Question 1

Draw the indifference curves for nickels and dimes.Would they ever have a non-constant slope? Explain.

Accepted Answer

@#IMG-DLM& See the above figure.Two nickels are wo

Question 2

Lisa has an income of $100.She spends all of her income on pizza and burritos.A pizza costs $10 and a burrito costs $5.However,the store where Lisa buys her burritos has a special deal.After you've bought six burritos,then you can buy each burrito for $2.50.Draw Lisa's opportunity set.

Accepted Answer

The answer of Lisa has an income of $100.She spends...

Question 3

Compute the MRS for the following utility functions:
a.U(X,Y)= aln(X)+ bln(Y),
b.U(X,Y)=XᵃYᵇ,and
c.U(X,Y)=aX + bY,
where a and b are strictly positive constants.

Accepted Answer

a.MUX = a/X,MUY = b/Y,thus MRS

Question 4

Jezz has the quasi log-linear utility function
U(q₁,q₂)= q₁ + 2ln(q₂)
Jezz has an income of $100 and faces prices p₁ = p₂ = 20.
a.What is the marginal rate of substitution for this utility function?
b.Solve for Jezz's optimal bundle.
c.Suppose Jezz's income falls to $20.What will happen to his optimal bundle? Is the MRS=MRT at the optimal bundle?

Accepted Answer

a.MRS = U₁/U₂ = 1/(2/q₂)= .5q₂
b.Set MRS

Question 5

If a consumer views the two goods they consume as perfect substitutes,the optimal bundle will be a corner solution.Explain.

Accepted Answer

Perfect substitutes are goods for which

Question 6

Economists assume consumers select a bundle of goods that maximizes their well-being subject to

Accepted Answer

A)  their budget constraint. 
B)  their income. 
C)  relative prices. 
D)  their marginal rate of substitution. 
A)  their budget constraint. 
B)  their income. 
C)  relative prices. 
D)  their marginal rate of substitution.

Question 7

Paul has the utility function U(q₁,q₂)= q₁q₂.If Paul consumes q₁ = 4 and q₂ = 2 his Marginal Rate of Substitution is

Accepted Answer

A)  -2. 
B)  1. 
C)  -1. 
D)  ₋₁/₂. 
A)  -2. 
B)  1. 
C)  -1. 
D)  ₋₁/₂.

Question 8

The consumer is in equilibrium when

Accepted Answer

A)  MRT = MRS. 
B)  Pₓ/Pᵧ = MUₓ/MUᵧ. 
C)  the budget line is tangent to the indifference curve at the bundle chosen. 
D)  All of the above. 
A)  MRT = MRS. 
B)  Pₓ/Pᵧ = MUₓ/MUᵧ. 
C)  the budget line is tangent to the indifference curve at the bundle chosen. 
D)  All of the above.

Question 9

Suppose sugar and artificial sweeteners are perfect substitutes for Sam.Her indifference curves for those two goods would be

Accepted Answer

A)  downward-sloping and convex to the origin. 
B)  downward-sloping and straight lines. 
C)  L-shaped. 
D)  downward-sloping and concave to the origin. 
A)  downward-sloping and convex to the origin. 
B)  downward-sloping and straight lines. 
C)  L-shaped. 
D)  downward-sloping and concave to the origin.

Question 10

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max's mother gives him 30 pounds of burger?

Accepted Answer

A)  Max would have preferred receiving the dollar-value of the burger. 
B)  Max is indifferent between this gift and the dollar-value of the burger. 
C)  Max prefers this gift to the dollar-value of the burger. 
D)  None of the above. 
A)  Max would have preferred receiving the dollar-value of the burger. 
B)  Max is indifferent between this gift and the dollar-value of the burger. 
C)  Max prefers this gift to the dollar-value of the burger. 
D)  None of the above.

Question 11

With respect to consuming food and shelter,two consumers face the same prices and both claim to be in equilibrium.We therefore know that

Accepted Answer

A)  they both have the same marginal utility for food. 
B)  they both have the same marginal utility for shelter. 
C)  they both have the same MRS of food for shelter. 
D)  All of the above. 
A)  they both have the same marginal utility for food. 
B)  they both have the same marginal utility for shelter. 
C)  they both have the same MRS of food for shelter. 
D)  All of the above.

