Sally and Eric are the only people in an economy. Sally buys 3 bottles of water when the price is £2 a bottle and 4 bottles of water when the price is £1 a bottle. Eric buys 10 bottles of water when the price is £0.50 a bottle and 5 bottles of water when the price is £1 a bottle. In the market for water, the quantity demanded _____________________.

increases as the price falls
at £2 a bottle is 8 bottles
increases as the price rises
at £1 a bottle is 4 bottles

Ethel cannot consume at a point to the right of her budget line, because this point is _______________.

unaffordable
not preferred
expensive
inefficient

Andy prefers playing soccer to playing hockey. If he spends one hour playing soccer his _______ will be _______ if he spends one hour playing hockey.

total utility; greater than
marginal utility; less than
total utility; the same as
marginal utility; the same as

The principle of diminishing marginal utility means that as you spend more and more hours watching television, your total utility from television will _______ and your marginal utility from each additional hour of television will _______.

increase; decrease
decrease; increase
decrease; decrease
increase; increase

Ricky is in a consumer equilibrium. Given the prices of goods, Ricky has allocated all his income such that his marginal utility per pound spent is ___________for _______ goods.

equal; all
maximized; all
maximized; essential
equal; normal

Fred spends all of his income on two goods: videos and CDs. If Fred's marginal utility per pound spent on videos is greater than his marginal utility per pound spent on CDs, Fred can ______________his total utility by buying ______________.

increase; more videos and fewer CDs
maximize; fewer videos and fewer CDs
maximize; more videos and more CDs
increase; more CDs and fewer videos

Emma consumes only orange juice and bread and she buys the quantities that maximize her total utility. Now, the price of orange juice falls. Emma will buy _______ orange juice and her marginal utility from orange juice __________ .

more; decreases
less; increases
the same quantity; does not change
more; does not change

Marginal utility theory predicts that as the price of coffee rises, the __________ a substitute for coffee ______________ and the ______________ coffee __________.

demand for; increases; quantity demanded of; decreases
supply of; decreases; supply of; increases
demand for; decreases; demand for; increases
supply of; increases; demand for; decreases

Lucy spends all of her income on magazines and CDs. Both are normal goods. Lucy's income increases, but the prices of magazines and CDs do not change. Marginal utility theory predicts that Lucy will __________________.

buy more magazines and more CDs
substitute magazines for CDs
increase her marginal utility from both magazines and CDs
substitute CDs for magazines

Rembrandt paintings are expensive and not as vital for life as milk, which is cheap. Marginal utility theory explains this paradox of value: The total utility from a Rembrandt painting is ________ than the total utility from milk, and the marginal utility from a Rembrandt painting is _________than the marginal utility from milk.

smaller; larger
larger; smaller
larger; larger
smaller; smaller

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