Econ Chapter 21

Exhibit 21-8 is not provided, so it is difficult to provide a specific explanation based on the exhibit. However, based on the answer choices provided, a move of the budget constraint from 1 to 2 indicates a decrease in the quantity of good X that can be purchased. This suggests that the price of good X has increased, as a higher price would result in a decrease in the quantity demanded. Therefore, the correct answer is a rise in the price of good X.

Exhibit 21-7 is not provided, so it is not possible to determine the relative price of X in terms of Y based on the given information. Therefore, the correct answer is that it cannot be determined based on the information provided.

A util is a unit of measurement used to quantify the satisfaction or utility that an individual derives from consuming a good. It is an artificial construct that helps economists understand and analyze consumer behavior. The answer choice "satisfaction one receives from the consumption of a good" accurately describes the purpose and function of a util in measuring the value or benefit that individuals gain from consuming a good.

The diamond-water paradox refers to the observation that things that have the greatest value in use, such as water, often have little value in exchange, while things that have little value in use, such as diamonds, often have the greatest value in exchange. This means that the value of a good in terms of its usefulness does not necessarily correspond to its value in terms of its exchangeability or price.

An interpersonal utility comparison refers to the act of comparing the preferences or levels of satisfaction between two individuals. In this scenario, the roommate is comparing their level of hunger to the speaker's in order to determine who should get the last slice of pizza. This is an example of an interpersonal utility comparison because it involves comparing the preferences or levels of satisfaction between two people.

Based on the table provided in Exhibit 21-3, the total utility for 3 apples and 1 orange is 58 + 2 = 60. This is the highest total utility compared to the other options. Therefore, if Linda wants to maximize her utility with a budget of $5, she should choose 3 apples and 1 orange.

Based on the given information, the total utility of plums increases from 22 to 57 as the number of units of plums consumed increases from 1 to 5. However, the marginal utility of plums decreases from 12 to 5 as the number of units of plums consumed increases from 1 to 5. This indicates that the additional satisfaction gained from consuming each additional unit of plums diminishes over time. Therefore, the correct answer is that the marginal utility constantly diminishes.

The correct answer is "takes place at relatively high marginal utility." This means that the consumption of diamonds is considered to be more valuable and desirable compared to the consumption of water. The concept of marginal utility suggests that the value or satisfaction derived from consuming an additional unit of a good or service decreases as more of it is consumed. In this case, the high marginal utility implies that each additional diamond consumed provides a significant increase in satisfaction or value.

Based on the given table, the total utility of plums increases as the number of plums consumed increases. The marginal utility is the additional utility gained from consuming one more unit of a good. In this case, the marginal utility of the fourth plum can be calculated by subtracting the total utility of the third plum (44 utils) from the total utility of the fourth plum (52 utils), which equals 8 utils. Therefore, the correct answer is 8 utils.

The correct answer is 60 utils. This is because the total utility is the sum of the marginal utilities of each unit consumed. In this case, the marginal utilities for the first four units are 20 utils, 16 utils, 13 utils, and 11 utils respectively. Adding these together gives a total utility of 60 utils.

The correct answer is "The less you have of any one good, the more you would be willing to pay for one more unit of it." This statement aligns with the concept of diminishing marginal utility, which states that as you consume more of a good, the additional satisfaction or utility derived from each additional unit decreases. Therefore, when you have less of a good, the value or willingness to pay for an additional unit increases because it provides a greater increase in utility.

According to the traditional theory of marginal utility, as more units of a good are acquired, the consumer's marginal utility diminishes. This means that the additional satisfaction or benefit that a consumer derives from each additional unit of a good decreases as they acquire more of it. This is because as the consumer already has a certain amount of the good, the importance or need for each additional unit decreases, resulting in a decrease in marginal utility.

The marginal utility is the additional satisfaction gained from consuming one more unit of a good. In this case, the marginal utility for the first unit consumed is 20, and the total utility for consuming two units is 30. To find the marginal utility for the second unit, we subtract the total utility of the first unit (20) from the total utility of the second unit (30). Therefore, the marginal utility for the second unit is 10.

