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ECN100 Chapter 5 A3

1) Pierre's utility table shows his preferences for bagels and cider. With a $12 budget and prices of $1 for bagels and $2 for cider, his optimal purchase is 8 bagels and 2 ciders. 2) The law of diminishing marginal utility states that the marginal utility of additional units of a good decreases as consumption increases. Marginal utility declines after an initial increase and equals zero when total utility is at its maximum. 3) Mia's marginal utility table shows her preferences for liters of soya milk. With a $7 budget and $1 per liter price, the maximum quantity she would purchase is 4 liters.

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45 views3 pages

ECN100 Chapter 5 A3

1) Pierre's utility table shows his preferences for bagels and cider. With a $12 budget and prices of $1 for bagels and $2 for cider, his optimal purchase is 8 bagels and 2 ciders. 2) The law of diminishing marginal utility states that the marginal utility of additional units of a good decreases as consumption increases. Marginal utility declines after an initial increase and equals zero when total utility is at its maximum. 3) Mia's marginal utility table shows her preferences for liters of soya milk. With a $7 budget and $1 per liter price, the maximum quantity she would purchase is 4 liters.

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mikedjahn
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ECN100-02 Chapter 5 Attempt 3

1) The following table shows Pierre's utility for bagels and cider.

Refer to the above information to answer this question. If Pierre has a budget of $12, the price of bagels
is $1 and cider is $2, what will be his optimal purchase?
A) 4 bagel and 4 ciders.
B) 6 bagels and 3 ciders.
C) 10 bagels and 1 ciders.
D) 2 bagel and 5 ciders.
E) 8 bagels and 2 ciders.

2) Which of the following is correct in reference to the law of diminishing marginal utility?
A) Total utility declines at first, but after some point starts to increase.
B) Marginal utility increases as more of a product is consumed.
C) The amount of additional utility decreases as successive units of a product are consumed.
D) Marginal utility increases at first, but after some point starts to decline.

If total utility is falling, what is also true?


A) Marginal utility must also be falling.
B) Marginal utility must be negative.
C) Marginal utility must be rising.
D) Marginal utility must be greater than total utility.

When is marginal utility equal to zero?


A) When TU is zero.
B) When MU is at its minimum.
C) When TU is at its maximum.
D) When MU is at its maximum.

It is the marginal utility of the last unit consumed that determines how much a consumer is prepared to
pay for a product.
True
False
The following table shows Mia's $ marginal utility for litres of soya milk:
Quantity (in litres) $MU
1 $15
2 10
3 8
4 2
5 1
6 0.50
7 0
Refer to the above table to answer this question. Suppose that Mia has a budget of $7 and the price of a
litre of soya milk is $1, what is the maximum quantity that Mia might purchase?
A) 0.
B) 4 litres.
C) 6 litres.
D) 5 litres.
E) Cannot be determined.
In order for price discrimination to work, three conditions must be fulfilled. Which of the following is not
one of those conditions?
A) It must be impossible to resell the product.
B) The different groups of buyers must have different elasticities of demand.
C) The product must be a necessity.
D) The seller must be able to identify and separate different groups of buyers.
What is meant by the term consumer surplus?
A) It is the surplus which consumers receive from a product as a result of a drop in its price.
B) It is the difference between the price which consumers pay for a product and the actual costs of
production.
C) It is the difference between the actual price of a product and its real value.
D) It is the difference between what the consumer is willing to pay and the actual price of the product.

The following table shows Ketta's utility for eggs and bacon.
Refer to the above information to answer this question. If Ketta has a budget of $5 and the price of both
eggs and bacon are $1, what will be her optimal purchase?
A) 2 eggs and 3 bacon.
B) 4 eggs and 1 bacon.
C) 1 egg and 4 bacon.
D) 3 eggs and 2 bacon.
E) 5 bacon.
Refer to the above information to answer this question. What is the total utility of 7 units?
A) 15.
B) 271.
C) 25.
D) 256.
E) Cannot be determined.

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