1.

Answer this question based on the following hypothetical data:

What is the total utility derived from buying the third unit of good X?

a. 23 utils b. 21 utils c. 5 utils d. 20 utils feedback: Incorrect. The table shows that the total utility of consuming two units is 18 utils and the marginal utility of consuming the third unit is 5 utils, therefore the total utility derived from consuming three units would be 18 + 5 = 23 utils

-------------------------------------------------------------------------------2. Answer this question based on the following hypothetical data:

The marginal utility derived from consuming four units is:

a. 4 utils. b. 2 utils. c. 6 utils. d. 3 utils.

correct: d your answer: b feedback: Incorrect. The total utility from consuming three units is 23 utils and the total utility from consuming four units is 26 utils, so the marginal utility of the fourth unit is 3 utils. -------------------------------------------------------------------------------3. Answer this question based on the following hypothetical data:

What is the total utility derived from buying the fifth unit of good X?

a. 28 utils b. 27 utils c. 2 utils d. 30 utils correct: a your answer: c feedback: Incorrect. The table shows that the total utility of consuming four units is 26 utils and the marginal utility of consuming the fifth unit is 2 utils, therefore the total utility derived from consuming five units would be 26 + 2 = 28 utils.

-------------------------------------------------------------------------------4. The consumer would never buy the 5th unit of good X. True False

feedback: Incorrect. The consumer might purchase the fifth unit if the price he had to pay for it was low enough to warrant only receiving two utils of marginal utility from consuming it. 5. For any two goods, X and Y, if MUX divided by PX = 2.5 and MUY divided by PY = 4.0, then the consumer should:

a. buy more of good X and less of good Y. b. buy more of good Y and less of good X. c. buy only good Y and no good X. d. stop because consumer equilibrium has been achieved. status: correct (1.0) correct: b your answer: b feedback: Correct. The consumer should buy more of Y and less of X, but there is no reason to conclude that the consumer should buy zero units of X. -------------------------------------------------------------------------------6. The "diamond-water paradox" refers to the:

a. well known fact that diamonds made from super-cooled ice are worth more than real diamonds. b. observation that diamonds that have been under water from a lengthy period develop a patina that makes them worth more than diamonds that have remained dry. c. observation that things with the greatest value in use often have little value in exchange whereas things that have great value in exchange often have little value in use. d. None of the above.

status: incorrect (0.0) correct: c your answer: b feedback: Incorrect. It refers to the observation that things with the greatest value in use often have little value in exchange whereas things that have great value in exchange often have little value in use. -------------------------------------------------------------------------------7. Behavioral economists argue that people behave just like they are assumed to behave according to traditional economic theories.

True False status: incorrect (0.0) correct: false your answer: true feedback: Incorrect. Behavioral economists believe that peoples' behavior is often inconsistent with the assumptions of rational, consistent, and self-interested behavior assumed by traditional economic theory. -------------------------------------------------------------------------------8. The utility obtained by one person ________ be scientifically or objectively compared with the utility obtained from the same thing by another person.

a. can with considerable effort b. can easily and routinely c. in the U.S.

d. cannot correct: d your answer: c feedback: Incorrect. Because each person is an individual with different tastes and preferences, the utility obtained by one person cannot be scientifically or objectively compared with the utility obtained from the same thing by another person. -------------------------------------------------------------------------------9. Which of the following represents a key assumption underlying the economic theory of consumer choice?

a. Consumers have unlimited budgets. b. Consumers can avoid the law of diminishing marginal utility by using credit cards instead of cash. c. Consumers wish to maximize marginal utility regardless of the cost of the good. d. Consumers seek to maximize total utility. correct: d your answer: b feedback: Incorrect. The theory of consumer choice assumes that consumers make rational choices and want to maximize their total utility. 10. Suppose that Kwame gets $20 in marginal benefit from his first hour of studying, and the marginal cost is $5. In his second hour of studying he gets $15 in marginal benefit and pays $10 in marginal cost. In his third hour of studying he gets $12 in marginal benefit and pays $12 in marginal cost. In his fourth hour of studying he gets $8 in marginal benefit and pays $15 in marginal cost. What is the efficient number of hours for Kwame to study?

a. 1 hour b. 2 hours

c. 3 hours d. 4 hours status: correct (1.0) correct: c your answer: c feedback: Correct. feedback: Incorrect. Kwame achieves the greatest utility by studying for 3 hours (his marginal benefit and cost are equal; in the fourth hour his marginal cost is greater than his marginal benefit).