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AP Microeconomics Cba 2 A a Define the Key Assumptions of Consumer Choice Theory B Explain Using a Table or Graph As Appropriate How a Rational Questions

Practise interpreting total and marginal utility, applying diminishing marginal utility, and allocating a fixed budget by comparing marginal utility per dollar across goods.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • calculate marginal utility from changes in total utility, or total utility from a marginal-utility schedule
  • explain diminishing marginal utility and relate positive, zero or negative marginal utility to total utility
  • compare marginal utility per dollar across goods and reallocate spending towards the higher ratio
  • use prices, a fixed budget and utility schedules to identify the utility-maximising bundle
  • predict how a price or income change alters the optimal bundle while respecting the budget constraint

AP Microeconomics Cba 2 A a Define the Key Assumptions of Consumer Choice Theory B Explain Using a Table or Graph As Appropriate How a Rational Questions question 1

[Maximum number: 4]

The table provided shows the marginal utility for Lucy when she consumes Good X and Good Y.

Table for Question AP Microeconomics Cba 2 A a Define the Key Assumptions of Consumer Choice Theory B Explain Using a Table or Graph As Appropriate How a Rational Questions question 1 — AP Microeconomics

Question (a)

(a)

If Good X and Good Y are free, how many units of each good will maximize Lucy's total utility?

[ 1 ]

Question (b)

(b)

Calculate Lucy's total utility if she consumes 2 units of Good X and 2 units of Good Y. Show your work.

[ 1 ]

Question (c)

(c)

Suppose instead that the price of each unit of Good X is $2 and the price of each unit of Good Y is $4. Lucy has a budget of $20 to spend on the two goods.

[ 2 ]

Question (i)

(i)

If Lucy purchases 2 units of Good X, what is the maximum quantity of Good Y Lucy can purchase?

[ 1 ]

Question (ii)

(ii)

What is Lucy's optimal combination of Good X and Good Y? Explain your answer using marginal analysis and numbers.

[ 1 ]
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