Tutorial Review 2 1

CONSUMER CHOICES-MARGINAL UTILITY

1. Marginal utility is the

A) total satisfaction received from consuming a given number of units of a product.
B) average satisfaction received from consuming a product.
C) extra satisfaction received from consuming one more unit of a product.
D) satisfaction achieved when a consumer has had enough of a product.
2. If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units
from consuming the second, and 15 from the third, the total utility of consuming the three units
is
A) 57 utils
B) 35 utils.
C) 15 utils.
D) unknown as more information is needed to determine the answer.
3.If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of
utility from consuming three candy bars, the marginal utility of the third candy bar is
A) 25 utils.
B) 20 utils.
C) 5 utils.
D) unknown as more information is needed to determine the answer.
4. If, as a person consumes more and more of a good, each additional unit adds less satisfaction
than the previous unit consumed, we are seeing the workings of
A) the law of demand.
B) the law of supply.
C) the law of increasing marginal opportunity cost.
D) the law of diminishing marginal utility.
5. Marginal utility can be
A) negative.
B) zero.
C) positive.
D) positive, negative, or zero.
6. If a consumer always buys goods rationally, then
A) the total utilities of the different goods consumed will be equal.
B) the average utilities of the different goods consumed will be equal.
C) the marginal utility per dollar spent on all goods will be equal.
D) the marginal utility of the different goods consumed will be equal.
Table 10-1

Quantity of Quantity of
Total Utility Total Utility
Pita Wraps Bubble Tea
1 60 1 40
2 102 2 70
3 132 3 91
4 144 4 106
5 144 5 112
6 138 6 115
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7 128 7 115

Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the
price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from different quantities of
the two items.
7. Refer to Table 10-1. What is Keegan's optimal consumption bundle?
A) 3 pita wraps and 3 bubble teas
B) 3 pita wraps and 4 bubble teas
C) 4 pita wraps and 2 bubble teas
D) 5 pita wraps and 0 bubble teas
8. Refer to Table 10-1. If Keegan can drink all the bubble tea he wants for free, how many
glasses will he consume?
A) 4 glasses
B) 5 glasses
C) 6 glasses
D) He would consume an infinite amount of bubble tea if it is free.
9. Avner is maximizing total utility by buying sports magazines and protein supplements. For
him to buy more sports magazines
A) the price of protein supplements. has to fall.
B) the price of sports magazines has to fall.
C) the price of sports magazines has to rise.
D) Since Avner is maximizing his utility, nothing can change the consumption of sports
magazines.
10. Most people would prefer to drive a luxury car that has all the options, but more people buy
less expensive cars even though they could afford the luxury car because
A) car buyers are irrational.
B) the total utility of less expensive cars is greater than that of luxury cars.
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on
luxury cars.
D) luxury cars cost a lot more than non-luxury cars.
11. If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,
and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she
A) is maximizing total utility and does not want to change her consumption of ankle socks or
bandanas.
B) wants to consume more ankle socks and fewer bandanas.
C) wants to consume more bandanas and fewer ankle socks.
D) wants to consume less of both ankle sock and bandanas.
12. If Ewan is consuming his utility maximizing bundle and the price of one good falls, what
happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?
A) MU/P has increased and Ewan should buy more of this good.
B) MU/P has increased and Ewan should buy less of this good.
C) MU/P has decreased and Ewan should buy more of this good.
D) MU/P has decreased and Ewan should buy less of this good.
13. When the price of summer tank tops falls and you buy more of them because they are
relatively less expensive, this is called
A) the substitution effect.
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B) the income effect.

C) the deadweight loss effect.
D) the elasticity effect.
14. The substitution effect of an increase in the price of Raisin Bran refers to
A) the decrease in the demand for Raisin Bran when its price rises.
B) the result that consumers will now switch to a substitute good such as Cheerios, and the
demand curve for Raisin Bran shifts to the left.
C) the fact that the higher price of Raisin Bran lowers consumers' purchasing power, holding
money income constant.
D) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes
consumers to buy less Raisin Bran.
15. The income effect of an increase in the price of salmon
A) is the change in the demand for salmon when income increases.
B) refers to the relative price effect—salmon is more expensive compared to other types of
fish—which causes the consumer to buy less salmon.
C) refers to the effect on a consumer's purchasing power which causes the consumer to buy less
salmon, holding all other factors constant.
D) is the change in the demand for other types of fish, say trout, that results from a decrease in
purchasing power.
Table 10-2

Quantity of Quantity of
Total Utility Total Utility
Soup (cups) Sandwiches
1 40 1 45
2 60 2 75
3 72 3 102
4 82 4 120
5 88 5 135
6 90 6 145

Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per
cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.
16. Refer to Table 10-2. What is Keira's marginal utility per dollar spent on the third cup of
soup?
A) 72 utils
B) 36 utils
C) 12 utils
D) 6 utils
17. Refer to Table 10-2. If Keira maximizes her utility, how many units of each good should she
buy?
A) 1 cup of soup and 5 sandwiches
B) 3 cups of soup and 4 sandwiches
C) 6 cups of soup and 2 sandwiches
D) 4 cups of soup and 3.5 sandwiches
18. Refer to Table 10-2. Suppose Keira's income increases from $18 to $23 but prices have not
changed. What is her utility maximizing bundle now?
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A) 6 cups of soup and 5 sandwiches

