Question
4. A consumer's demand curve for a product is downward sloping because A. total utility falls...
4. A consumer's demand curve for a product is downward sloping because A. total utility falls below marginal utility as more of a product is consumed. B, marginal utility diminishes as more of a product is consumed. C. time becomes less valuable as more of a product is consumed. D. the income and substitution effects precisely offset each other. 5. Consider Janice's consumption of wine and cheese. Suppose that the price of wine she buys is equal to the price of cheese she buys. If Janice is a rational consumer, then we know that: A. she buys equal quantities of each good. B. she buys unequal quantities of each good. C. the marginal utilities per dollar of the quantities she buys are equal. D. the marginal utilities of the quantities she buys are unequal. 6. A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 units and Y is 16 units. The unit price of X is $5. The price of Y is: A. $1 per unit B. $2 per unit C. $3 per unit. D. $4 per unit 7. The following two schedules show the amounts of additional satisfaction (marginal utility) which a consumer would get from successive quantities of products Ja a money income of 552 and the prices of J and Kare S8 and $4 per unit respectively, the consumer will maximize her utility by purchasing: Units MU MUK Units of K of 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
Answers
4.Ans: B) marginal utility diminishes as more of a product is consumed.
5.Ans: C) the marginal utilities per dollar of the quantities she buys are equal.
6.Ans: B) $2 per unit.
Explanation:
At equilibrium combination;
MUx /Px = MUy / Py
40 / 5 = 16 / Py
8 = 16 /Py
8Py = 16
Py = 16 / 8 = $2
7.Ans: C) 4 units of J and 5 units of K
Explanation:
At equilibrium combination;
MUj /Pj = MUk / Pk
Entire given income must be spent on both the goods
Y = (Pj * Qj) + ( Pk * Qk )
$52 = ( $8 * 4 ) + ( $4 * 5)
Units of J MUj MUj /Pj Units of K MUk MUk /Pk 1 56 7 1 32 8 2 48 6 2 28 7 3 32 4 3 24 6 4 24 3 4 20 5 5 20 2.5 5 12 3 6 16 2 6 10 2.5 7 12 1.5 7 8 2
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