CH 6

Which statement is correct? Select the best answer.
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Terms in this set (21)
Which statement is correct? Select the best answer.
The law of diminishing marginal utility states that additional utility decreases with each unit added.
Consider the following graph. Assume that income increases, and the budget constraint line shifts to the right. The utility-maximizing choice on the original budget constraint is A. Which statement is correct? Select the best answer.
On the new budget constraint, a choice like C should be made if both goods are normal goods, Choice B if Product 1 is an inferior good, and Choice D is Product 2 is an inferior good.
Consider the spending choices of the following consumer:
Caitlin's income is spent on pizzas and hamburgers, as well as other goods. She considers pizzas to be an inferior good and hamburgers to be an inferior good.
What will happen to Caitlin's purchases of these goods if her income decreases? Select the best answer.
She will buy more pizzas and more hamburgers
Which statement is consistent with the traditional view of economics? Select the best answer.
People's decision-making is based on all available information and their best interest.
Would a behavioral economist agree with the following statement? Select the best answer.
Cecilia lost $10 at the mall and found $10 in the parking lot. Cecilia is happy she lost $10.
No, a behavioral economist would not agree with this statement
Consider the spending choices of the following consumer:
Sarah's income is spent on noodles and pizzas, as well as other goods. She considers noodles to be a normal good and pizzas to be an inferior good.
What will happen to Sarah's purchases of these goods if her income increases? Select the best answer.
She will buy more noodles and fewer pizzas.
How would the following change affect consumer choice? Select the best answer.
Marginal utility for one good decreases
The consumer should purchase less of this good.
Which statement is consistent with the traditional view of economics? Select the best answer.
If the interest paid for a credit card is higher than the interest received from a bank account, a person will pay off the credit as soon as possible using the money from a savings account.
Consider the following graph. Assume that income increases, and the budget constraint line shifts to the right. The utility-maximizing choice on the original budget constraint is A.
If the vertical axis shows inferior good, and the horizontal axis shows normal goods, the point of consumption choice on the new budget constraint line will be closer to the horizontal axis.
Which option correctly completes the blanks in the following scenario? Select the best answer.
Ethel buys melons and other goods. For Ethel, melons are a normal good, and all other goods can be considered normal. If the price of melons rises, the substitution effect will cause Ethel to buy [blank] melons and [blank] other goods.
fewer; more