Question 1

The utility function U(x1,x2)= min(x1,x2)is an apt description of preferences when:

Accepted Answer

A) x1 is money and x2 is cocaine. 
B) x1 is $5 bills and x2 is $5 bills. 
C) x1 is a Coke and x2 is a Pepsi. 
D) x1 is a left hand glove and x2 is a right hand glove. 
A) x1 is money and x2 is cocaine. 
B) x1 is $5 bills and x2 is $5 bills. 
C) x1 is a Coke and x2 is a Pepsi. 
D) x1 is a left hand glove and x2 is a right hand glove.

Question 2

The nonsatiation assumption implies that more is preferred to less. Can two bundles that contain different amounts of good 1 but the same amount of good 2 be on the same indifference curve?

Accepted Answer

No, except when the

Question 3

If the utility number associated with consumption bundle a is exactly twice the utility number associated with bundle b, then:

Accepted Answer

A) bundle a is preferred to bundle b. 
B) bundle b is preferred to bundle a. 
C) bundle a offers as much utility as two of bundle b. 
D) bundle a is twice as desirable as b. 
A) bundle a is preferred to bundle b. 
B) bundle b is preferred to bundle a. 
C) bundle a offers as much utility as two of bundle b. 
D) bundle a is twice as desirable as b.

Question 4

The value of a good is determined by:

Accepted Answer

A) the amount of resources used to produce it. 
B) the maximum amount of goods in the market. 
C) the amount of time it takes to produce it. 
D) the maximum amount that one is willing to sacrifice to get it. 
A) the amount of resources used to produce it. 
B) the maximum amount of goods in the market. 
C) the amount of time it takes to produce it. 
D) the maximum amount that one is willing to sacrifice to get it.

Question 5

If the utility number associated with consumption bundle a is exactly half the utility number associated with bundle b, then:

Accepted Answer

A) bundle b is twice as desirable as a. 
B) bundle b is preferred to bundle a. 
C) bundle b offers as much utility as two of bundle a. 
D) bundle a is preferred to bundle b. 
A) bundle b is twice as desirable as a. 
B) bundle b is preferred to bundle a. 
C) bundle b offers as much utility as two of bundle a. 
D) bundle a is preferred to bundle b.

Question 6

Nonsatiation implies that consumption bundles:

Accepted Answer

A) which are nearer the origin are preferred. 
B) which contain more of all goods are preferred. 
C) which contain fewer of all goods are preferred. 
D) which contain more of one good and less of another are preferred. 
A) which are nearer the origin are preferred. 
B) which contain more of all goods are preferred. 
C) which contain fewer of all goods are preferred. 
D) which contain more of one good and less of another are preferred.

Question 7

If an indifference curve has a kink, then:

Accepted Answer

A) the indifference curve is not convex to the origin. 
B) the marginal rate of substitution is a meaningless concept. 
C) preferences are normal. 
D) the marginal rate of substitution is undefined at the kink. 
A) the indifference curve is not convex to the origin. 
B) the marginal rate of substitution is a meaningless concept. 
C) preferences are normal. 
D) the marginal rate of substitution is undefined at the kink.

Question 8

Which of the following is required for the existence of a utility function?

Accepted Answer

A) transitivity 
B) relativity 
C) universality 
D) satiation 
A) transitivity 
B) relativity 
C) universality 
D) satiation

Question 9

If an indifference curve is convex, the marginal rate of substitution is not:

Accepted Answer

A) the rate at which an individual is willing to trade goods. 
B) constant. 
C) a function. 
D) minus one times the slope of an indifference curve. 
A) the rate at which an individual is willing to trade goods. 
B) constant. 
C) a function. 
D) minus one times the slope of an indifference curve.

Question 10

If the marginal rate of substitution is a constant (5, for example), then indifference curves are not:

Accepted Answer

A) smooth. 
B) straight lines. 
C) downward sloping. 
D) kinked. 
A) smooth. 
B) straight lines. 
C) downward sloping. 
D) kinked.

Question 11

The slope of an indifference curve reflects:

Accepted Answer

A) the income of a consumer. 
B) the relative value that a consumer places on one commodity compared to another. 
C) the relative price of two commodities. 
D) the utility number associated to the utility function. 
A) the income of a consumer. 
B) the relative value that a consumer places on one commodity compared to another. 
C) the relative price of two commodities. 
D) the utility number associated to the utility function.

Question 12

If we consider the bundles A = (5,30)and B = (6,40), then:

Accepted Answer

A) the consumer is indifferent between A and B. 
B) A is preferred to B. 
C) utility at point A is lower than the utility at point B. 
D) B is preferred to A. 
A) the consumer is indifferent between A and B. 
B) A is preferred to B. 
C) utility at point A is lower than the utility at point B. 
D) B is preferred to A.

Question 13

Tim consumes goods x and y. His utility function is given by U(x,y)= y(x + 5). Which of the following is true?

Accepted Answer

A) Tim prefers bundle (1,2)to bundle (2,1) 
B) Tim likes good x but hates good y. 
C) Tim likes good y but hates good x. 
D) Tim prefers bundle (7,3)to bundle (3,7). 
A) Tim prefers bundle (1,2)to bundle (2,1) 
B) Tim likes good x but hates good y. 
C) Tim likes good y but hates good x. 
D) Tim prefers bundle (7,3)to bundle (3,7).

