Practise deriving marginal and total utility, applying the equi-marginal condition to consumer bundles and evaluating rational-choice explanations of market demand.
Which statement about the concept of utility is correct?
Diminishing marginal utility means that producers become less efficient the more they produce.
If marginal utility is above average utility, average utility must be rising.
The equi-marginal principle says that a consumer gets equal total satisfaction from each item purchased.
Total utility continually rises as the level of consumption rises.
Economists normally assume that the marginal utility from consuming additional goods is positive and diminishing.
What is the effect on total satisfaction of consuming extra units of the good?
Total satisfaction falls at a decreasing rate.
Total satisfaction falls at an increasing rate.
Total satisfaction rises at a decreasing rate.
Total satisfaction rises at an increasing rate.
The price of good S is $ 6 and the price of good T is $ 8. A consumer's marginal utility for each good is shown.
If this consumer wants to maximise total utility, which combination of goods would they consume?
S
T
1
1
2
1
3
4
5
5
What is held constant when deriving an individual consumer's downward-sloping demand curve for a product?
marginal utility
the consumer's income
the price of the product
total utility
Utility theory is based on the assumption of the 'rational consumer'.
What is necessary to act as a 'rational consumer'?
access to
complete
information
addictive
behaviour
choice is
independent
of other
consumers
no
yes
yes
yes
no
no
yes
yes
no
yes
no
yes