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17 Mar 2018

Please explain each answers with clear explanations, thank you


1) The concept of utility is:

A) objective so that psychologists can measure utility and compare one person's utility with that of another person.

B) subjective so there can be no true measurement ofsomeone's utility.

C) objective so that devices can be developed that would measure a person's utility

D) subjective so measurement of someone's utility must be done scientifically.

2) If Cy purchases more than one gallon of gas, then his consumer surplus is:

A) the difference between what he would be willing to pay and what he does pay.

B) the sum of what he is willing to pay and what he does pay.

C) what he does pay minus what he is willing to pay.

D) value of the last gallon purchased.

3) Marginal utility analysis is unrelated to the demand curve.

A) True

B) False

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Sixta Kovacek
Sixta KovacekLv2
18 Mar 2018

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Related questions

Darrell has a utility function for daily income given by u(I) = 10* I . Thus, an income of $36 a day would give Darrell a utility of u($36) = 10* 36 = 10*6 = 60.

Darrell has a job that pays him $100 a day. Darrell goes snowboarding on weekends, so with a probability of 10% (p = 0.10), Darrell has an accident that results in him breaking his leg and unable to work.

What is the actuarially fair price of an insurance policy that will pay Darrell $100 a day if he injures himself snowboarding and is unable to work (just think of this policy paying Darrell for a single day of missed work to simplify calculations)? What is Darrell's expected utility for a given day in the case that he doesn't have insurance (think of what he expects his utility to be on Monday when he leaves work on Friday)?

Would Darrell be willing to buy the insurance policy in part (a) at the actuarially fair price you calculated? Would Darrell be willing to pay more than this actuarially fair price? If so, what is the most that Darrell would pay for such a policy? What does this tell you about Darrell's risk premium given his preferences? Is he risk-averse?

Now consider Tommy who also likes to snowboard but is much more reckless and makes more money than Darrell. Tommy has the same utility function as Darrell but has a daily income of $225. Tommy will break his leg with a probability of 60% (so p = 0.6), and be fine for work on Monday only 40% of the time. What is an actuarially fair price of insurance for Tommy that will pay him $225 per day in the event of an accident? What is his expected income without insurance? Calculate the risk premium that Tommy would be willing to pay for insurance given this scenario. How does his risk premium compare to Darrell's? 

John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 30 utils. After three Cokes, he has a total utility of 60 utils.

Complete the table below to show John's marginal utility for each Coke.

Coke Marginal Utility
First
Second
Third


Does John show diminishing marginal utility for Coke, or does he show increasing marginal utility for Coke? (Click to select)increasing//diminishing

Suppose that John has $6 in his pocket. If Cokes cost $2 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too?

(Click to select)Yes//No

What about the third dollar?

(Click to select)Yes//No

If John's marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke?

(Click to select)Yes//No

Michael spends all of his income on coffee and donuts. A coffee costs $2.50 and a donut costs $2.00. At his current consumption level, the marginal utility for coffee is 30 utils, and the marginal utility for a donut is 60 utils. Which statement best describes what Michael needs to do to maximize his utility?

Question 1 options:

1)

buy less of both coffee and donuts.

2)

buy less coffee and more donuts.

3)

buy more coffee and less donuts.

4)

spend the same amount on coffee as he does on donuts.

Question 2

What is it called when the marginal utility derived from the last dollar spent on each good is the same across all goods and the last dollar spent uses all of the available budget for the purchase of those goods?

Question 2 options:

1)

the optimal consumption bundle.

2)

the optimal production bundle.

3)

diminishing marginal utility.

4)

optimal point.

Question 3 (1 point)

What does the economic theory of marginal utility infer?

Question 3 options:

1)

consumers naturally know which consumption choices will maximize their utility.

2)

consumers who watch market trends are better at maximizing their utility than are those who do not watch those trends.

3)

one cannot maximize utility without taking an economics class that explains utility theory.

4)

one cannot maximize utility without doing the math of calculating the ratios of marginal utility divided by price.

Question 4

Kate is addicted to chocolate and does not care how much it costs. In fact, she spends more than $20 a week on chocolate. What can be concluded about elasticity in her buying decisions?