Based on the given table, the total utility for apples and oranges increases as the number of units consumed increases. However, the rate at which the total utility increases starts to diminish after a certain point. In this case, Linda wants to maximize her utility while spending $5. Since the price of both goods is $1 per unit, she can purchase a maximum of 5 units. Looking at the table, when she purchases 1 apple and 4 oranges, the total utility is the highest at 22 + 73 = 95. Therefore, the answer is 1 and 4.

If the marginal utility curve for units 1 through 5 of good Z lies above the horizontal axis, it implies that the additional utility gained from consuming each additional unit of good Z is positive. This suggests that the total utility curve for units 1 through 5 of good Z must be upward sloping, as the total utility is increasing with each additional unit consumed.

The correct answer is 10 utils. This can be determined by calculating the difference in total utility between the second and third plum. The total utility of the second plum is 34 utils and the total utility of the third plum is 44 utils. Therefore, the marginal utility of the third plum is 44 - 34 = 10 utils.

In Exhibit 21-7, graph (1) shows a direct relationship between the price of X and the price of Y. As the price of X increases, the price of Y also increases. When the price of X is $20, the corresponding price of Y is $40. This can be determined by following the line on the graph from $20 on the X-axis to the point where it intersects with the line representing the price of Y. Therefore, the correct answer is $40.

Exhibit 21-8 refers to a graphical representation of a budget constraint. A move of the budget constraint from 2 to 3 indicates a decrease in the price of good X. This is because when the price of good X falls, the consumer can now afford to purchase more of it with the same income, causing the budget constraint to shift outward. As a result, the consumer's purchasing power for good X increases, allowing them to consume more of it. Therefore, the correct answer is a fall in the price of good X.

The correct answer is the slope of the budget constraint between the two goods is equal to the marginal rate of substitution (MRS) between the two goods. This is because the MU/P ratio represents the marginal rate of substitution, which is the rate at which a consumer is willing to trade one good for another while keeping the same level of satisfaction. The slope of the budget constraint represents the rate at which the consumer can trade one good for another given their budget constraint. If the MU/P ratio is the same for both goods, it means that the consumer is willing to trade them at the same rate, which is reflected in the slope of the budget constraint.

The correct answer is MUX/PX = MUY /PY. This equation represents the condition for maximizing utility, known as the marginal rate of substitution (MRS). It states that the ratio of the marginal utility of good X to its price should be equal to the ratio of the marginal utility of good Y to its price. This ensures that the consumer is getting the most satisfaction from their spending, as they are equating the additional utility gained from consuming one more unit of each good to the additional cost of each good.

The proposition that gambling in a fair game is not worth it implies that the utility gained from gambling is not enough to justify the risk involved. Increasing marginal utility of money contradicts this proposition because it suggests that the additional satisfaction or benefit obtained from each additional unit of money increases. This would imply that the utility gained from gambling, in terms of potential monetary gains, is worth the risk involved.

This scenario demonstrates an interpersonal utility comparison because it involves comparing the utility gained from an extra dollar by two different individuals, Smith and Jones. It suggests that Smith, who has less wealth, derives more utility from the additional dollar compared to Jones, who has more wealth. This highlights how utility can vary between individuals based on their personal circumstances and preferences, emphasizing the importance of considering interpersonal comparisons when analyzing utility.

The value that goes in blank (C) is 5. This can be determined by looking at the table provided. The marginal utility for the 4th unit consumed is not given, so we cannot determine the specific value for (C). However, we can see that the total utility for the 4th unit consumed is 100, and the total utility for the 5th unit consumed is 102. Therefore, the marginal utility for the 5th unit consumed must be 2 (102 - 100 = 2).

Marginal utility is the additional satisfaction or benefit that a person derives from consuming one more unit of a good. It is calculated by dividing the change in total utility (the overall satisfaction or benefit) by the change in the quantity of the good consumed. This measure helps to understand how the utility or satisfaction gained from consuming a good changes as the quantity consumed changes. By calculating the marginal utility, individuals can make decisions about how much of a good to consume to maximize their overall satisfaction.

