A is $1, and the price of good B is $2. The income of the
consumer is $8.
Good A
Good B
Quantit
y
M
UA
Quantit
y
M
UB
1
10
1
16
2
9
2
14
3
8
3
12
4
7
4
10
5
6
5
8
7-112
6
5
6
6
7
4
7
4
If the price of B falls to $1, while the price of A and the consumer‘s income stay the same, what
would be the utility-maximizing combination of goods A and B?
207. The table shows the marginal-utility schedules for goods A and B for a hypothetical
consumer. The price of good A is $1, and the price of good B is $2. The income of the
consumer is $8.
Good A
Good B
Quantit
y
M
UA
Quantit
y
M
UB
1
10
1
16
2
9
2
14
3
8
3
12
4
7
4
10
5
6
5
8
6
5
6
6
7
4
7
4
If the price of A decreases, while the price of B and the consumer’s income stay the same, we
would expect
D. MU/P of A to decrease, and the consumer will thus buy less of A.
208. A downward-sloping demand curve can be derived for a normal product by increasing its
price in the consumer-behavior model and noting
A. the increase in the utility–maximizing quantity of that product demanded.
209. Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If
the price of X increases, then the MU/P of X will
D. increase and the consumer will respond by buying more X and less Y.
7-114
210. When the price of a product falls for a normal good, the
effect will encourage them to purchase less.
211. When the price of a product rises for an inferior good, the
A. income and substitution effects will encourage consumers to purchase more of the product.
212. The reason the substitution effect works to encourage a consumer to buy less of a product
when its price increases is that
A. the real income of the consumer has been increased.
7-115
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
D i f f i c u l t y :
02 Medium
Learning Objective: 07–04 Discuss how the utility-maximization model helps highlight
the income and substitution effects of a price change.
Test Bank: II
Topic:
Income and Substitution Effects
213. Assume that Tonya consumes only two products, pizza and potato chips, out of a given
budget. Both are normal goods for Tonya. If the price of pizza decreases, then Tonya‘s
consumption of pizza will
A. decrease due to the income effect.
214. The substitution effect
A. is generally so weak that its effect cannot be predicted.
7-116
215. An increase in the price of product X causes a decrease in the quantity demanded for
product X. One basic explanation for this is
A. the law of increasing opportunity cost.
216. If the price of a good increases, the substitution effect will
D. go either way, but the income effect will always make the quantity decrease.
217. The table shows the total utility data for products X and Y. Assume that the prices of X and
Y are $3 and $4, respectively, and that consumer income is $18.
Units of
X
Total
Utility
Units of
Y
Total
Utility
1
9
1
16
2
15
2
28
3
19
3
36
4
21
4
40
5
22
5
42
How many units of the two products will the consumer buy to get maximum utility?
218. The table shows the total utility data for products X and Y. Assume that the prices of X and
Y are $3 and $4, respectively, and that consumer income is $18.
Units of
X
Total
Utility
Units of
Y
Total
Utility
1
9
1
16
2
15
2
28
3
19
3
36
4
21
4
40
5
22
5
42
If the price of X decreases from $3 to $2, while the price of Y and the consumer’s income stay
the same, then the utility-maximizing combination is such that the quantity of X
7-118
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
219. The table shows the total utility data for products X and Y. Assume that the prices of X and
Y are $3 and $4, respectively, and that consumer income is $18.
Units of
X
Total
Utility
Units of
Y
Total
Utility
1
9
1
16
2
15
2
28
3
19
3
36
4
21
4
40
5
22
5
42
Which of the following price-quantity schedules would represent the demand for X in the $2
and $3 price range?
(a)
(b)
(c)
(d)
P
Qd
P
Qd
P
Qd
P
Qd
$3
1
$3
2
$3
2
$3
2
2
4
2
5
2
3
2
4
220. The increase in demand for iPad tablet computers can be explained by
A. an increase in the technology used to produce iPads, making the supply of iPads increase.
7-119
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
D i f f i c u l t y :
02 Medium
Learning Objective: 07–05 Give examples of several real-world phenomena that can
be explained by applying the theory of consumer behavior.
Test Bank: II
Topic:
Applications and Extensions
221. Many people buy no more than one iPad because
222. Understanding the water and diamond paradox is valuable because it explains why
223. The price of diamonds is substantially greater than the price of water because
A. the total utility of water is greater than the total utility of diamonds.
B. the total utility of diamonds is greater than the total utility of water.
7-120
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. the marginal utility of the last diamond purchased is significantly greater than the marginal
utility of the last gallon of water purchased by a typical person.
D. the marginal utility of the last diamond purchased is significantly less than the marginal
utility of the last gallon of water purchased by a typical person.
224. The fact that an ounce of gold is priced higher than an ounce of chocolate suggests that
D. there are many substitutes for chocolate but few for gold.
225. A consumer has two basic choices: rent a DVD movie for $4.00 and spend 2 hours
watching it, or spend $13 for a miniature golf game that takes 1 hour. If the marginal utilities of
the movie and the miniature golf game are equal, and the consumer values time at $12 an hour,
the rational consumer will most likely
A. rent the movie instead of playing miniature golf.