Question

Can you answer these questions?

11. Suppose that MUr/Pr exceeds MUyl/Py. To maximize utility the consumer who is spending all her money income should buy A. less of X only if its price rises. B. more of Y only if its price rises. C. more of Y and less of X. D. more of X and less of Y 12. In purchasing products A and B, a consumer is in equilibrium when: 13. The diamond-water paradox atises because: A. essential goods may be cheap while nonessential goods may be expensive. B. the marginal utility of certain products increases, rather than diminishes. C essential goods are always higher priced than nonessential goods. D. we sometimes fail to use money as a standard of valuc. 14. The law of diminishing marginal utility states that A total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed B. beyond some point additional units of a product will yield less and less extra satisfaction to a consumer. C. price must be lowered to induce firms to supply more of a product. D. it will take larger and larger amounts of resources beyond some point to produce successive units of a product. Total Product Input of Labor no. of workers (no. of snowboard roduced in weeks) 30 68 110 140 135 15) In the above table, average physical product is 30 snowboards when A) 4 workers are employed. B) 3 workers are employed C) 2 workers are employed D) 1 worker is employed. 16) In the above table, when the firm employs 4 workers, the marginal product will be A) 140 snowboards. B) 30 snowboards. C) 35 snowboards. D) 208 snowboards. 17) In the above table, how many workers are employed when marginal product reaches its maximum? A) 1 B) 2 C) 3 D) 4 18) In the above table, diminishing marginal product occurs after employing th A) first worker. B) second worker. C) third worker. D) fourth worker. 19) In the above table, marginal product becomes negative after employing the A) second worker. B) third worker. C) fourth worker. D) fifth worker. 20) In the above table, the marginal product of the second worker is A) 68. B) 98. C) 38 D) It cannot be determined.

Answer 1

11. D

More of X and less of Y because the marginal utility from X, relative to its price, is higher than from Y. So the consumer gets more utility from X (compared to what she has to pay) and hence it makes sense to buy more X and less Y.

12. A

This is just a fundamental condition required for utility maximization.

13. A

The paradox arises because water is more valuable to life than diamond (an essential good) but diamond is a lot more expensive. So it shows that essential goods could still be cheaper than non essential goods.

14. B

The law intuitively just says that additional units of a commodity give lesser and lesser satisfaction for each new unit consumed.

15. D

Average physical product is total product divided by number of units employed. When 1 labor is employed total product is 30. Average product is 30/1. Which is just 30.

16. B

Marginal product is the increase in output when an extra unit of input is employed. When 3 units were employed the output was 110. When the 4th unit is employed, the output is 140. The increase is 140-110 which is 30.

17. C

Moving from 2 to 3 units of input increases output by 42. That is the highest increase you see in the table (and so the marginal product is 42).

18. C

The first worker increases output by 30. The second worker increases output by 38 (to 68). The third worker increases output by 42 (to 110) and the fourth worker increases output by 30 again. Up until the fourth worker was employed, each new worker was increasing output by more than the previous worker did. So the marginal product (which shows this increase) began to diminish at the fourth worker. And after the third worker.

19. D

Output keeps increasing till the 5th worker is employed. After which the output actually decreases from 140 to 135. So the change in output is negative- or the marginal product is negative.

20. C

(Already mentioned why in the 18th question)