Basil is maximizing his utility from consuming tea and crumpets. If the marginal utility of the last crumpet was 32 units of utility and the prices of tea and crumpets are 4 and 8, respectively, what was the marginal utility of the last cup of tea Basil consumed?
a. 2 units of utility
b. 12 units of utility
c. 6
d. 128 units of utility
e. 16 units of utility
QUESTION 2Basil is maximizing his utility from consuming tea and crumpets. If the marginal utility of his last cup of tea was 24 units of utility and that of his last crumpet was 6 units of utility, which of the following is true?
a. The price of tea is six times the price of crumpets.
b. The price of crumpets is four times the price of tea.
c. The prices of tea and crumpets are equal.
d. The price of tea is four times the price of crumpets.
e. The MU of the next cup of tea is less than the MU of the next crumpet.
QUESTION 3If Arnold thinks his last dollar spent golfing yields less satisfaction than the last dollar spent on movies, and Arnold is a utility-maximizing consumer, he should
a. golf more so that the total satisfaction from this activity will increase
b. spend less on movies so that the marginal satisfaction from expenditures in this area will increase
c. golf less and spend more on movies
d. eliminate golfing from his schedule
e. golf more since it costs less
QUESTION 4If by purchasing a little more milk and a little less ice cream you could increase your total utility,
a. the MU of milk must be greater than that of ice cream
b. the MU of ice cream must be greater than that of milk
c. the MU/P of milk must be greater than that of ice cream
d. milk must be cheaper than ice cream
e. the MU of milk will increase
QUESTION 5Suppose you have spent your entire budget and, for all the goods you purchase, the marginal utilities per dollar spent are identical. Which of the following is true?
a. You are being irrational.
b. You can increase your utility by reallocating your income.
c. You will reduce your utility if you allocate income in any other way.
d. You are minimizing your marginal utility.
e. You can avoid diminishing marginal utility.
QUESTION 6The law of diminishing marginal utility may be illustrated by a person
a. buying additional goods after getting a pay raise
b. eating more twinkies but enjoying them less
c. giving some of income to a needy person
d. who spends more hours studying than do his fellow students
e. buying goods so long as their marginal utility is greater than zero
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