Question 12

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

Accepted Answer

A)  Max will double his consumption of both meats. 
B)  Max will spend it all on burger. Because of its lower price, he can buy more of it. 
C)  Max will take advantage of the gift by buying all chicken because it is the more expensive meat. 
D)  There is not enough information to answer the question. 
A)  Max will double his consumption of both meats. 
B)  Max will spend it all on burger. Because of its lower price, he can buy more of it. 
C)  Max will take advantage of the gift by buying all chicken because it is the more expensive meat. 
D)  There is not enough information to answer the question.

Question 13

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then we know that

Accepted Answer

A)  his indifference curves are convex. 
B)  his indifference curves are L-shaped. 
C)  his indifference curves are linear. 
D)  his indifference curves are downward sloping. 
A)  his indifference curves are convex. 
B)  his indifference curves are L-shaped. 
C)  his indifference curves are linear. 
D)  his indifference curves are downward sloping.

Question 14

The preferences for Californians can be represented by the following utility function: U(X,Y)= XᵃY¹⁻ᵃ.The consumer faces the budget constraint I = p.X + q.Y,where I is the agent's income,and p and q are the prices.Suppose the government imposes a consumption restriction so that any person in the state is allowed to consume 50 units of electricity at most.
a.If a = 0.25,I = 100,and both prices are equal to one,find the optimal consumption of gasoline and electricity by the agent.Is the electricity constraint binding? (Hint: solve the problem without the 50≥X constraint and see if the solution satisfies the constraint.If your answer then does not satisfy 50≥X,the solution must be 50 = X)
b.How does your answer in part a.change if a = 0.75? Explain.
c.On a graph,illustrate the answers to parts a.and b.

Accepted Answer

a.The consumer will choose X and Y to so

Question 15

-John is indifferent between canned soup and fresh soup.Canned soup sells for $1 per serving and fresh soup sells for $2 per serving.Assuming that John has allocated $4 toward soup,how will he spend it? Explain your answer by drawing John's budget line and indifference curves.

Accepted Answer

@#IMG-DLM& See the above figure.Canned a

Question 16

If Johnny likes homework (H)but hates exercise (E),which of the following might best represent his utility function for homework and exercise?

Accepted Answer

A)  U = H + E 
B)  U = H/E 
C)  U =   +   
D)  U =   ×   
A)  U = H + E 
B)  U = H/E 
C)  U =   +   
D)  U =   ×

Question 17

If a consumer's budget line for food (F)and shelter (S)is represented as F = 250 - 5S,we know that

Accepted Answer

A)  the consumer's income is 250. 
B)  the price of shelter is five. 
C)  the price of shelter is five times the price of food. 
D)  All of the above. 
A)  the consumer's income is 250. 
B)  the price of shelter is five. 
C)  the price of shelter is five times the price of food. 
D)  All of the above.

Question 18

Betty consumes good x and good y.If the price of x = $3 and the price of y = $4,then

Accepted Answer

A)  an extra unit of x costs 4/3 units of y. 
B)  an extra unit of y costs 4/3 units of x. 
C)  an extra unit of x costs 3/4 units of y. 
D)  Both B and C. 
A)  an extra unit of x costs 4/3 units of y. 
B)  an extra unit of y costs 4/3 units of x. 
C)  an extra unit of x costs 3/4 units of y. 
D)  Both B and C.

Question 19

If a consumer's budget line for food (F)and shelter (S)is represented as F=250-5S,and 50 units of food is purchased,how many units of shelter can be purchased at most?

Accepted Answer

A)  0 
B)  40 
C)  60 
D)  80 
A)  0 
B)  40 
C)  60 
D)  80

Question 20

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max's current MRS = -0.8,then Max is at point

Accepted Answer

A)  b 
B)  d 
C)  e 
D)  None of above. 
A)  b 
B)  d 
C)  e 
D)  None of above.

