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Chapter 20: Q. 2- For Critical Thinking (page 450)

What is true of the marginal utility per dollar spent on a stomach pacemaker compared with the marginal utility per dollar of food consumed during that interval?

Short Answer

Expert verified

The standard rule is that marginal utility equals the change in total utility divided by the change in quantity of goods.

Step by step solution

01

Introduction.

The added satisfaction that comes from having one more unit of a good or service is known as marginal utility. Economists use the concept of marginal utility to determine how much of a product consumers are willing to buy.

02

Marginal utility per dollar.

To calculate the change in total utility, subtract the current total utility from the previous total utility. The change in units is calculated by subtracting the current unit amount from the previous unit amount.

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Most popular questions from this chapter

The table below represents Sue's preferences for bottled water and soft drinks, the combination of which yields the same level of utility.

Calculate Sue's marginal rate of substitution of soft drinks for bottled water at each rate of consumption of water (or soft drinks). Relate the marginal rate of substitution to marginal utility.

The campus pizzeria sells a single pizza for \(12. If you order a second pizza, however, the pizzeria charges a price of only \)5for the additional pizza. Explain how an understanding of marginal utility helps to explain the pirzeria's pricing strategy.

Suppose that you observe that total utility rises as more of an item is consumed. What can you say for certain about marginal utility? Can you say for sure that it is rising or falling or that it is positive or negative?

If the fee charged to a client for legal service is $800per hour and the marginal utility from that service is 1,600units of additional utility, what is the client's hourly marginal utility per dollar for other purchased items?

Consider the movements that take place from one point to the next ( Ato Bto Cand so on) along the total utility curve as the individual successively increases consumption by one more unit, and answer the questions that follow.

a. Which one-unit increase in consumption from one point to the next along the total utility curve gencrates the highest marginal utility?

b. Which one-unit increase in consumption from one point to the next along the total utility curve gencrates zero marginal utility?

c. Which one-unit increase in consumption from one point to the next along the total utility curve generates negative marginal utility?
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