Chapter 10- The Logic of Individual Choice: The Foundation Of Supply And Demand

Question 1

If eating the first jelly bean gives you 15 units if utility ad the second gives you 10 additional units…

Answer 1

Total utility of both is 25 units

Question 2

Marginal utility is:

Answer 2

The additional utility gained from consuming one more unit of a product.

Question 3

Which of the following is the best example of the law if diminishing marginal utility?

a) I could eat M&Ms forever
b) M&Ms are like potato chips; you can’t eat just one
c) the more M&Ms I eat, the less I enjoy eating them
d) the more M&Ms I eat, the more I enjoy eating them

Answer 3

c) the more M&Ms I eat, the less I enjoy eating them

Question 4

The principle of rational choice assumes that people:

Answer 4

Maximize total utility

Question 5

Economists assume that consumers will choose to purchase and consume goods that:

Answer 5

Gives them the greatest additional satisfaction per dollar spent.

Question 6

A consumer is following the utility-maximizing rule if:

Answer 6

Her marginal utility per dollar for all goods is the same

Question 7

Assuming DMU, if the marginal utility per dollar of cheeseburgers is less than the marginal utility per dollar of chili dogs, you can increase utility without spending more money by:

Answer 7

Consuming more chilli dogs ad fewer cheese burgers.

Question 8

The law if demand can be explained by the law of:

Answer 8

Diminishing marginal utility

Question 9

As one moves down along a demand curve:

Answer 9

Marginal utility falls

Question 10

Fads, such as wearing extremely skinny jeans, come and go. Which assumption of economists theory of choice do fads violate?

Answer 10

Preferences are given.

Question 11

In consumer theory, when economists talk about utility, they are referring to:

Answer 11

Satisfaction

Question 12

“The third piece if chocolate cake I had for breakfast this morning was good, but not as good as the first” ?

Answer 12

Diminishing marginal utility

Question 13

Jen is deciding between coffee ($1, 10 units utility) or orange juice ($2, 16 units utility)?

Answer 13

Choose coffee since it gives her the most marginal utility per dollar.

Question 14

Suppose Bill was consuming his utility-maximizing combination of pizza and bagels when the Brice if bagels increased by 10%. In response to the INCOME EFFECT, Bill will:

Answer 14

Decrease his consumption of Bagels because the price increase has made Bill poorer

Question 15

Assume Jo lives in a world where there’s only good X and Y. If for Jo, MUx/Px > MUy/Py, how can she increase total utility?

Answer 15

She could buy less Y and use the money she saves to buy more X

Question 16

Economists assume that the goal of consumers is :

Answer 16

Maximize total utility

Question 17

Which of the following is not an underlying assumption of economists’ theory of consumer choice?

a) decisions can be made costlessly
b) consumer tastes and preferences are innate and not shape by society
c) consumers consider social issues when deciding what to buy.
d) consumers seek to maximize utility.

Answer 17

c) consumers consider social issues when deciding what to buy.

Question 18

Economists focus on self-interest and utility maximization:

Answer 18

As a simplifying abstraction that allows them to cut through obfuscations and confusing mix of motivations.