Question : 63) In making decisions about what to consume, a person’s : 1387694

 

 

63) In making decisions about what to consume, a person’s goal is to

A) allocate her limited income among all the products she wishes to buy so that she receives the highest total utility.

B) buy low-priced goods rather than high-priced goods.

C) maximize her marginal utility from the goods and services she wishes to buy using her limited income.

D) consume as many necessities as possible and then, if there is money left over, to buy luxuries.

 

64) The amount of income a consumer has to spend on goods and services is known as

A) purchasing power.

B) effective demand.

C) a budget constraint.

D) wealth.

 

 

65) A budget constraint

A) represents the bundles of consumption that make a consumer equally happy.

B) refers to the limited amount of income available to consumers to spend on good and services.

C) reflects the desire by consumers to increase their income.

D) shows the prices that a consumer chooses to pay for products he consumes.

 

 

66) The restriction that a consumer’s total expenditure on goods and services purchased cannot exceed the income available is referred to as

A) maximizing behavior.

B) economizing behavior.

C) the price constraint.

D) the budget constraint.

 

67) Which of the following is explained by the law of diminishing marginal utility?

A) The marginal utility of Isabel’s second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola.

B) The marginal utility of Isabel’s second bottle of Coca-Cola is greater than the marginal utility of her third pretzel.

C) The marginal utility of Isabel’s second bottle of Coca-Cola is greater than the marginal utility of her friend Margie’s third pretzel.

D) The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola.

 

 

68) Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop ‘n Save. Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv’s cart equals 50. The marginal utility per dollar of the boxes of cereal in Marv’s cart equals 20. Marv has only $50 to spend, but has not yet paid for his groceries. How can Marv increase his total utility without spending more than $50?

A) Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices.

B) Marv should buy more boxes of cereal and fewer bottles of soft drink.

C) Marv should buy fewer boxes of cereal and more bottles of soft drink.

D) Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then spend more on other items.

 

Table 10-3

 

 

Ice Cream Cones

Lime Fizz Soda

Quantity

MU

MU

1

30

40

2

25

35

3

20

26

4

15

18

5

10

15

6

5

7

 

69) Refer to Table 10-3.  The table above shows Lee’s marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda. The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1. Use this information to select the correct statement.

A) We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his income is.

B) To maximize his utility, Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda.

C) We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee’s utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity.

D) If Lee has an unlimited budget, he will maximize his utility by buying only Lime Fizz Soda.

 

 

70) Refer to Table 10-3.  The table above shows Lee’s marginal utility from consuming ice cream cones and cans of Lime Fizz Soda. Select the phrase that completes the following statement. “We can determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utility

A) if we know what Lee’s income is.”

B) if we know what Lee’s income is and the price of an ice cream cone and the price of a can Lime Fizz Soda.”

C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda.”

D) if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda.”

 

71) During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume. Peter explained that “To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola.” Was Peter’s analysis correct?

A) Peter described one of the conditions necessary for utility maximization. The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola.

B) Peter’s statement is correct.

C) Peter’s statement is correct, but we must also assume that the consumer is rational.

D) Peter describes one of the conditions necessary for utility maximization. The second condition is that total spending on both goods must equal the amount available to be spent.