Holt 7525-9 S15_IT

___ 3. If Alex is willing to pay $200 for a new smartphone and Andy is not willing to pay $200 for
a new smartphone, this means:
a. that Andy does not anticipate at least $200 worth of utility from the smartphone
b. that Alex anticipates more utility from the smartphone than Andy
c. Both of the above
d. Neither of the above
Complete the following table to answer questions 4. and 5.:
Units ofGood X Total Utility Marginal Utility
0 0 X
1 30 30
2 54 __
3 72 __
4 84 __
5 90 __
6 92 __
___ 4. What is the marginal utility of the 3 rd unit of Good X?
a. 72
b. 24
c. 18
d. 12
___ 5. What is the marginal utility of the 5 th unit of Good X?
a. 0
b. 6
c. 18
d. 90
___ 6. A market economy:
a. gives resource owners the incentive to produce the output that generates the most
satisfaction for the consumers
b. results in an equal distribution of income
c. Both of the above
d. Neither of the above
___ 7. Max has annual income of $20 million. Minnie has annual income of $20,000. If each
received an additional $1,000 of income:
a. this clearly would provide Max with more marginal utility, since he obviously likes
money more than Minnie.
b. this clearly would provide Minnie with more marginal utility due to the law of
diminishing marginal utility
c. it is impossible to objectively determine who would receive more marginal utility
___ 8. Diamonds have a higher price than water because:
a. diamonds provide greater total utility than water
b. the water that a person drinks has very little utility
c. the price of a good is equal to the marginal utility of the last unit consumed
d. All of the above
___ 9. Diamonds are more valuable than water:
a. in terms of marginal utility
b. in terms of total utility
c. Both of the above
d. Neither of the above
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
Utility 18 - 10