Question
Marginal utility is the change in total utility that results from consuming an extra unit of a good the utility gained from consuming one unit of a good. total utility divided by the quantity consumed. the average amount of utility gained from consuming an extra unit If a person with $75 of income is getting 5 utils front the consumption of the 3rd unit of good X and 20 utils from the 6th unit of good Y and the price of X is $5 and the price of Y is $10, then this consumer: is maximizing utility. should increase the consumption of Y and decrease that of X to maximize utility. should increase the consumption of X and decrease the consumption of Y to maximize utility. should increase the consumption of both goods to maximize utility. Cardinal utility analysis allows you to ________ consumption bundles while ordinal utility allows you to ______ consumption bundles: rank preferences for, place values on the utility of. place values on the utility of, rank preferences for. identify optimum, only identify preferred. only identify preferred, identify optimum. A price-consumption curve: is a collection of optimal bundles that result from changes in the price of one good, ceteris paribus. is a collection of optimal bundles that result from changes in income, ceteris paribus. shows the relationship between price and quantity consumed for one good. shows the relationship between income and the optimal quantity consumed for one good. An income-consumption curve: is a collection of optimal bundles that result from changes in the price of one good, ceteris paribus. is a collection of optimal bundles that result from changes in income, ceteris paribus. shows the relationship between price and quantity consumed for one good. shows the relationship between income and the optimal quantity consumed for one good. An individual's demand curve is derived from a price-consumption curve. an income-consumption curve. an Engel curve. a price elasticity curve. If the cross-price elasticity of demand between two goods is positive. one good is a luxury good and the other is a necessity good. one good is a normal good and the other is an inferior good. the two goods are complements. the two goods are substitutes.
Explanation / Answer
Some of these explanations are short just because the questions ask about a definition. Where an explanation is needed, one is provided. 23. A is correct by definition. 24. We maximize utility when MU/P is equal for all goods and we spend all our income. MUx/Px = MUy/Py and Px*X + Py*Y = I imply utility maximization. Here: Income constraint: 3*5 + 6*10 = 15+60 = 75 The income constraint is satisfied. However, 5/5 < 20/10 so we should increase Y and decrease X to maximize utility. B is correct. 25. A is correct by definition. 26. A is correct by definition. 27. The correct answer is B. That is the definition. 28. This is a bad question. But Demand deals with price and quantity. Engel curves deal with income and quantity. The best answer is A. 29. Cross price elasticity is the percentage change in quantity divided by the percentage change in the price of a different good. If this value is positive, that implies that increasing a good's price increases the quantity demanded of a different good. This is characteristic of substitutes. D.