Question 1

A student is choosing between REV wraps and V1 food. The marginal utility (MU) of the first REV wrap is 40, and the first V1 food is 15. If the price of a REV wrap is $$15 and V1 food is 10$$, what is the marginal utility per dollar for each good at the first unit?

Accepted Answer

REV wrap: $$\frac{40}{15} = 2.67$$, V1 food: $$\frac{15}{10} = 1.5$$

Question 2

If a student has $$65 to spend and REV wraps cost 15 $$each while V1 food costs $10 each, which combination maximizes total utility based on the marginal utility schedule provided (whole units only)?

Accepted Answer

2 REV wraps and 4 V1 foods

Question 3

Given the optimal bundle from the previous question (2 REV wraps and 4 V1 foods), what is the total utility the student receives?

Accepted Answer

124

Question 4

After spending their entire $65 budget on the optimal bundle, what is the student's average utility per dollar?

Accepted Answer

~1.97

Question 5

Which of the following best characterizes consumer equilibrium in terms of marginal utility and price?

Accepted Answer

$$\frac{MU(x)}{P(x)} = \frac{MU(y)}{P(y)}$$

Question 6

Suppose the price of REV wraps increases to $$20. With a 65 $$budget, what is the new optimal bundle (whole units only)?

Accepted Answer

2 REV wraps and 2 V1 foods

Question 7

Why did the amount of REV wraps change when the price increased from $$15 to 20$$?

Accepted Answer

Both a. and b.

Question 8

Which of the following is NOT true about marginal utility for normal goods?

Accepted Answer

It is linear

Question 9

A decrease in the price of a good will:

Accepted Answer

Increase quantity demanded

Question 10

A decrease in marginal utilities of a good will:

Accepted Answer

Decrease quantity demanded

Question 11

Why are diamonds more expensive than water, despite water being more important for survival?

Accepted Answer

Water has a faster diminishing marginal utility

Question 12

Suppose a student can trade one V1 meal for one REV wrap. If they have already purchased their optimal bundle, would they accept this trade?

Accepted Answer

No

Question 13

Which of the following best describes perfect complements in consumer preferences?

Accepted Answer

Goods that are always consumed together in fixed proportions

Question 14

If a consumer's marginal rate of substitution (MRS) between poutine and soda-pop is 2, what does this mean?

Accepted Answer

The consumer is willing to give up 2 soda-pops for 1 poutine

Question 15

Under which circumstances would a consumer spend below their budget constraint?

Accepted Answer

When they would like to save for the future

Question 16

If the marginal utility per dollar spent on good X is greater than that of good Y, what should the consumer do to maximize utility?

Accepted Answer

Buy more of good X and less of good Y

Question 17

Suppose a consumer's indifference curve is steeper than their budget line at the current consumption bundle. What does this imply?

Accepted Answer

The consumer should consume more of the good on the horizontal axis

Question 18

If the price of poutine increases, what happens to the consumer's budget constraint (holding income and other prices constant)?

Accepted Answer

It pivots inward on the poutine axis

Question 19

If a consumer's preferences for soda-pop increase, how is this represented on an indifference curve map?

Accepted Answer

Indifference curves become flatter

Microeconomics Practice Midterm 2 – Step-by-Step Study Guidance

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