The marginal utility for the second unit of the good consumed is 10.0. This can be determined by subtracting the total utility of the first unit (20) from the total utility of the second unit (30).

The correct answer is "they yield higher marginal utility." Marginal utility refers to the additional satisfaction or value that a consumer derives from consuming an additional unit of a good or service. In this case, diamonds are more expensive than water because each additional unit of diamond provides a higher level of satisfaction or utility compared to each additional unit of water. This higher marginal utility justifies the higher price of diamonds in the market.

The value that goes in blank (B) is 95 because it represents the marginal utility of consuming the third unit of the good. This can be determined by subtracting the total utility of consuming the second unit (35) from the total utility of consuming the third unit (20). The result is a decrease in total utility of 15, indicating that the marginal utility of the third unit is 15.

The term "utility" in economics refers to the satisfaction or pleasure that individuals derive from consuming goods and services. It represents the subjective value or benefit that a person obtains from consuming a particular good. This concept is important in understanding consumer behavior and decision-making, as individuals typically seek to maximize their utility by choosing goods and services that provide the greatest satisfaction. Therefore, when an economist talks about utility, they are referring to the satisfaction that results from the consumption of a good.

The correct answer is "It is possible for total utility to rise as marginal utility falls." This statement is true because total utility is the overall satisfaction or benefit derived from consuming a certain quantity of a good, while marginal utility is the additional satisfaction or benefit gained from consuming an additional unit of the good. Initially, as more units of a good are consumed, the marginal utility tends to decrease, meaning that each additional unit provides less satisfaction. However, total utility can still increase if the decrease in marginal utility is offset by the increase in the quantity consumed.

The total utility for the first three units can be calculated by summing up the marginal utilities of each unit. In this case, the marginal utilities for the first three units are 20, 16, and 13 utils respectively. Adding them together, we get 49 utils. Therefore, the correct answer is 49 utils.

As the "relative price" of one beverage was raised, both white rats began to consume less of the higher-priced beverage. This suggests that the increase in price had an impact on their consumption behavior, causing them to consume less of the higher-priced beverage.

The marginal utility of the sixth wing is 20 utils. This can be determined by calculating the difference in total utils between the sixth and fifth wings. The total utils from the sixth wing is 136, and the total utils from the fifth wing is 116. Therefore, the marginal utility of the sixth wing is 136 - 116 = 20 utils.

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The total utility for all five units of oranges can be calculated by adding up the marginal utilities of each unit. In this case, the marginal utilities are 20, 16, 13, 11, and 8. Adding these values together gives a total of 68 utils.

If the consumer reallocates dollars from the purchase of good Y to the purchase of good X, it indicates that the consumer finds more utility in good X compared to good Y. According to the law of diminishing marginal utility, as the consumer consumes more units of a good, the marginal utility derived from each additional unit decreases. Therefore, as the consumer reallocates more dollars to purchase good X, the marginal utility of good X will fall. On the other hand, since the consumer is reallocating fewer dollars to purchase good Y, the marginal utility of good Y will rise.

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The value that goes in blank (C) is 44. This can be determined by looking at the pattern of the marginal utility values. In this case, the marginal utility decreases as the number of units consumed increases. The marginal utility for the first unit consumed is 20, for the second unit it is (A) (which is not provided), for the third unit it is 8, and for the fourth unit it is 6. Based on this pattern, it can be inferred that the marginal utility for the fifth unit consumed would be 3. Therefore, the value in blank (C) must be 44.

When a person's income falls, their budget constraint moves inward toward the origin because they have less money to spend. However, the slope of the budget constraint remains the same because the ratio of the prices of goods and services does not change. The slope represents the trade-off between the two goods, and this trade-off remains the same even when income decreases. Therefore, the correct answer is inward toward the origin, and its slope remains the same.

The value that goes in blank (D) is 102. This can be determined by looking at the table provided. The total utility for the first unit consumed is 40, for the second unit it is 35, for the third unit it is 20, and for the fourth unit it is 100. Since the marginal utility for the fifth unit is 2, it can be inferred that the total utility for the fifth unit is 102.

