Question 1

If two goods are perfect substitutes,then the indifference curves for those two goods would be

Accepted Answer

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

Question 2

Suppose that the preferences a typical American has for quantities of electricity (E)and gasoline (G)is given by
U(E,G)= a ln(E)+ (1-a)ln(G)
where 0 < a < 1.Suppose the prices of gasoline and electricity in the units provided are both $1/unit and the consumer has an income of $100.Suppose in addition,the government has chosen to ration electricity by allowing a maximum consumption of 50 units of electricity (E≤50).
a.If a = .25,find the optimal consumption bundle of gasoline and electricity.Does the electricity rationing constraint have an influence on consumer's choice?
b.If a = .75,find the optimal consumption bundle of gasoline and electricity.Does the electricity rationing constraint of the government have an influence on the consumer?

Accepted Answer

For each case,the best approach is to so

Question 3

Joe's income is $500,the price of food (F)is $2 per unit,and the price of shelter (S)is $100.Which of the following represents his budget constraint?

Accepted Answer

A)  500 = 100F + 2S 
B)  500 = 2F + 100S 
C)  S = 500 - 2F 
D)  All of the above 
A)  500 = 100F + 2S 
B)  500 = 2F + 100S 
C)  S = 500 - 2F 
D)  All of the above

Question 4

Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes.Due to differences in caffeine levels,his MRS of tea for coffee equals two.If coffee and tea sell for the same price,Johnny will

Accepted Answer

A)  spend all $30 on tea. 
B)  spend all $30 on coffee. 
C)  spend $20 on coffee and $10 on tea. 
D)  be indifferent between any bundle of coffee and tea costing $30. 
A)  spend all $30 on tea. 
B)  spend all $30 on coffee. 
C)  spend $20 on coffee and $10 on tea. 
D)  be indifferent between any bundle of coffee and tea costing $30.

Question 5

Suppose that left shoes and right shoes must be purchased separately.Ingrid needs an equal number of each type of shoe and has a budget of $100 for shoes.Left shoes always cost $1.If right shoes cost $19 each,how many of each will Ingrid buy? If the price of right shoes increases to $49 each,how will Ingrid react? Explain your answer by drawing the indifference curves and budget lines.

Accepted Answer

@#IMG-DLM& See the above figure.Since Ingrid needs

Question 6

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

Accepted Answer

A)  U = x - y 
B)  U = x/y 
C)  U = x 
D)  U = y 
A)  U = x - y 
B)  U = x/y 
C)  U = x 
D)  U = y

Question 7

A consumer's willingness to trade one good for another can be expressed by the consumer's

Accepted Answer

A)  indifference curve. 
B)  marginal rate of substitution. 
C)  Both A and B above. 
D)  None of the above. 
A)  indifference curve. 
B)  marginal rate of substitution. 
C)  Both A and B above. 
D)  None of the above.

Question 8

Joseph has the utility function U(F,H)=10F²H,where F is the quantity of food he consumes per year and H is the quantity of housing per week.Suppose the price of food is $10 and the price of housing is $5,while Joseph has an income of $150/week.
a.Calculate Joseph's MRS as a function of the quantities F and H.
b.Write out Joseph's constrained optimization problem with the information provided.
c.Using the substitution method,solve for Joseph's optimal consumption bundle of food and housing.
d.Show that at the optimum,Joseph consumes the bundle along the budget constraint where MRS = MRT.

Accepted Answer

a.MRS = -2 * 10FH/10F² = -2H/F.
b.max 10

Question 9

If the utility for two goods "x" and "y" is measured as U = x + y,then it can be concluded that

Accepted Answer

A)  "x" and "y" are perfect substitutes. 
B)  "x" and "y" are perfect complements. 
C)  "x" and "y" are both bads. 
D)  the indifference curves on the x,y graph will be upward sloping. 
A)  "x" and "y" are perfect substitutes. 
B)  "x" and "y" are perfect complements. 
C)  "x" and "y" are both bads. 
D)  the indifference curves on the x,y graph will be upward sloping.

Question 10

If the utility for two goods "x" and "y" can be measured as U = x,then it can be concluded that

Accepted Answer

A)  "x" and "y" are perfect complements. 
B)  "y" is a "bad". 
C)  the indifference curves on the x,y graph are upward sloping where "x" is measured on the horizontal axis. 
D)  the indifference curves on the x,y graph are vertical where "x" is measured on the horizontal axis. 
A)  "x" and "y" are perfect complements. 
B)  "y" is a "bad". 
C)  the indifference curves on the x,y graph are upward sloping where "x" is measured on the horizontal axis. 
D)  the indifference curves on the x,y graph are vertical where "x" is measured on the horizontal axis.

Question 11

There is an indifference curve through every bundle because of the assumption of

Accepted Answer

A)  transitivity. 
B)  completeness. 
C)  rationality. 
D)  nonsatiation. 
A)  transitivity. 
B)  completeness. 
C)  rationality. 
D)  nonsatiation.

