Determine the utility-maximizing combination of goods

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Reference no: EM13188103

1)Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $200 and the price of a textbook is $50, then the slope of his budget line (assuming vacation trips are measured on the Y - axis) would be

a)-4
b)4
c)0.25
d)-1.75
e)-0.25

2)An increase in the price of the good measured on the horizontal axis (the X-axis) of a budget line diagram will

a)make the budget line flatter
b)make the budget line steeper
c)leave the budget line unchanged
d)cause a parallel inward shift of the budget line
e)cause a parallel outward shift of the budget line


3)If income and the prices of both goods all double, the budget line will

a)become flatter
b)become steeper
c)remain unchanged
d)experience a parallel outward shift
e)experience a parallel inward shift

4)Roger spends all of his money on racquetballs and food. What would happen to Roger's budget line if his income increased by 10 percent, holding prices constant?

a)it would shift inward
b)it would pivot about the axis for food
c)it would pivot about the axis for racquetballs
d)nothing would happen to the budget line, since the relative prices for food and racquetballs have not changed
e)it would shift outward


5)To determine the utility-maximizing combination of goods X and Y the consumer will purchase, the following assumption(s) are made:

a)The consumer's income remains constant.
b)The price of good X remains constant.
c)The price of good Y remains constant.
d)The preferences of the individual remain constant.
e)All of the above.

6)Scott's marginal utility for the 1st through 4th slices of pizza are 18, 6, 4, and 2, respectively. What is his total utility of consuming 3 slices of pizza?

a)28
b)24
c)4
d)12
e)can not be calculated with the given information


7)When the marginal utility of a good is zero, this implies that

a) the consumer would not spend any additional income to buy more of that good.
b)consumption of additional units would have positive marginal utility
c)consumption of fewer units would increase total utility
d)total utility is maximized
e)None of the above.


8)As more hours of Internet access are purchased, everything else equal, marginal utility will tend to

a)decrease at the same rate for all consumers
b)decrease, but at different rates for different people
c)decrease at different rates for different people, but at the same rate as for other goods
d)increase at the same rate for all consumers
e)increase, but at a decreasing rate for all consumers


9)A consumer who follows the principle of utility maximization subject to constraints will

a)consume at a point on her budget line
b)consume each good until its marginal utility is zero
c)adjust her consumption pattern so that the marginal utilities of all goods are equal
d)consume more of a good only if its price rises
e)stop consuming any good whose price rises

10)If bread costs $1 per pound and meat costs $4 per pound, a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utility only if the marginal utility per pound of bread equals

a)4 utils
b)5 utils
c)10 utils
d)20 utils
e)80 utils

11)Ignoring all other goods, if Cathy's marginal utility per dollar for bread is 10 utils per dollar and for cheese it is 30 utils per dollar, her

a)total utility could be increased by buying more bread and less cheese
b)total utility could be increased by buying more cheese and less bread
c)total utility would be maximized if the price per pound of cheese is one-third the price per pound of bread
d)marginal utility would be maximized if the price per pound of cheese is one-third the price per pound of bread
e)none of the above

12)As the price of computers falls, overall

a)the marginal utility of computers rises
b)the total utility of computers falls
c)the total utility per dollar spent on computers falls
d)individuals would purchase fewer computers in equilibrium
e)the marginal utility of computers falls

13)X is a normal good, a rise in price of X causes

a)negative income and substitution effects for X
b)positive income and substitution effects for X
c)a negative income effect for X and a positive substitution effect for X
d) a positive income effect for X and a negative substitution effect for X
e)a positive income effect for X, but no substitution effect for X

14)Jessica likes to buy only two goods: Cheetos and Pepsi. Her individual utility functions for Cheetos and Pepsi depend upon

a) Jessica's preferences for Cheetos and Pepsi.
b) The prices of Cheetos and Pepsi.
c) Jessica's income.
d) Both (a) and (b).
e) All of the above.

Reference no: EM13188103

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