Question

​Demand for a service like medical care:

Select one:

a.​is an example of the negative substitution effect.

b.​is perfectly inelastic.

If medical care is provided free of charge, _____.

Select one:

a.​beneficiaries consume it up to the point at which the marginal utility of the final unit is positive

b.​beneficiaries will consume it up to the point at which the demand curve intersects the vertical axis

c.beneficiaries will derive no consumer surplus from medical care

d.​beneficiaries will consume it up to the point at which the marginal utility of the final unit is negative

e.​beneficiaries will consume it up to the point at which the marginal utility of the final unit is zero

Dale is willing to pay $300 for a pair of Rollerblades and he purchases them on sale for $200. His consumer surplus is valued at:

Select one:

a.​$300.

b.​$1.5.

c.​$100.

d.​$200.

e.​$0.

​"The second glass of Evian water was very good. May I have another?" Which of the following is necessarily true regarding this statement?

Select one:

a.​The marginal utility of the second glass of water was negative.

b.​The marginal utility of the first glass of water was zero.

c.​The marginal utility of the second glass of water was positive.

d.The water is available free of cost.

e.​The marginal utility of the third glass of water will be negative.

​The following table shows the marginal utility of each additional unit of pretzel for a consumer. The first column of the table shows the number of pretzels consumed in a day, and the second column of the table shows the marginal utility of each additional unit of pretzel. The marginal utility of the third pretzel is _____ units.

​

Table 6.1

​

Pretzels	Marginal Utility
1	30
2	20
3	5
4	−15

​

Select one:

a.​5

b.​10

c.15

d.​−0.15

e. ​55

​For any given price, the more elastic is the demand for a good, the greater will be the consumer surplus.

Select one:

True

False

​A free good will be consumed up to the point at which its marginal utility is positive.

Select one:

True

False

As price falls along the demand curve for pretzels, _____.

Select one:

a.​consumer surplus remains unchanged

b.​consumer surplus decreases

c.​total utility decreases

d.​consumer expenditure changes

e.​marginal utility increases

Arnold is a utility-maximizing consumer. If he thinks his last dollar spent on playing golf yields less satisfaction than the last dollar spent on movies, he should:

Select one:

a.​play more golf so that the total satisfaction derived from golf increases.

b.​spend less on movies so that the marginal satisfaction of a movie increases.

c.play less golf and spend more on movies.

d.not play golf at all.

e.​play more golf because it costs less.

Consumer tastes and preferences:

Select one:

a.​are determined solely by advertising.

b.​are relatively stable over time.

c.​do not vary from one consumer to another.

d.are irrelevant to utility analysis.

e.​can be measured in terms of units of utility.

​

Answer 1

1) Demand for a service like medical care is perfectly inelastic because medical care is necessary service and all necessary goods and service is perfect inelastic.

So option B) is correct answer.

2) If a medical care is provided free of charge the beneficiary will consume it up to the point at which the marginal utility of final unit is Zero. Because after that if get negative marginal utility and in this situation beneficiary can't achieve their maximum satisfaction point. So he consume at final unit where Marginal utility is zero. Or total utility at maximum.

So option E) is correct answer.

3) Dane is willing to pay $300 and he purchases on sale for $200 therefore he pay less as compare to his own willingness therefore his consumer surplus is 300-200 = $100.

So option C) is correct answer.

4) C) the marginal utility of the second glass of water was positive is correct answer.

Because if second glass of evian water was not good then either he not consumed or either he get negative satisfaction from the second glass. Only if marginal utility of the second glass of water was positive is true statement.

5) as given in table 3rd unit of pretzel marginal utility is 5

I.e option A) is correct answer.