Question 1

Answer the question on the basis of the following two schedules,which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K.  Unit of JMUj156248332424520616712Unit of KMUk13222832442051261078\begin{array}{c}\begin{array}{ccc}Unit&&\	ext { of } J & & M U_{j} \\hline1 & & 56 \2 & & 48 \3 & & 32 \4 & & 24 \5 & & 20 \6 & & 16 \7 & & 12\end{array}\begin{array}{ccc}Unit&&\	ext { of } K & & M U_{k} \\hline1 & & 32 \2 & & 28\3 & & 24\4 & & 20\5 & & 12\6 & & 10\7 & & 8\end{array}\end{array}Unit of J1234567​​MUj​56483224201612​​Unit of K1234567​​MUk​3228242012108​​​  Refer to the data.If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively,the consumer will maximize her utility by purchasing:

Accepted Answer

A)   2 units of J and 7 units of K.
B)   5 units of J and 5 units of K.
C)   4 units of J and 5 units of K.
D)   6 units of J and 3 units of K. E) C) and D)
F) All of the above

Question 2

Indifference analysis assumes that utility is numerically measurable.

Accepted Answer

A) True 
 B)False

Question 3

In drawing a particular budget line,money income and the prices of the two products are fixed.

Accepted Answer

A) True 
 B)False

Question 4

An indifference curve:

Accepted Answer

A)   may be either upsloping or downsloping,depending on whether the two products are complements or substitutes.
B)   is downsloping and convex to the origin.
C)   is upsloping and has a constant slope.
D)   is downsloping and concave to the origin.E) B) and D)
F) B) and C)

Question 5

Assume you are spending your full budget and purchasing such amounts of X and Y that the marginal utility from the last units consumed is 40 and 20 utils respectively.Assume (a) the prices of X and Y are $8 and $4 respectively; (b) it takes 3 hours to consume a unit of X and 1 hour to consume a unit of Y;and (c) your time is worth $2 per hour.You:

Accepted Answer

A)   should substitute X for Y until the marginal utility per hour is the same for both products.
B)   are consuming X and Y in the optimal amounts.
C)   should consume less of Y and more of X.
D)   should consume less of X and more of Y.E) A) and B)
F) A) and C)

Question 6

The diamond-water paradox occurs because:

Accepted Answer

A)   the price of a product is related to its total utility,not its marginal utility.
B)   the price of a product is related to its marginal utility,not its total utility.
C)   water is,in fact,very scarce in certain regions of the world.
D)   diamonds are more useful than water.E) None of the above
F) A) and C)

Exam 7: Utility Maximization

Indifference analysis assumes that utility is numerically measurable.

Correct Answer
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Correct Answer
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In drawing a particular budget line,money income and the prices of the two products are fixed.

Correct Answer
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The diamond-water paradox occurs because:

Correct Answer
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Correct Answer
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An indifference curve:

Correct Answer
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Exam 7: Utility Maximization

Indifference analysis assumes that utility is numerically measurable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In drawing a particular budget line,money income and the prices of the two products are fixed.

Correct AnswerverifiedShow Answer

The diamond-water paradox occurs because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An indifference curve:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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