Exam 3: Consumer Behavior

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.2 -Refer to Figure 3.2.Which assumption concerning preferences do Alvin's indifference curves violate?

Marginal utility measures:

The Laspeyres price index tends to __________ the ideal cost-of-living index.

Zoe is an executive at Dell Computer Company who is in charge of designing the next version of laptop computers.She will consider such features as screen size,weight,processor speed,and CD and DVD drives.Given the fact that it is costly to include more features in new products,why might Zoe be interested in data on how much consumers paid for a range of laptops with different attributes?

The price of lemonade is $0.50; the price of popcorn is $1.00.If Fred has maximized his utility by purchasing lemonade and popcorn,his marginal rate of substitution will be:

If Jill's MRS of popcorn for candy is 2 (popcorn is on the horizontal axis),Jill would willingly give up:

Suppose that a market basket of two goods is changed by adding more of one of the goods and subtracting one unit of the other.The consumer will:

Figure 3.3 -Refer to the indifference curve in Figure 3.3.Which of the following statements is correct?

Suppose that a consumer's increase in nominal income from the base year is exceeded by the inflation level given by a Paasche cost of living index for their level of purchases Show that this information implies that the consumer is strictly worse-off as compared to the base year.(HINT: Use a revealed preference argument)

At commodity bundle A,which consists of only apples and oranges,Annette's marginal utility per dollar spent on apples is 10 and her marginal utility per dollar spent on oranges is 8.Diagram a representative budget constraint and indifference curve that that passes through bundle A given Annette's budget is exhausted at bundle A.Is Annette maximizing utility? Why or why not? If she is not,what could she do to increase her level of satisfaction?

Pencils sell for 10 cents and pens sell for 50 cents.Suppose Jack,whose preferences satisfy all of the basic assumptions,buys 5 pens and one pencil each semester.With this consumption bundle,his MRS of pencils for pens is 3.Which of the following is true?

Please consider the following figure: The consumer chooses A on budget line I1 and B on budget line I2.Which of the following statements is NOT true?

Envision a graph with meat on the horizontal axis and vegetables on the vertical axis.A strict vegetarian would have indifference curves that are:

To simplify our consumption models,suppose U.S.consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map.Also,suppose that all states initially impose state sales taxes on all goods (including food),but then the states exempt food from the state sales tax.How does this tax policy change alter the consumer's budget line?

The assumption of transitive preferences implies that indifference curves must:

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1 -Refer to Figure 3.1.Which assumption concerning preferences do Alvin's indifference curves violate?

The following combinations of goods X and Y represent various market baskets.Consumption is measured in pounds per month. Market Basket Units of X Units of Y A 4 6 B 16 7 C 15 3 D 3 2 Explain which market basket(s)is(are)preferred to other(s),and if there is any uncertainty over which is preferable,point this out as well.

A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:

Please consider the following figure: The consumer chooses A on budget line I1 and B on budget line I2.Which of the following statements is NOT true?

Sheila can watch as many television programs as she wants for free,but she must pay $2 for each video she rents.Draw Sheila's budget line for t.v.shows (T)and videos (V),and identify the set of affordable bundles (be sure to label the axes).At a particular point on Sheila's budget line,her MRS is 1T/2V.Illustrate this situation on your diagram.Has Sheila maximized her satisfaction at this point? If not,identify a change in consumption that will make her better off.Describe her preferences when satisfaction is maximized.