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30 Cards in this Set

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"When the price of M & Ms fell, I bought more bags of M & Ms and fewer Snickers bars." This statement best illustrates:
the substitution effect
Units of J MUj Units of K MUk
1 20 1 48
2 18 2 40
3 16 3 32
4 14 4 24
5 12 5 16
6 10 6 8
7 8 7 4

Refer to the table. If this consumer has an income of $26 and the prices of J and K are $2 and $4 respectively, the consumer will maximize her utility by purchasing:
5 units of J and 4 units of K
The income effect suggests that an increase in price will:
reduce the amount a consumer can afford with a specific money income
reduce the amount a consumer can afford with a specific money income
the consumer buys less of that product and more of products that are similar
If the marginal utilities of each unit consumed are summed, one obtains:
total utility
True or false: The high marginal utility of water explains the diamond-water paradox.
False



The paradox is explained by the relatively low marginal utility of water and the high marginal utility of diamonds.
Answer the next question on the basis of the following table which shows a consumer's total utility for products A, B, C, and D.

Units of
Product TUA TUB TUC TUD
1 11 28 12 17
2 21 49 22 30
3 30 63 30 39
4 38 70 36 44
5 45 70 40 45

Refer to the table. Demand is least elastic for product:
B
Suppose the prices of products X and Y are $5 and $10, respectively. For a specific consumer who is currently exhausting her total income, the total utility from X is 100, while the total utility from Y is 200. The marginal utility of X and Y are both equal to 8. From this information, we can conclude:
she should purchase relatively more X
Suppose the price of X is $4 and the price of Y is $2. In order to maximize total utility, a consumer should allocate purchases such that:
the marginal utility of X is twice that of Y
Suppose that Karen used to buy one latte every weekday, but now that the price has increased she has cut back her purchases to just one each weekday. Her decision is best explained by:
both income and substitution effects
True or false: Even millionaires face a budget constraint.
True
If you are purchasing two products whose prices are Px = $3 and Py = $9, in order to maximize your utility you should purchase:
X and Y such that the marginal utility of X is one third the marginal utility of Y
Suppose your supervisor at work gives you a basket for "employee recognition day" containing food items with a combined market value of $25. Then:
you would likely have preferred $25 cash instead
Kevin received 80 total units of utility from the first four chips he consumed. If the marginal utilities of the first, second, and third chips are 20, 25, and 20, respectively, the marginal utility of the fourth chip is:
15 units of utility
Suppose Joan's marginal utility of oranges diminishes very slowly. Then Joan's:
demand for oranges is likely very elastic
True or false: Both an increase in money income and an increase in prices will shift the budget constraint to the right.
False
Jacquee and Shariff have identical preferences but Shariff has a lower opportunity cost of time. We should expect that, compared to Jacquee, Shariff:
will consume more time-intensive commodities
Suppose ramen noodles are an inferior good. Theory tells us that if its price rises:
only the substitution effect leads to a decrease in quantity purchased
Suppose Josh is currently consuming 7 apples and 14 oranges per week. Further suppose he would receive the same utility from consuming 8 apples and 10 oranges per week. If apples cost $2.00 each and oranges cost $1.00 each:
Josh could increase his utility by consuming relatively more apples
The price of apples decreases and Josh responds by buying more apples and fewer oranges. Accordingly, the:
marginal utility of apples will decrease and oranges will increase
For a normal good, the income effect:
reinforces the substitution effect of a price increase
Tulia consumes only two goods, burgers and fries, both of which are normal goods. If the price of burgers decreases, Tulia's consumption of burgers will:
increase due to the income effect
Which one of the following is inconsistent with the law of diminishing marginal utility? Jenny's marginal utility of cookies:
falls for the first four cookies, but increases for each successive cookie
Answer the next question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K.

Units of J MUj Units of K MUk
1 20 1 48
2 18 2 40
3 16 3 32
4 14 4 24
5 12 5 16
6 10 6 8
7 8 7 4
3 units of J and 5 units of K
When offered another helping of mashed potatoes at dinner, your dinner guest passes but asks for a second glass of wine. We can conclude that your guest's:
marginal utility of wine is positive but marginal utility of mashed potatoes is zero or negative
Answer the next question on the basis of the following table which shows a consumer's total utility for products A, B, C, and D.

Units of
Product TUA TUB TUC TUD
1 11 28 12 17
2 21 49 22 30
3 30 63 30 39
4 38 70 36 44
5 45 70 40 45
A
Suppose that the marginal utilities per dollar of goods X and Y are 4 and 2, respectively. Further suppose the prices of the two goods are $10 and $5. If the consumer is just exhausting his income, he:
should buy relatively more X and less Y
Suppose the price of a compact disc (CD) is half that of a DVD. A consumer who purchases both DVDs and CDs will allocate her income between them such that:
the marginal utility of CDs is half that of DVDs
Tonya currently rents four DVDs per week for $4 each and plays 2 rounds of golf, priced at $10 per nine-hole round. She values her time at $8 per hour and it takes 2 hours either to watch a DVD or play a round of golf. The marginal utilities of a DVD and a round of golf are 40 and 60, respectively. Based on the information, Tonya should:
play more golf and watch fewer DVDs
True or false: All else equal, people will eat more at an all-you-can-eat buffet than at a traditional ala carte restaurant.
True