Mrs. Green is spending all her money income by buying bottles ofsoda and bags of

Question

Mrs. Green is spending all her money income by buying bottles ofsoda and bags of pretzels in such amounts that the marginal utilityof the last bottle is 60 utils and the marginal utility ofthe last bag is 30 utils. The prices of soda and pretzels are $.60per bottle and $.40 per bag respectively. It can be concludedthat:

A.the two commoditites are substitute goods.

B.Mrs Green should spend more on pretzels and less on soda.

C.Mrs. Green should spend more on soda and less on pretzels.

D.Mrs.Green is buying soda and pretzels in theutility-maximizing amounts.

Which of the following statement is correct?

A.Utility and usefulness are synonymous.

B.The marginal utility derived from successive units of aproduct tends to be similar for all consumers.

C.Because utility is not measurable, the utility-maximizing ruleprovides no useful insights as to consumer behavior.

D.A product may yield utility, but not be functionallyuseful.

Which of the following is correct?

A.There is no firm mathematical relationship between marginalutility and total utility.

B.Total utility is equal to the change in marginal utility fromconsuming an additional unit of a product.

C.If marginal utility is diminishing and is a positive amount,total utility will increase.

D.If marginal utility is diminishing, total utility must also bedimishing.

Explanation / Answer

1. Choice C.    Mrs.Green should spend more on soda and less onpretzels. 2. Choice D    A product may yield utility, but not be functionallyuseful. 3.Choice C.    If marginal utility is diminishing and is a positiveamount , total utility will increase.

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