Question 12

The indifference curves for left shoes and right shoes would most likely be

Accepted Answer

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

Question 13

Assume the price of beer is $4,the price of pizza is $10 and the consumer's income is $250.Which consumption bundle will NOT be the consumer's choice?

Accepted Answer

A)  A (5 Beers, 5 Pizzas) 
B)  B (0 Beers, 25 Pizzas) 
C)  C (25 Beers, 15 Pizzas) 
D)  None of the above bundles will be chosen. 
A)  A (5 Beers, 5 Pizzas) 
B)  B (0 Beers, 25 Pizzas) 
C)  C (25 Beers, 15 Pizzas) 
D)  None of the above bundles will be chosen.

Question 14

For the following, please answer "True" or "False" and explain why.
-Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

Accepted Answer

A) True 
 B)False

Question 15

-Joe's indifference map for lobster and soda is shown in the above figure along with his budget line.Will Joe choose point a? Explain your answer in terms both of MRS and the level of utility.

Accepted Answer

Joe will not choose point a.Since the sl

Question 16

Indifference curves are downward sloping because of the assumption of

Accepted Answer

A)  completeness. 
B)  transitivity. 
C)  more is better. 
D)  All of the above. 
A)  completeness. 
B)  transitivity. 
C)  more is better. 
D)  All of the above.

Question 17

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If the price of burger increases,which of the following bundles are in Max's opportunity set?

Accepted Answer

A)  b, d, e 
B)  d, e 
C)  a, b, c, d, e 
D)  None of the labeled points are in Max's opportunity set. 
A)  b, d, e 
B)  d, e 
C)  a, b, c, d, e 
D)  None of the labeled points are in Max's opportunity set.

Question 18

For the following, please answer "True" or "False" and explain why.
-Indifference curves cannot intersect.

Accepted Answer

A) True 
 B)False

Question 19

An optimum that occurs as a corner solution

Accepted Answer

A)  includes only one good. 
B)  cannot be an equilibrium. 
C)  cannot exhaust the budget constraint. 
D)  includes the exact same amounts of each good. 
A)  includes only one good. 
B)  cannot be an equilibrium. 
C)  cannot exhaust the budget constraint. 
D)  includes the exact same amounts of each good.

Question 20

Teddy has preferences given by the utility function U(K,L)= 2L + K where K = pounds of Kale per month and L = pounds of lettuce per month.What is Teddy's Marginal Utility of Kale? What is Teddy's Marginal Utility from Lettuce? If Kale is on the horizontal axis,what is Teddy's marginal Rate of Substitution?

Accepted Answer

The marginal utility of Kale is the part

If two goods are perfect substitutes,then the indifference curves for those two goods would be

Joe's income is $500,the price of food (F)is $2 per unit,and the price of shelter (S)is $100.Which of the following represents his budget constraint?

Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes.Due to differences in caffeine levels,his MRS of tea for coffee equals two.If coffee and tea sell for the same price,Johnny will

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

A consumer's willingness to trade one good for another can be expressed by the consumer's

If the utility for two goods "x" and "y" is measured as U = x + y,then it can be concluded that

If the utility for two goods "x" and "y" can be measured as U = x,then it can be concluded that

There is an indifference curve through every bundle because of the assumption of

The indifference curves for left shoes and right shoes would most likely be

Assume the price of beer is $4,the price of pizza is $10 and the consumer's income is $250.Which consumption bundle will NOT be the consumer's choice?

For the following, please answer "True" or "False" and explain why. -Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

-Joe's indifference map for lobster and soda is shown in the above figure along with his budget line.Will Joe choose point a? Explain your answer in terms both of MRS and the level of utility.

Indifference curves are downward sloping because of the assumption of

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If the price of burger increases,which of the following bundles are in Max's opportunity set?

For the following, please answer "True" or "False" and explain why. -Indifference curves cannot intersect.

An optimum that occurs as a corner solution

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

If two goods are perfect substitutes,then the indifference curves for those two goods would be

Joe's income is $500,the price of food (F)is $2 per unit,and the price of shelter (S)is $100.Which of the following represents his budget constraint?

Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes.Due to differences in caffeine levels,his MRS of tea for coffee equals two.If coffee and tea sell for the same price,Johnny will

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

A consumer's willingness to trade one good for another can be expressed by the consumer's

If the utility for two goods "x" and "y" is measured as U = x + y,then it can be concluded that

If the utility for two goods "x" and "y" can be measured as U = x,then it can be concluded that

There is an indifference curve through every bundle because of the assumption of

The indifference curves for left shoes and right shoes would most likely be

Assume the price of beer is $4,the price of pizza is $10 and the consumer's income is $250.Which consumption bundle will NOT be the consumer's choice?

For the following, please answer "True" or "False" and explain why. -Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

-Joe's indifference map for lobster and soda is shown in the above figure along with his budget line.Will Joe choose point a? Explain your answer in terms both of MRS and the level of utility.

Indifference curves are downward sloping because of the assumption of

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If the price of burger increases,which of the following bundles are in Max's opportunity set?

For the following, please answer "True" or "False" and explain why. -Indifference curves cannot intersect.

An optimum that occurs as a corner solution

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