1.08 Basic Economic Concepts

Q. If a consumer is trying to choose between four different restaurants for dinner, which of the following accurately describes the relief of hunger? (2 points)

a. It is a benefit with marginally increasing returns.

b. It is a variable cost of the meal because the consumer will eat varying amounts by restaurant.

c. That benefit is constant because a meal at any of the four restaurants will relieve hunger.

d. It is a rational factor to consider in the choice.

e. It is not a part of the utility of any of the consumer's options.

Q. Below is the total benefit Michelle estimates she would get for eating handfuls of dried cranberries in one sitting.

Number of HandfulsTotal Benefit (dollars)

1 $2.00

2$3.50

3$4.50

4$5.00

5$5.25

6$5.00

7$4.00

If a handful of dried cranberries costs $0.25, what is the optimal number of handfuls for Michelle to eat? (2 points)

a. 1

b. 2

c. 3

d. 4

e. 5

Q. According to rational consumer choice, what will happen to the optimal quantity of consumption for a good if the price decreases? (2 points)

a. It will decrease along with total utility.

b. It will decrease.

c. It will increase.

d. It will be unaffected.

e. Insufficient data to determine

Q.

Below is the marginal utility that Chris gains from purchasing oil paints and canvases for his painting hobby.

Units of Oil Paints Marginal Utility of Oil Paints Units of Canvases Marginal Utility of Canvases 1 10 25 2 7.5 2 20 3 5 3 15 4 2.5 4 10 5 1 5Miniature Powdered Donuts Consumed Total utility (utils) 1 12 2 20 3 26 4 29 5 28 6 25$6 $5 Price $2 QuantityPillows per Day Rugs per Day Tommy 5 10 Gina 15 15O B Product I E O D Product 2