Econ Exam 3

Question 1

You have preferences

Answer 1

Complete

Question 2

Can rank choices from most to least preferred

Answer 2

Complete

Question 3

What is this an example of?
Ex.- Given 2 goods, x,y
1. Prefer x to y
2. Prefer y to x
3. Indifferent

Answer 3

Complete

Question 4

Preferences are logically consistent

Answer 4

Transitive

Question 5

What is this an example of?
Ex.- Prefer A to B and B to C, then must prefer A to C

Answer 5

Transitive

Question 6

If _______ + ______ are satisfied: preferences are rational.

Answer 6

Complete and Transitive

Question 7

Ability to make typically consistent choices.

Answer 7

Rational

Question 8

Consumers are never satisfied

Answer 8

More is Better

Question 9

People always prefer more as long as Mu is (+)

Answer 9

More is Better

Question 10

Never consume if Mu (-)

Answer 10

More is Better

Question 11

Common assumptions about Preferences are:

Answer 11

1. Complete
2. Transitive
3. More is Better

Question 12

Also known as Utility

Answer 12

Total Utility

Question 13

Quantitative measure of the satisfaction, or enjoyment, you get from consuming g + s

Answer 13

Utility (Total Utility)

Question 14

Consumer’s Goal is ________ utility.

Answer 14

maximize

Question 15

Things that make you better off ______ u

Answer 15

increase

Question 16

Things that make you worse off ____ u

Answer 16

decrease

Question 17

Tu = ___ + ____

Answer 17

Mu + Mu

Question 18

The additional utility you get from consuming 1 more unit

Answer 18

Marginal Utility

Question 19

The change in Tu from consuming 1 more unit

Answer 19

Marginal Utility

Question 20

• As consumption increases, Mu decreases
• This is a feature of ALL consumption

Answer 20

Law of Diminishing Mu

Question 21

Preferences are what consumers ______ to do.

Answer 21

want

Question 22

Budgets are what consumers _______ to do.

Answer 22

are ABLE

Question 23

We are ______ by our limited incomes.
- i.e. Consumption Possibility Frontier

Answer 23

constrained

Question 24

All combos of good a consumer can afford with a limited income.

Answer 24

Budget Constraint

Question 25

i = Pr + Pz

Answer 25

Budget Constraint

Question 26

If Income increases the line shifts to the ______

Answer 26

right

Question 27

If income decreases the line shifts to _______

Answer 27

left

Question 28

Budget Constraint: Vertical Int. = ____/____

Answer 28

Income/Pr

Question 29

Budget Constraint: Horizontal Int. = ____/____

Answer 29

Income/ Pz

Question 30

Consumer decisions are what consumers _____ to do.

Answer 30

ACTUALLY choose

Question 31

Optimal decisions are made at ______.

Answer 31

the margin

Question 32

Max u; subject to BC

Answer 32

Consumer Equilibrium

Question 33

Last dollar spent on each good yields some Mu

Answer 33

Consumer Equilibrium

Question 34

Budget is exhausted (ALL of Budget is spent)

Answer 34

Consumer Equilibrium

Question 35

The value of a good purchased must be at least _____ to the price.

Answer 35

= or the value of a good is greater than or equal to the price

Question 36

The dollar value to you of the Mu derived from consuming each additional unit of a good.

Answer 36

Marginal Evaluation of a good

Question 37

Max amount willing to pay for a good - actual price paid

Answer 37

Consumer Surplus

Question 38

What is this an example of? Ex.- Willing to pay: $7 Actually Paid: $4 Saved: $3

Answer 38

Consumer Surplus

Question 39

Marginal cost= ____/______

Answer 39

Change in TC/change in quantity

Question 40

AVC= _____/_______

Answer 40

Variable cost/ quantity

Question 41

AFC= ______/_______

Answer 41

Fixed cost/ Quantity

Question 42

ATC = ____/______

Answer 42

Total cost / Quantity