Question

16. Marginal utility refers to a. the total satisfaction derived from all the units of the product consumed. b. the satisfaction that an individual receives from consuming a product. c. the change in satisfaction resulting from consuming one more unit or one less unit of the product. d. the dissatisfaction that is derived from not using an additional unit of the product 17. For a given market price, Jane can increase her total utility by adding to her purchases of bananas as long as the value that she places on cach additional banana: a. is less than the amount that she must pay for that additional banana. b. exceeds the amount that she must pay for that additional banana, c. is equal to the amount that she must pay for the additional banana. d. all of the above are true. 18. Let the price of rice be $5/kg and the price of flour be $20/kg. With the quantity of rice on the vertical axis, the absolute value of the slope of the budget line for an income of $1000 is: a. 0.5 b. 2 c. the consumer's marginal rate of substitution of flour for rice d. 4 19. For a third world country increasing food production: a. would not exist if consumers had better information b. keeps farm prices high c. increases the demand for land d. none of the above 20. Brokers of various kinds a. do not contribute to society because they are just buying and selling! b. take advantage of farmers because they have superior market information c. perform a valuable function because they lower transaction costs d. provide a service that farmers could easily do for themselves if they had the time

Answer 1

16.c. the change in satisfaction resulting from consuming one more unit or one less unit of the product.

Reason- Marginal utility is the utility derived from consuming one more unit of a good.

17.c. is equal to the amount that she must pay for the additional banana.

Reason- Optimal allocation is where MC=MB. The addtional cost must be equal to additional benefit by consuming one more unit.

18. d.4

Reason- Absolute slope of budget line=Px/Py= P flour/P rice= $20/$5= $4

19. c. Increases the demand for land.

Reason- Third world country cannot raise production without more land due to less efficiency.

20. b. Take advantage of farmers because they have superior market information

Reason- Brokers have more knowledge about the market supply and demand because of which they take advantage of farmers by paying them less price for their crops.