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Exam 7: Utility Maximization

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Question 131

Multiple Choice

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Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 22 and MU z/ P_z = 25. To maximize utility, without spending more money, the consumer should

A) purchase less of Z and more of Y.
B) purchase more of Z and less of Y.
C) purchase more of both Y and Z.
D) make no change in the quantities Y and Z.

E) B) and D)
F) A) and B)

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Question 132

Multiple Choice

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The indifference curve in the diagram yields Juan 100 units of utility. If Juan's money income were to increase by 20 percent, the indifference curve would

A) shift leftward.
B) shift rightward.
C) become steeper.
D) not be affected.

E) B) and C)
F) None of the above

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Question 133

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Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $3 and $4, respectively. The marginal utility of the last units of A and B are 15 and 24, respectively. These data suggest that Ms. Thomson

Refer to the table. The addition of which unit has the greatest marginal utility?

Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line is

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 75 utils and the marginal utility of the last bag is 100 utils. The prices of soda and pretzels are $0.5 per bottle and $0.6 per bag, respectively. It can be concluded that

It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.

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?

Refer to the table. What is the marginal utility of the sixth unit?

The marginal rate of substitution measures the

When a consumer has maximized total utility, he or she cannot increase total utility by reallocating expenditures among different products.

What is consumer equilibrium? How is it achieved?

How do you identify consumer equilibrium in indifference curve analysis?

With diminishing marginal utility, if a consumer reduces her consumption of a good, then her marginal utility from that good would increase.

Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This indicates that

Refer to the diagram. Cheri's budget line shifts inward from CD to AB. Which statement below is consistent with this shift?

If the marginal utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

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

If marginal utility is diminishing, total utility must also be declining.

A consumer has an income of $100, and the price of X is $2, while the price of Y is $4. If the consumer buys 20 units of X, then the maximum quantity of Y that she could also buy is