1. Suppose that you consume apples and bananas, and the marginal utility of the
ID: 1219847 • Letter: 1
Question
1. Suppose that you consume apples and bananas, and the marginal utility of the last apple consumed is six times the marginal utility of the last banana consumed. However, the price of apples is only three times the price of bananas. To maximize utility you should:
consume more apples and more
bananas.
consume fewer apples and more bananas.
consume more apples and
fewer bananas.
refuse to pay three times more for apples than for bananas.
2. When consumers reduce their purchases of a good because of a increase in its price, the:
income effect reduces purchases of normal goods.
marginal utility derived from the
good rises.
total utility enjoyed from other
goods declines.
substitution effect is positive.
3. Which of the following might contradict the law of diminishing marginal utility?
Fred asks Wilma for a divorce
John enjoys his sixth beer more than the fifth.
Bill trades in his old car for a newer car
The all-you-can-eat salad bar isn’t looking so good after the fifth trip
a.consume more apples and more
bananas.
consume fewer apples and more bananas.
c.consume more apples and
fewer bananas.
refuse to pay three times more for apples than for bananas.
Explanation / Answer
1.
consume more apples and fewer bananas.
because you are getting more utility from the apple which is twice adjusting for price( apple utility per dollar =6/3 =2 times than banana) than the banana , so consume more apple
we only do one question as per Chegg
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