Question

As Shaniq drinks additional cups of tea at breakfast, Shaniq's

Question 1 options:

	marginal utility from tea decreases.
	total utility from tea increases.
	total utility from tea decreases.
	Both answers A and B are correct.
	Both answers B and C are correct.

Question 2 (1 point)

You can use marginal utility theory to find the demand curve by changing

Question 2 options:

	only the price of one good.
	only income.
	only the prices of both goods.
	the utility schedule.

Question 3 (1 point)

The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. Sarah is NOT able to purchase the combination of

Question 3 options:

	30 roses bushes and 300 pieces of sushi.
	20 rose bushes and 200 pieces of sushi.
	50 roses bushes and 0 pieces of sushi.
	0 roses bushes and 300 pieces of sushi.

Question 4 (1 point)

Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing lures and steaks. Lures cost $5 each, steaks cost $10 each. With this level of income, which consumption points are not possible?

Question 4 options:

	100 lures, 60 steaks
	200 lures, 0 steaks
	50 lures, 50 steaks
	0 lures, 50 steaks

Question 5 (1 point)

Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100. Juan spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5 per pint. To maximize his utility, Juan should

Question 5 options:

	buy more cream and fewer strawberries.
	buy less cream and fewer strawberries.
	buy more cream and more strawberries.
	buy less cream and more strawberries.

Question 6 (1 point)

In order to maximize his or her utility, a consumer must allocate his or her entire budget and

Question 6 options:

	buy the combination of goods that makes the marginal utility per dollar from all goods as large as possible.
	buy the combination of goods that makes the marginal utility per dollar from all goods as small as possible.
	buy the combination of goods that equalizes the marginal utility per dollar from all goods.
	do nothing else because when the entire budget is allocated, utility is maximized.

Question 7 (1 point)

Quantity of pizza	Total utility from pizza	Quantity of Diet Pepsi	Total utility from Diet Pepsi
0	0	0	0
1	24	1	14
2	44	2	26
3	60	3	36
4	72	4	44
5	76	5	50
6	79	6	54
7	80	7	56

Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs $2 each. The table above gives your utility from consuming these two goods. If your income is $14, which of the following consumption combinations will you choose?Question 7 options:

	0 slices of pizza and 7 Diet Pepsis
	2 slices of pizza and 3 Diet Pepsis
	1 slice of pizza and 5 Diet Pepsis
	3 slices of pizza and 1 Diet Pepsi

Question 8 (1 point)

The figure above shows a consumer's budget line between sodas and DVD rentals. Point b represents an

Question 8 options:

	affordable combination of sodas and DVDs that spends the entire budget.
	affordable combination of sodas and DVDs that does not spend the entire budget.
	unaffordable combination of sodas and DVDs.
	affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure.

Question 9 (1 point)

When Chris maximizes his total utility, then his entire available budget is allocated in such a way that the

Question 9 options:

	marginal utility is as large as possible for goods.
	marginal utility of all goods is equal.
	marginal utility will start decreasing if it consumes fewer goods.
	marginal utility per dollar is equal for all goods.

Answer 1

Question 1

Both answers A and B are correct

Law of diminishing marginal utility states that as a consumer consumes more and more units of a good, the addition to total utility obtained goes on decreasing. In other words, as more and more units of a good is consumed, marginal utility derived from each unit keeps falling.

Therefore as Shaniq drinks additional cups of tea at breakfast, even though his total utility keeps increasing, his marginal utility derived from each additional cup of tea keeps falling.