Draw the indifference curves for nickels and dimes.Would they ever have a non-constant slope? Explain.

Lisa has an income of $100.She spends all of her income on pizza and burritos.A pizza costs $10 and a burrito costs $5.However,the store where Lisa buys her burritos has a special deal.After you've bought six burritos,then you can buy each burrito for $2.50.Draw Lisa's opportunity set.

Compute the MRS for the following utility functions: a.U(X,Y)= aln(X)+ bln(Y), b.U(X,Y)=XᵃYᵇ,and c.U(X,Y)=aX + bY, where a and b are strictly positive constants.

If a consumer views the two goods they consume as perfect substitutes,the optimal bundle will be a corner solution.Explain.

Economists assume consumers select a bundle of goods that maximizes their well-being subject to

Paul has the utility function U(q₁,q₂)= q₁q₂.If Paul consumes q₁ = 4 and q₂ = 2 his Marginal Rate of Substitution is

The consumer is in equilibrium when

Suppose sugar and artificial sweeteners are perfect substitutes for Sam.Her indifference curves for those two goods would be

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max's mother gives him 30 pounds of burger?

With respect to consuming food and shelter,two consumers face the same prices and both claim to be in equilibrium.We therefore know that

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then we know that

-John is indifferent between canned soup and fresh soup.Canned soup sells for $1 per serving and fresh soup sells for $2 per serving.Assuming that John has allocated $4 toward soup,how will he spend it? Explain your answer by drawing John's budget line and indifference curves.

If Johnny likes homework (H)but hates exercise (E),which of the following might best represent his utility function for homework and exercise?

If a consumer's budget line for food (F)and shelter (S)is represented as F = 250 - 5S,we know that

Betty consumes good x and good y.If the price of x = $3 and the price of y = $4,then

If a consumer's budget line for food (F)and shelter (S)is represented as F=250-5S,and 50 units of food is purchased,how many units of shelter can be purchased at most?

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max's current MRS = -0.8,then Max is at point

Introduction

Supply and Demand

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 3: A Consumers Constrained Choice

Draw the indifference curves for nickels and dimes.Would they ever have a non-constant slope? Explain.

Lisa has an income of $100.She spends all of her income on pizza and burritos.A pizza costs $10 and a burrito costs $5.However,the store where Lisa buys her burritos has a special deal.After you've bought six burritos,then you can buy each burrito for $2.50.Draw Lisa's opportunity set.

Compute the MRS for the following utility functions: a.U(X,Y)= aln(X)+ bln(Y), b.U(X,Y)=XᵃYᵇ,and c.U(X,Y)=aX + bY, where a and b are strictly positive constants.

If a consumer views the two goods they consume as perfect substitutes,the optimal bundle will be a corner solution.Explain.

Economists assume consumers select a bundle of goods that maximizes their well-being subject to

Paul has the utility function U(q₁,q₂)= q₁q₂.If Paul consumes q₁ = 4 and q₂ = 2 his Marginal Rate of Substitution is

The consumer is in equilibrium when

Suppose sugar and artificial sweeteners are perfect substitutes for Sam.Her indifference curves for those two goods would be

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max's mother gives him 30 pounds of burger?

With respect to consuming food and shelter,two consumers face the same prices and both claim to be in equilibrium.We therefore know that

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then we know that

-John is indifferent between canned soup and fresh soup.Canned soup sells for $1 per serving and fresh soup sells for $2 per serving.Assuming that John has allocated $4 toward soup,how will he spend it? Explain your answer by drawing John's budget line and indifference curves.

If Johnny likes homework (H)but hates exercise (E),which of the following might best represent his utility function for homework and exercise?

If a consumer's budget line for food (F)and shelter (S)is represented as F = 250 - 5S,we know that

Betty consumes good x and good y.If the price of x = $3 and the price of y = $4,then

If a consumer's budget line for food (F)and shelter (S)is represented as F=250-5S,and 50 units of food is purchased,how many units of shelter can be purchased at most?

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max's current MRS = -0.8,then Max is at point

Introduction

Supply and Demand

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters