Exam 2: A Theory of Preferences

Jane's utility function is given by: U(x, y)= xy². i)Is Jane indifferent between bundles (2,1)and (1,2)? ii)Suppose Jane consumes 3 units of x and 2 units of y. If Jane increases her consumption of x by 1 unit but decreases her consumption of y by 1 unit, will she move to a lower indifference curve? iii)Calculate the MRS when x = 3 and y = 2. (Calculus required)

Given the following utility function, U(x₁,x₂)= x₁ * x₂, which of the following does not represent the same preference ordering:

Which of the following is not a reason that economists use the assumption that indifference curves are convex?

Cheryl is always willing to trade 3 cheeseburgers for a bucket of shrimp. Her indifference curves are:

A consumer's set of indifference curves provides:

The basic reason there are so many excellent substitutes for water in almost all Canadian cities is that:

Figure 2A -In Figure 2A, which of the following curves represents a weakly convex indifference curve?

Define the Panglossian dilemma and illustrate it with an example.

If x₁ is $20 bills and x₂ is $100 bills, then:

Consider the following utility functions: i)U(x, y)= xy^1/2 ii)U(x, y)= 10xy iii)U(x, y)= 3x + 4y iv)U(x, y)= 2x + ln(y) v)U(x, y)= x³ a)Construct an indifference curve for each of these functions. b)Calculate the MRS for each of these functions. (Calculus required)

People smooth out consumption over time:

If Henry decides to give up his social life in order to be more productive at work, an economist would consider this:

If Jane's utility function is given by U = xy:

Employees demand more more for overtime work because:

Compute the MRS for the indifference curve x₁ + x₂ = c. Is it diminishing?

The nonsatiation assumption:

Anna's preferences can be expressed by the utility function U(x₁, x₂)= x₁ + x₂. Which of the following does NOT represent the same preferences?

If the utility number associated with consumption bundle a is exactly the square root of the utility number associated with bundle b, then:

Indifference curves between left shoes and right shoes are:

For the utility function: U = x + y², the MRS is given by: (calculus required)