Suppose that for Jason the marginal utility of 50-per-serving caviar is 100 and the marginal utility of 1-per-serving popcorn is 10 . For his snack, Jason should buy
a. the caviar if he has the 50; otherwise the popcorn
b. the caviar if he has the 50; otherwise nothing
c. the popcorn, whether he has the 50 or not
d. one serving each of the caviar and popcorn, if he has 51
e. five servings of popcorn for each serving of caviar
QUESTION 2As a consumer allocates income between good A and good B, total utility is maximized when
a. the marginal utility of A = the marginal utility of B
b. the marginal utility of A = the marginal utility of B = 0
c. the price of A = price of B
d. marginal utility of A/price of A = marginal utility of B/price of B = 0
e. marginal utility of A/price of A = marginal utility of B/price of B
QUESTION 3When a consumer spends income so that the ratio of marginal utilities (MUs) of all goods purchased equals the ratio of their prices, the consumer is
a. maximizing marginal utility
b. spending too much on all goods
c. maximizing total utility
d. beyond the point of diminishing marginal utility
e. behaving in opposition to the principal of rational behavior
QUESTION 4Consumers must understand the law of diminishing marginal utility in order to maximize their satisfaction.
a. True
b. False
QUESTION 5A utility-maximizing consumer equalizes marginal utilities across all goods.
a. True
b. False
QUESTION 6In terms of utility theory, equilibrium in the real world means that
a. households are consuming as much of every commodity as they would like
b. households have spent their incomes in such a way that their overall satisfaction is maximized
c. households have spent their incomes in such a way that their marginal utility is maximized
d. households have spent their incomes in such a way that their marginal utility is zero for every product consumed
e. households have spent their incomes in such a way that their total utility is zero
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