Question 14

Which of the following is a scarce commodity?

Accepted Answer

A) fresh air 
B) stock market advice 
C) air 
D) pollution 
A) fresh air 
B) stock market advice 
C) air 
D) pollution

Question 15

If people regard pollution as a bad thing, then their indifference curves for pollution and income (P, I)are:

Accepted Answer

A) kinked. 
B) upward sloping. 
C) undefined. 
D) convex. 
A) kinked. 
B) upward sloping. 
C) undefined. 
D) convex.

Question 16

Explain the difference between ordinal and cardinal utility.

Accepted Answer

The theory of utility used by economists

Question 17

Given the following utility function, U(x1,x2)= x1 + x2, which of the following preference statements is not true?

Accepted Answer

A) (1, 9)is preferred to (3, 5) 
B) (1, 4)is indifferent to (2, 2) 
C) (100, 0)is preferred to (1, 1) 
D) (4, 4)is indifferent to (3, 5) 
A) (1, 9)is preferred to (3, 5) 
B) (1, 4)is indifferent to (2, 2) 
C) (100, 0)is preferred to (1, 1) 
D) (4, 4)is indifferent to (3, 5)

Question 18

Utility functions assign a:

Accepted Answer

A) preference ordering to each individual. 
B) service truck to each customer request. 
C) unique number to each indifference curve. 
D) unique indifference curve to each number. 
A) preference ordering to each individual. 
B) service truck to each customer request. 
C) unique number to each indifference curve. 
D) unique indifference curve to each number.

Question 19

Is an indifference curve defined as a set of bundles that a consumer with a given income can afford, and among which he or she is indifferent?

Accepted Answer

No. The definition o

Question 20

Which of the following assumptions is not generally applied to an indifference curve?

Accepted Answer

A) transitive 
B) smooth 
C) convex 
D) diminishing MRS 
A) transitive 
B) smooth 
C) convex 
D) diminishing MRS

The utility function U(x₁,x₂)= min(x₁,x₂)is an apt description of preferences when:

The nonsatiation assumption implies that more is preferred to less. Can two bundles that contain different amounts of good 1 but the same amount of good 2 be on the same indifference curve?

If the utility number associated with consumption bundle a is exactly twice the utility number associated with bundle b, then:

The value of a good is determined by:

If the utility number associated with consumption bundle a is exactly half the utility number associated with bundle b, then:

Nonsatiation implies that consumption bundles:

If an indifference curve has a kink, then:

Which of the following is required for the existence of a utility function?

If an indifference curve is convex, the marginal rate of substitution is not:

If the marginal rate of substitution is a constant (5, for example), then indifference curves are not:

The slope of an indifference curve reflects:

If we consider the bundles A = (5,30)and B = (6,40), then:

Tim consumes goods x and y. His utility function is given by U(x,y)= y(x + 5). Which of the following is true?

Which of the following is a scarce commodity?

If people regard pollution as a bad thing, then their indifference curves for pollution and income (P, I)are:

Explain the difference between ordinal and cardinal utility.

Given the following utility function, U(x₁,x₂)= x₁+ x₂, which of the following preference statements is not true?

Utility functions assign a:

Is an indifference curve defined as a set of bundles that a consumer with a given income can afford, and among which he or she is indifferent?

Which of the following assumptions is not generally applied to an indifference curve?

Microeconomics: a Working Methodology

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 2: A Theory of Preferences

The utility function U(x1,x2)= min(x1,x2)is an apt description of preferences when:

The nonsatiation assumption implies that more is preferred to less. Can two bundles that contain different amounts of good 1 but the same amount of good 2 be on the same indifference curve?

If the utility number associated with consumption bundle a is exactly twice the utility number associated with bundle b, then:

The value of a good is determined by:

If the utility number associated with consumption bundle a is exactly half the utility number associated with bundle b, then:

Nonsatiation implies that consumption bundles:

If an indifference curve has a kink, then:

Which of the following is required for the existence of a utility function?

If an indifference curve is convex, the marginal rate of substitution is not:

If the marginal rate of substitution is a constant (5, for example), then indifference curves are not:

The slope of an indifference curve reflects:

If we consider the bundles A = (5,30)and B = (6,40), then:

Tim consumes goods x and y. His utility function is given by U(x,y)= y(x + 5). Which of the following is true?

Which of the following is a scarce commodity?

If people regard pollution as a bad thing, then their indifference curves for pollution and income (P, I)are:

Explain the difference between ordinal and cardinal utility.

Given the following utility function, U(x1,x2)= x1 + x2, which of the following preference statements is not true?

Utility functions assign a:

Is an indifference curve defined as a set of bundles that a consumer with a given income can afford, and among which he or she is indifferent?

Which of the following assumptions is not generally applied to an indifference curve?

Microeconomics: a Working Methodology

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

The utility function U(x₁,x₂)= min(x₁,x₂)is an apt description of preferences when:

Given the following utility function, U(x₁,x₂)= x₁+ x₂, which of the following preference statements is not true?