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ECON 1000 Study Guide - Final Guide: Average Cost, Average Variable Cost, Marginal Utility

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goldleopard14
15 Jan 2017
School
York University
Department
Economics
Course
ECON 1000
Professor
Ardeshir Noordeh

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ECON 1000 Full Course Notes
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ECON 1000 Full Course Notes
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Document Summary

The limit to a household"s consumption choices. It marks the boundary between those combinations of goods and services that a household can afford to buy and those that it cannot afford. Preferences a description of a person"s likes and dislikes and the intensity of those feelings. Utility the benefit or satisfaction that a person gets from the consumption of goods and services. Total utility the total benefit that a person gets from the consumption of all the different goods and services. Marginal utility the change in total utility resulting from a one unit increase in the quantity of a good consumed. Diminishing marginal returns the tendency for the marginal product of an additional unit of a factor of production to be less than the marginal product of the previous unit of the factor. Diminishing marginal utility the tendency for marginal utility to decrease as the quantity consumed of a good increase.

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Related Questions

budget line

marginal utility

complete property of preferences

market demand

consumption bundle

substitution effect

Giffen good

total effect

income effect

transitive property of preferences

indifference curves

utility

the marginal rate of substitution

utility function

 

1.

_____

The satisfaction or benefit that consumers receive from consuming goods or services.

 

 

2.

________________ _

A particular combination of specific quantities of goods or services

3.

________________ _

Consumers can rank all conceivable bundles of goods or services

4.

_____

If A is preferred to B, and B is preferred to C, then A is always preferred to C.

5.

_____

Equation showing a consumer’s perception of the total utility forthcoming from consuming each bundle of goods and services.

6.

_____

A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.

7.

_____

The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.

8.

_____

The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.

9.

_____

The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.

10.

_____

The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.

11.

_____

The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.

12.

________________ _

The sum of the substitution and income effects.

13.

_____

A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.

14.

_____

A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

1. Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.

  consumer happiness
  utility
  a happiness index
  a satisfaction index

2. Sue likes brownies. However, Sue notices that the more brownies she eats the less satisfaction she receives from each extra brownie. We can say that Sue is experiencing ___________________ from each extra brownie.

  sugar sickness
  total utility
  diminishing marginal utility
  increasing marginal utility

3. When total utility is maximized, the marginal utility will be

  positive.
  zero.
  negative.
  none of these.

4. Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?

  Dirk and Lee both receive 10 utils from eating pizza.
  Dirk and Lee both receive the same level of satisfaction from eating pizza.
  Dirk gets more twice as much satisfaction as Lee from eating pizza.
  It is difficult to determine because the utility is subjective.

5. For many products, the total utility curve is

  strictly increasing because of increasing marginal utility.
  strictly decreasing because of diminishing marginal utility.
  increasing initially because of increasing marginal utility, but eventually decreases.
  increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

6. When consumers get the biggest bang for the buck, we say they

  used the loudest gun in hunting season.
  reached a consumer optimum.
  minimized consumer satisfaction.
  maximized marginal utility.

7. By choosing to consume at the consumer optimum, consumers will

  maximize their total utility.
  minimize their total utility.
  maximize the amount they spend on each good.
 

minimize the amount they spend on each good.

8. A consumer is in equilibrium when consuming two goods when which of the following holds?

  MUa/ Pa = MUb/ Pb
  MUa/ Ph =MUb/ Pa
  Pa/ MUa = Pb/ MUb
  MUa x Pa = MUbxPb

9. If the marginal utility of good 1 is 15 and its price is $3, and the marginal utility of good 2 is 12, and its price is $4, then the consumer

  has achieved a consumer optimum.
  should increase his or her consumption of good 1.
  should increase his or her consumption of good 2.
  should decrease his or her consumption of good 1.

10.Suppose the price of an iPod decrease and the price of HD TVs remains the same; what noticeable effect(s) occur(s)?

  the substitution effect only
  the real-income effect only
  the substitution effect and real-income effect, if there is a noticeable change in purchasing power
  the substitution effect and real-income effect, if there isn’t a noticeable change in purchasing power

11. The ______________ paradox was described by Adam Smith in 1776.

  diamond-carbon
  diamond-water
  diamond-life
  water-utility

12. What is the key to solving the diamond-water paradox?

  more water and fewer diamonds
  marginal utility
  total utility
  consumer demand

13. When solving the diamond-water paradox we notice that the marginal utility of

  diamonds are equal to the marginal utility of water.
  diamonds are greater than the marginal utility of water.
  diamonds are less than the marginal utility of water.
  water is equal to its price, and therefore lower than the marginal utility of diamonds.

14. The consumer surplus for water is

  greater than that for diamonds because water is nonessential.
  greater than that for diamonds because water is essential.
  less than that for diamonds because water is nonessential.
  less than that for diamonds because water is essential.

15. Suppose a consumer consumes only diamonds and water, and the price of diamonds increases. All else being equal, a consumer’s marginal utility for diamonds

  decreases and the marginal utility for water stays the same.
  increases and the marginal utility for water decreases.
  decreases and the marginal utility for water increases.
  increases and the marginal utility for water stays the same.

n this assignment you will apply consumer choice theory and marginal analysis to business problems. Consider each of the following products and services: a pair of tickets to a sporting or cultural event that you enjoy a can of common table salt a college class In a two-page essay: Explain how your own current household budget, tastes and preferences, and future expectations determine how much of each of these products you purchase in a year. Describe the benefits (utility) you get from each product and service. Suppose the price of the tickets were cut in half. How would your consumption of cultural or sporting goods change? Why? Suppose your household budget was suddenly doubled because you received a 100% raise. How would your consumption of each of these goods and services change? Explain your answer in terms of utility and marginal analysis. What is the law of diminishing marginal utility? How does this law affect the ability of table salt companies to stimulate demand for their product?