Question 4 options:

1)

Her income elasticity of demand for chocolate is equal to one.

2)

Her income elasticity of demand for chocolate is equal to zero.

3)

Her price elasticity of demand for chocolate is equal to one.

4)

Her price elasticity of demand for chocolate is equal to zero.

Save

Question 5 (1 point)

Why does the demand for a good become relatively more elastic?

Question 5 options:

1)

substitutes for the good become more available.

2)

substitutes for the good become less available.

3)

the good becomes more of a necessity.

4)

the time allowed for adjustment is shortened.

Save

Question 6 (1 point)

Assume the price of chicken per pound is $3.49 and that Americans purchase 10 million pounds per chicken every month. If the price of chicken increases to $5.49 per pound, identify what will occur to consumer surplus?

Question 6 options:

1)

consumer surplus increases.

2)

consumer surplus decreases.

3)

consumer surplus creates incentive to save.

4)

consumer surplus creates incentive to spend.

Question 7 (1 point)

What is another name for the difference between the price that consumers are willing to pay for a good and a lower price that they may actually have to pay?

Question 7 options:

1)

profit.

2)

revenue.

3)

consumer utility.

4)

consumer surplus.

Question 8

Adam, Brian, Robert, and Sam all want to attend a football game. The admission price is $48. Adam is willing to pay $59 for the ticket. Brian is willing to pay $39. Robert is willing to pay $45, and Sam is willing to pay $55. Based on this information, who will go to the game?

Question 8 options:

1)

Adam, Brian, Robert, and Sam.

2)

Brian and Robert.

3)

Adam and Sam.

4)

Brian, Robert, and Sam.

Save

Question 9 (1 point)

Lily is willing to pay $10 for one bracelet and $5 for a second. Patty is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, identify what is the total consumer surplus after Lily and Patty make their purchases?

Question 9 options:

1)

$8

2)

$6

3)

$7

4)

$5

Question 10 (1 point)

Manfred is willing to shovel one driveway for $25, a second for $30, and a third for $35. Assume that the market rate for shoveling driveways is $32. How many driveways will Manfred shovel, what will be his total revenue, and what will be his producer surplus?

Question 10 options:

1)

Manfred will shovel two driveways for a total revenue of $64 and his producer surplus will be $9.

2)

Manfred will shovel three driveways for a total revenue of $75 and his producer surplus will be $12.

3)

Manfred will shovel three driveways for a total revenue of $96 and his producer surplus will be $5.

4)

Manfred will shovel four driveways for a total revenue of $125 and his producer surplus will be $18.

Save

Question 11 (1 point)

What would the difference between the price that producers receive and the lower price at which they are willing to sell the good be called?

Question 11 options:

1)

producer shortage.

2)

producer surplus.

3)

consumer shortage.

4)

consumer surplus.

Save

Question 12 (1 point)

What will happen when there is an increase in the price of eBook downloads?

Question 12 options:

1)

It reduces the marginal utility derived from each dollar spent on eBooks.

2)

It reduces the marginal utility derived from each hardcopy book purchased.

3)

There will not be a substitution effect.

4)

There will not be a change in the number of eBooks in the set of consumption possibilities.

Save

Question 13 (1 point)

When is price elasticity of demand utilized to measure how an individual changes the quantity they demand?

Question 13 options:

1)

when supply changes.

2)

when product quality changes.

3)

when marketing changes.

4)

when price changes.

Save

Question 14 (1 point)

Assume Mary consumes only tea and pastries. A cup of tea costs 5 euros and a pastry costs 8 euros. Her weekly income is 450 euros. Mary always drinks 2 cups of tea for every pastry she consumes. What is Mary’s optimal weekly consumption bundle?

Question 14 options:

1)

25 cups of tea and 50 pastries.

2)

50 cups of tea and 25 pastries.

3)

58 cups of tea and 20 pastries.

4)

60 cups of tea and 30 pastries.

Save

Question 15 (1 point)

When is producer surplus a positive value?

Question 15 options:

1)

the price the producer is willing to charge equals the market price.

2)

there is no tax applied to the good.

3)

the price the producer is willing to charge is less than the market price.

4)

the price the producer is willing to charge is greater than the market price.

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