B) 4 cups of soup and 5 sandwiches
C) 5 cups of soup and 4 sandwiches
D) 5 cups of soup and 5 sandwiches
19. Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23,
her utility maximizing bundle changed. Based on your answers to her optimal choices at the two
income levels, what type of goods are soup and sandwiches?
A) Soup is an inferior good and sandwiches are a normal good.
B) Soup is a normal good and sandwiches are an inferior good.
C) Both soup and sandwiches are normal goods.
D) Both soup and sandwiches are inferior goods.
20. Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23,
what happens to her total utility and to the marginal utilities of the last cup of soup and the last
sandwich purchased?
A) Her total utility increases but the marginal utilities of the last cup of soup and the last
sandwich consumed decrease.
B) Her total utility, the marginal utility of the last cup of soup consumed, and the marginal utility
of the last sandwich consumed all increase.
C) Her total utility decreases but the marginal utilities of the last cup of soup and the last
sandwich consumed increase.
D) Her total utility and the marginal utility of the last cup of soup consumed increase but
marginal utility of the last sandwich consumed decreases.
E) Her total utility and the marginal utility of the last sandwich consumed increase but marginal
utility of the last cup of soup consumed decreases.
21. The limitation 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.

Table 10-4

Steak & Cheese Steak & Cheese Grilled Chicken Grilled Chicken
Quantity MU MU/P MU MU/P
1 40 10 30 15
2 32 8 24 12
3 20 5 16 8
4 12 3 12 6
5 6 1.5 8 4
6 2 0.5 4 2

22. Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the
table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for
Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken
sandwiches. Which of the following statements is false?
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A) The price of steak and cheese sandwiches is $4. The price of grilled chicken sandwiches is
$2.
B) If Mabel maximizes her utility, she will buy three grilled chicken sandwiches.
C) If Mabel maximizes her utility, she will buy two steak and cheese sandwiches.
D) We do not have enough information to determine how many sandwiches Mabel will buy to
maximize her utility.
23. Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the
table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for
Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken
sandwiches. Which of the following statements is true?
A) If Mabel maximizes her utility, she will buy three steak and cheese sandwiches and two
grilled chicken sandwiches.
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4,
she would receive the most marginal utility per dollar if her next purchase was another grilled
chicken sandwich.
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will
buy three grilled chicken sandwiches.
D) To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and
cheese sandwiches and 6 grilled chicken sandwiches.
24. Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility
of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of
CDs and DVDs for Marge?
A) No. We need to know her preferences for CDs and DVDs.
B) Yes.
C) No. For this to be the optimal combination, the total utility from her purchase of CDs needs to
equal the total utility from her purchase of DVDs.
D) No. If this was the optimal combination, the marginal utility per dollar of the 5th CD and the
7th DVD would be equal.
Table 10-6

Quantity of Marginal Quantity of Marginal

Burgers Utility Pepsi Utility
1 20 1 30
2 14 2 10
3 10 3 7
4 3 4 5
5 1 5 1
6 -5 6 0
7 -10 7 -4

Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two
goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
25. Refer to Table 10-6. What is Jay's optimal consumption bundle?
A) 1 burger and 2 cans of Pepsi
B) 2 burgers and 3 cans of Pepsi
C) 3 burgers and 1 can of Pepsi
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D) 3 burgers and 2 cans of Pepsi

26. Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will
he consume?
A) 7 burgers
B) 6 burgers
C) 5 burgers
D) 3 burgers
27. Terence has $50 per week to spend on Subway sandwiches and milkshakes. The price of a
Subway sandwich is $5 and the price of a milkshake is $4. He buys 6 sandwiches and 5
milkshakes. The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th
milkshake = 24. Which of the following is true?
A) He is not maximizing his utility and should buy more milkshakes.
B) He is maximizing his utility.
C) He is not maximizing his utility and should buy more Subway sandwiches.
D) He is not maximizing his utility because he is not spending all of his income.
Table 10-7

Quantity of Quantity of
Total Utility Total Utility
Beer (glasses) Pizza (slices)
1 25 1 20
2 45 2 35
3 60 3 45
4 65 4 50
5 69 5 52
6 70 6 52

Table 10-7 shows Antonio's utility from beer and pizza.

28. Refer to Table 10-7. What is Antonio's marginal utility from consuming the fifth beer?
A) 4 utils
B) 13.6 utils
C) 69 utils
D) 134 utils
29. Refer to Table 10-7. Suppose Antonio has $10 to spend and the price of beer = $2 per glass
and the price of pizza = $2 per slice. How many of each good will he consume when he
maximizes his utility?
A) 2 glasses of beer, 1 slice of pizza
B) 2 glasses of beer, 3 slices of pizza
C) 3 glasses of beer, 2 slices of pizza
D) 4 glasses of beer, 5 slices of pizza

30. Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea. The
price of a pineapple is $4 and the price of a bottle of green tea is $2. The table below shows
Arnie's utility values. Use the table to answer the questions that follow the table.

Quantity Total Marginal Marginal Quantity Total Marginal Marginal

of Utility Utility Utility per of Green Utility Utility Utility per
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Pineapples Dollar Tea Dollar

1 32 1 28
2 52 2 46
3 64 3 54
4 68 4 60
5 70 5 64
6 71 6 66
7 71 7 67

a. Complete the table by filling in the blank spaces.

b. Suppose Arnold purchases 4 pineapples and 2 bottles of green tea. Is he consuming the
optimal consumption bundle? If so, explain why. If not, what combination should he buy and
why?
THE END