Q: If Hurley buys 100 fish at $$4 each, how many mangos can he buy with the remaining income if mangos cost 1 $$each and his total income is $1200?

$$1200 - (100 \times 4) = 800$$ left, $$800 / 1 = 800$$ mangos

Q: A consumer has $$21 to spend per week on two goods, A and B. If the price of A is 3 $$and the price of B is $7, which combination is affordable?

7 units of A and 0 units of B: $$3 \times 7 = 21$$

Question 1

Hurley has an income of $$1200. The price of fish is 4 $$per fish, and the price of mangos is $1 per mango. If Hurley spends all his income on mangos, how many mangos can he buy?

Accepted Answer

$$1200 / 1 = 1200$ mangos

Question 2

If Hurley buys 100 fish at $$4 each, how many mangos can he buy with the remaining income if mangos cost 1 $$each and his total income is $1200?

Accepted Answer

$$1200 - (100 	imes 4) = 800$$ left, $$800 / 1 = 800$$ mangos

Question 3

What does the slope of the budget constraint represent in the context of Hurley’s choices between fish and mangos?

Accepted Answer

The opportunity cost of the good on the X-axis in terms of the good on the Y-axis

Question 4

If Hurley’s income falls from $$1200 to 800$$, what happens to his budget constraint?

Accepted Answer

It shifts downward, reducing the opportunity set

Question 5

If the price of mangos rises from $$1 to 2$$, but Hurley’s income and the price of fish remain unchanged, what happens to the budget constraint?

Accepted Answer

It pivots inward around the fish axis

Question 6

Which of the following best describes the law of diminishing marginal utility?

Accepted Answer

As more of a good is consumed, the additional satisfaction from each extra unit decreases

Question 7

Suppose the marginal utility per dollar spent on good X is greater than that for good Y. What should the consumer do to maximize utility?

Accepted Answer

Buy more of good X and less of good Y

Question 8

The utility-maximizing rule can be written as:

Accepted Answer

$$\frac{MU_X}{P_X} = \frac{MU_Y}{P_Y}$$

Question 9

Why do demand curves slope downward according to the law of diminishing marginal utility?

Accepted Answer

Because each additional unit consumed provides less additional satisfaction, so consumers are only willing to buy more at lower prices

Question 10

A consumer has $$21 to spend per week on two goods, A and B. If the price of A is 3 $$and the price of B is $7, which combination is affordable?

Accepted Answer

7 units of A and 0 units of B: $$3 	imes 7 = 21$$

Question 11

If a consumer’s marginal utility from the last dollar spent on good X is less than that from the last dollar spent on good Y, what should the consumer do?

Accepted Answer

Buy more of good Y and less of good X

Question 12

Which of the following is NOT a basic decision every household must make?

Accepted Answer

How much profit to maximize

Question 13

If the price of fish increases while income and the price of mangos remain constant, what happens to the opportunity set?

Accepted Answer

It shrinks, and the budget constraint pivots inward around the mango axis

Question 14

Which of the following best defines total utility?

Accepted Answer

The total amount of satisfaction obtained from consumption of a good or service

Question 15

A consumer faces the following marginal utilities and prices: $$MU_X = 20$$, $$P_X = 4$$, $$MU_Y = 10$$, $$P_Y = 2. Is $$the consumer maximizing utility?

Accepted Answer

Yes, because $$\frac{MU_X}{P_X} = \frac{MU_Y}{P_Y} = 5$$

Question 16

Which of the following would cause a consumer’s budget constraint to shift outward?

Accepted Answer

An increase in income

Question 17

If a consumer spends all their income on two goods, X and Y, and the price of X doubles, what happens to the maximum quantity of X the consumer can buy?

Accepted Answer

It is cut in half

Question 18

Which of the following is an example of a tradeoff faced by households?

Accepted Answer

Working more hours means more income but less leisure time

Household Behavior and Consumer Choice: Budget Constraints and Utility

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