Exam 4: The Theory of Individual Behavior

Suppose a manager's preferences depend only on profit.Such a manager will then have an indifference curve that

By the transitivity property if A ≻ B and B ≻ C then

At the equilibrium consumption bundle, which of the following holds?

Indifference curves further from the origin imply

Which of the following is true?

Which is more preferred between a cash gift and an in-kind gift?

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y increases.Then, which of the following effect is known with certainty.

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, X = 20, and M = 400?

If money income doubles and the prices of all goods triples, then the

The possible goods and services a consumer can afford to consume represents the:

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure.What is the price to the worker of consuming an additional hour of leisure?

While at a discount shoe store, a customer asked a clerk, "I see that your shoes are 'buy one, get one free - limit one free pair per customer.' Will you sell me one pair for half-price?" The clerk answered, "I can't do that." When the customer started to leave the store, the clerk hastily offered, "However, I am authorized to give you a 40 percent discount on any pair in the store." Assuming the consumer has $200 to spend on shoes (X) or all other goods (Y), and that shoes cost $100 per pair, answer the following questions: a.Illustrate the consumer's opportunity set with the "buy one, get one free" deal and with a 40 percent discount. b.Why was the 40 percent discount offered only after the consumer rejected the "buy one, get one free" deal and started to leave the store? c.Why was the clerk willing to offer a "buy one, get one free" deal, but unwilling to sell a pair of shoes for half-price? A.Based on this the clerk concluded that the consumer is indifferent between bundle A and bundle N in Figure 4-17.By offering the consumer the 40 percent discount on a single pair of shoes, the budget line is AM, and the consumer would just as soon buy a pair of shoes for $60 as leave the store.The purchase yields the store $60 in revenue for the pair of shoes, which is greater than the $50 it would have earned if the clerk let the consumer buy a pair of shoes at half price.

If a consumer's income decreases, what will happen to the budget line?

If income increases, the budget line

In order to encourage energy conservation, many pubic utility companies charge consumers a higher rate on units of electricity consumed in excess of some threshold amount.In contrast, a common marketing ploy by other firms is to offer "quantity discounts" to consumers who purchase large quantities of a good.To illustrate how these pricing schemes alter the typical consumer's opportunity set, suppose income = $100,

What are the advantages to a firm of selling gift certificates?

An increase in the price of good X will have what effect on the budget line on a normal X-Y graph?

Draw the opportunity set of a consumer with an income of $200 who faces prices of

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up the $10 implies the

A worker's total earnings for one day is $100.He received a $20 fixed payment and consumes 14 hours of leisure.What is the hourly wage rate?