Eco08L2 1 Ethel cannot consume at a point to the right of her budget line, because this point is _______________. inefficient expensive unaffordable not preferred 2 Andy prefers playing baseball to playing hockey. If he spends one hour playing baseball his _______ will be _______ if he spends one hour playing hockey. marginal utility; the same as total utility; the same as marginal utility; less than total utility; greater than 3 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 _______. decrease; increase increase; decrease increase; increase decrease; decrease 4 Ricky is in a consumer equilibrium. Given the prices of goods, Ricky has allocated all his income such that his marginal utility per dollar spent is ___________for _______ goods. maximized; essential equal; all equal; normal maximized, all 5 Fred spends all of his income on two goods: videos and CDs. If Fred's marginal utility per dollar spent on videos is greater than his marginal utility per dollar spent on CDs, Fred can ______________his total utility by buying ______________. maximize; more videos and more CDs increase; more CDs and fewer videos increase; more videos and fewer CDs maximize; fewer videos and fewer CDs 6 Emma consumes only orange juice and bread and she buys the quantities that maximizes her total utility. Now, the price of orange juice falls. Emma will buy _______ orange juice and her marginal utility from orange juice __________ . more; decreases the same quantity; does not change less; increases more; does not change 7 Marginal utility theory predicts that as the price of coffee rises, the __________ a substitute for coffee ______________ and the ______________ coffee __________. demand for; decreases; demand for; increases demand for; increases; quantity demanded of; decreases supply of; increases; demand for; decreases supply of; decreases; supply of; increases 8 Lucy buys only 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 __________________. increase her marginal utility from both magazines and CDs substitute CDs for magazines buy more magazines and more CDs substitute magazines for CDs 9 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 increases as the price rises at $2 a bottle is 8 bottles at $1 a bottle is 4 bottles 10 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. larger; larger smaller; larger smaller; smaller larger; smaller Please enter your name and press the SEND button