Exam 4: Consumer Behavior

Justin buys water (W) at $2 per gallon and food (F) at $10 per unit. Justin has income of $50. Suppose that the government imposes a tax on water of $1 for each gallon consumed beyond 10 gallons. Graph Justin's budget constraint with water on the y-axis and food on the x-axis.

Use the following to answer question: Figure 4.6 -(Figure 4.6) What type of good is good X?

Monroe consumes crab cakes and tuna. Monroe's utility increases with the consumption of crab cakes, but his utility neither increases nor decreases with the consumption of tuna. Assuming tuna is on the x-axis and crab cake is on the y-axis, what do Monroe's indifference curves look like?

Alice's utility function over toys (T) and games (G) can be expressed as U(T,G) = 2TG. a. What is her marginal utility of toys? b. What is her marginal utility of games? c. What is her marginal rate of substitution MRS_TG?

Brenda's utility function for regular-flavored toothpaste (R) and mint-flavored toothpaste (M) is given by U = 2R + 4M. Which of the following statements is TRUE?

Use the following to answer question: Figure 4.16 -(Figure 4.16) To maximize utility, this consumer will buy _____ hockey tickets and _____ soccer tickets.

Which of the following statements is FALSE?

Nancy's ratio of marginal utility for coffee and lipstick is 3:1, while the price ratio of coffee to lipstick is 1.5:1. Which of the following statements is (are) TRUE?

Maggie prefers cheese to crayons, and she prefers crayons to coconuts. To satisfy the assumption of _____, Maggie must also prefer _____.

The equation for budget constraint 1, assuming income of $140, is _____ and for budget constraint 2, assuming income of $180, it is_____.

For the utility function U(X,Y) = 10X + 4Y, the marginal utility of X is:

Suppose that Ken cares only about bathing suits (B) and flip-flops (F). His utility function is U = B^0.8F^0.2. The price of bathing suits is $30, and the price of flip-flops is $2. Ken has a budget of $150. a. What Lagrangian equation can be used to solve Ken's utility maximization problem? b. Derive the first-order conditions for the maximization problem. c. What is the solution to Ken's maximization problem?

The three-legged Ork, a space creature from the universe Warhammer, wears 1 right shoe and 2 left shoes. Which set of market bundles provides an Ork with the highest level of utility?

Use the following to answer question: Figure 4.4 -(Figure 4.4) This figure violates the assumption:

Suppose that Jana cares only about apples and lettuce. Her utility function is U = A^0.5L^0.5, where A is the number of apples and L is the number of heads of lettuce that she consumes. The price of apples is $1, and the price of lettuce is $4. Suppose that Jana must have 100 units of utility and wants to achieve this level of utility with the lowest possible expenditure. a. How can Jana's expenditure minimization problem be expressed as a Lagrangian equation? b. Derive the first-order conditions for Jana's minimization problem. c. What is the solution to Jana's minimization problem? d. How much does this optimal solution cost?

Larry's utility function is U = 4X + 12Y. Which property of consumer preferences does Larry's utility function violate? Explain your answer.

Use the following to answer question: Figure 4.15 -(Figure 4.15) The consumer maximizes utility by consuming:

Mark's utility function over dance show tickets (D) and baseball game tickets (B) can be expressed as U(D,B) = D + 5B. a. Use calculus to argue whether Mark's preferences also can be represented by U(D,B) = 5DB. b. If Mark's utility function is U(D,B) = D + 5B , is the Lagrangian approach an appropriate way to solve for his optimal quantities? c. If Mark's utility function is U(D,B) = 5DB, is the Lagrangian approach an appropriate way to solve for his optimal quantities?

A consumer buys coffee (C) for $3 each and bagels (B) for $1.50 each. She has income of $40. If the coffee shop limits the number of bagels that a customer may purchase to 6, what is the equation of her budget constraint?