Assume an indifference curve yields a consumer 1,000 utils of total utility. If the consumer's budget increases by 50 percent, then the indifference curve:
a. shifts rightward.
b. shifts leftward.
c. becomes more linear.
d. is unchanged.
QUESTION 2For a monopoly, price always equals marginal revenue.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3Show, using utility theory, why a consumer who is initially maximizing her utility will alter her consumption pattern in response to a change in the price of a good.
QUESTION 4The monopolist faces the market demand curve.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 5Justin Field just stopped at the Exxon station on the way to campus and bought four Butterfinger candy bars, two 20-ounce bottles of grape-watermelon Snapple, and 10 gallons of gas. His marginal-utility-to-price ratios are 3.21 for the Butterfingers, 4.8 for the Snapples, and 5.7 for the gas. Explain why this set of purchases did not maximize Ryan's utility and how could he have increased his utility.
QUESTION 6A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7Lori plans to buy a convertible this weekend. Her two favorite cars are the BMW, which would give her 160,000 utils of satisfaction, and the Mitsubishi Eclipse Spyder, which would give her only 124,000 utils of satisfaction. The BMW that she wants sells for 37,220, while the Mitsubishi sells for 28,200 . She can afford either car.
a. Which car will she buy in order to maximize her utility?
b. To what price will her second choice have to fall to get her to make her first choice?
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