ECO 365T Wk 4 - Apply Quiz

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ECO 365T Wk 4 - Apply Quiz

A child is given $2.50 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 10 cents and hard candies 50 cents each. The marginal utilities derived from each product are as shown in the following table.

Number of Items    MU of Chocolates  MU of Hard Candies

1     60    150

2     50    140

3     40    120

4     30    100

5     20    80

6     10    70

7     5     50

8     0     20

Which combination would give the child the maximum utility out of spending $2.50?

Multiple Choice

•      7 chocolates and 3 hard candies
•      8 chocolates and 2 hard candies
•      5 chocolates and 4 hard candies
•      4 chocolates and 4 hard candies

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $80 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Faith would be most consistent with the findings of behavioral economists?

Multiple Choice

•      Faith receives $80 from the dictator game and $60 from the ultimatum game.
•      Faith receives $40 from the dictator game and $34 from the ultimatum game.
•      Faith receives $40 from the dictator game and $40 from the ultimatum game.
•      Faith receives $47 from the dictator game and $41 from the ultimatum game.

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson

Multiple Choice

•      has preferences that are at odds with the principle of diminishing marginal utility.
•      considers A and B to be complementary goods.
•      should buy less A and more B.
•      should buy less B and more A.

If the marginal utility from consuming the fourth unit of a product is 20 and the total utility from all four units is 126, then the total utility from consuming three units must be

Multiple Choice

•      146.
•      42.
•      106.
•      504.

Suppose Ryan and Rita were randomly shown the numbers 49 and 47, respectively, and then asked to estimate the price of an item about which they have relatively limited knowledge. According to findings from behavioral economics, we would expect

Multiple Choice

•      Ryan to estimate a price higher than what Rita would estimate.
•      Ryan to estimate a price about the same as what Rita would estimate.
•      Ryan to estimate a price lower than what Rita would estimate.
•      the randomly shown numbers to have no influence on their estimates.

Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $25

Units of L       Total Utility    Units of M      Total Utility

1     9     1     16

2     15    2     28

3     18    3     36

4     20    4     40

5     21    5     42

How many units of the two products will the rational consumer purchase?

Multiple Choice

•      5 of L and 2 of M
•      1 of L and 5 of M
•      4 of L and 3 of M
•      3 of L and 4 of M

Multiple Choice

•      the two commodities are substitute goods.
•      Mrs. Arnold should spend more on pretzels and less on soda.
•      Mrs. Arnold should spend more on soda and less on pretzels.
•      Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.

The first Pepsi yields Craig 12 units of utility and the second yields him an additional 15 units of utility. His total utility from three cans of Pepsi is 36 units of utility. The marginal utility of the third Pepsi is

Multiple Choice

•      21 units of utility.
•      27 units of utility.
•      9 units of utility.
•      36 units of utility.