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In graph (2), the consumer's income is represented by the horizontal line labeled "Budget Line". The point where this line intersects with the price of X ($60) determines the consumer's income. From the graph, we can see that the intersection point is at the vertical line labeled "$3,000". Therefore, the consumer's income is $3,000.

The research conducted by Nicholas Epley and his colleagues at Harvard showed that people are more likely to spend a greater percentage of money given to them if it is termed a bonus rather than a rebate. This suggests that individuals perceive a bonus as extra or additional money, which they are more willing to spend, compared to a rebate which may be seen as a refund or a return of money already spent. Therefore, when money is framed as a bonus, people tend to view it as discretionary income and are more inclined to spend it.

Based on the given information, the price of X is $40 and the consumer allocates all of his income to good X. This means that the consumer can only purchase as many units of X as his income allows. Since the price of X is $40 and the consumer's income is $80, he can purchase 2 units of X (80/40 = 2). Therefore, the consumer will purchase 80 units of X.

The correct answer is "sum of the amounts of satisfaction a person receives from consuming a good." This is because total utility refers to the overall satisfaction or happiness that a person derives from consuming a good. It is the cumulative sum of the satisfaction obtained from each unit consumed. This definition does not involve any changes in marginal utility, price, or consumption, but rather focuses on the overall satisfaction received from consuming the good.

The law of diminishing marginal utility states that as a person consumes more and more of a good, the satisfaction or utility derived from each additional unit of the good decreases. In the context of income, this means that as a person earns more money, the value or worth of an additional dollar of income decreases. This is because the initial dollars of income are able to fulfill basic needs and provide significant utility, but as income increases, the additional dollars have less impact on overall satisfaction or well-being. Therefore, the correct answer is that the law of diminishing marginal utility tells us that an additional dollar of income is worth less than the preceding dollar of income.

Based on the given information, Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. Since utils represent the satisfaction or utility derived from consuming a good, we can compare the utils obtained from each item. The hot dog gives her 20 utils, while the hamburger gives her 25 utils. However, the price of a hot dog is $2, while the price of a hamburger is $2.50. To determine consumer equilibrium, we need to consider the marginal utility per dollar spent. In this case, the marginal utility per dollar spent on hot dogs is 10 utils per dollar ($2 divided by 20 utils) and the marginal utility per dollar spent on hamburgers is 10 utils per dollar ($2.50 divided by 25 utils). Since the marginal utility per dollar spent is the same for both goods, Ari is consuming the correct quantities of hot dogs and hamburgers to be in consumer equilibrium. Therefore, the correct answer is "Yes, so there is no need to change her eating habits."

The correct answer is that at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC. This is because people will be willing to pay a higher price to live in GWC due to its better weather, increasing the demand for housing in GWC. As a result, housing prices in GWC will rise. On the other hand, the decrease in demand for housing in BWC as people move to GWC will lead to a decrease in housing prices in BWC.

The equilibrium position for the consumer is at point T because it represents the point where the budget constraint (line ab) is tangent to the highest indifference curve (I3). This means that at point T, the consumer is maximizing their utility given their budget constraint. Any point on the budget constraint would not be optimal because it would either be below the highest indifference curve (resulting in lower utility) or above the highest indifference curve (resulting in unaffordable consumption). Points M, J, and R are not optimal because they do not represent the point of tangency between the budget constraint and the highest indifference curve.

If the total utility of consuming additional units of a good rises by a constant amount, it implies that the marginal utility remains constant. Marginal utility refers to the additional utility gained from consuming one more unit of a good. If the total utility increases by the same amount for each additional unit, it suggests that the marginal utility is not changing and remains constant.

The marginal utility of the second plum is 12 utils. This can be determined by calculating the difference in total utility between the second and first plum, which is 34 - 22 = 12. Marginal utility represents the additional utility gained from consuming one additional unit of a good, and in this case, consuming the second plum adds 12 utils of utility.