Question 1

Suppose utility is given by  
And px = 1,I = 10.If y must be purchased in whole units,what is the maximum price this person would pay for that good?

Accepted Answer

A) 1 
B) 5 
C) 10 
D) 20 
A) 1 
B) 5 
C) 10 
D) 20 B

Question 2

assume that a person has a quasi-linear utility function of the form  
-​If  
,what is the utility maximizing commodity bundle?

Accepted Answer

A) ​(8,1) 
B) ​(2,4) 
C) ​(1,4.5) 
D) ​(5,2.5) 
A) ​(8,1) 
B) ​(2,4) 
C) ​(1,4.5) 
D) ​(5,2.5) A

Question 3

An individual has a utility function for tennis rackets (x)and tennis balls (y)of the form   His or her expenditure function is given by:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)    A

Question 4

If the price of x falls,the budget constraint:

Accepted Answer

A) shifts outward in a parallel fashion. 
B) shifts inward in a parallel fashion. 
C) rotates outward about the x-intercept. 
D) rotates outward about the y-intercept. 
A) shifts outward in a parallel fashion. 
B) shifts inward in a parallel fashion. 
C) rotates outward about the x-intercept. 
D) rotates outward about the y-intercept.

Question 5

Suppose that an individual has a constant MRS of shoes for sneakers of 4:3 (that is,he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of shoes).Then,if sneakers and shoes are equally costly,he or she will:

Accepted Answer

A) buy only sneakers. 
B) buy only shoes. 
C) spend his or her income equally on sneakers and shoes. 
D) wear sneakers only 3/4 of the time. 
A) buy only sneakers. 
B) buy only shoes. 
C) spend his or her income equally on sneakers and shoes. 
D) wear sneakers only 3/4 of the time.

Question 6

"If an individual is to maximize the utility received from consumption,he or she should spend all available income...." This statement assumes:

Accepted Answer

A) that saving is impossible. 
B) that the individual is not satiated in any one good. 
C) that no goods are "inferior." 
D) that every good has a positive marginal utility. 
A) that saving is impossible. 
B) that the individual is not satiated in any one good. 
C) that no goods are "inferior." 
D) that every good has a positive marginal utility.

Question 7

assume that a person has a quasi-linear utility function of the form  
-If this person starts from a utility maximizing position,an increase in income will cause:​

Accepted Answer

A) ​more of both goods to be bought. 
B) ​more of only good y to be bought. 
C) ​more of only good x to be bought. 
D) ​more x and less y to be bought. 
A) ​more of both goods to be bought. 
B) ​more of only good y to be bought. 
C) ​more of only good x to be bought. 
D) ​more x and less y to be bought.

Question 8

If an individual's utility function for coffee (x)and cream (y)is given by   ,the demand function for coffee is given by:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

Suppose an individual's MRS (of steak for beer)is 2:1.That is,at the current consumption choices he or she is willing to give up 2 beers to get an extra steak.Suppose also that the price of a steak is $1 and a beer is $4.Then in order to increase utility the individual should:

Accepted Answer

A) buy more steak and less beer. 
B) buy more beer and less steak. 
C) continue with current consumption plans. 
A) buy more steak and less beer. 
B) buy more beer and less steak. 
C) continue with current consumption plans.

Question 10

If an individual's indifference curve map does not obey the assumption of a diminishing MRS,then:

Accepted Answer

A) the individual will not maximize utility. 
B) the individual will buy none of good x. 
C) tangencies of indifference curves to the budget constraint may not be points of utility maximization. 
D) the budget constraint cannot be tangent to an appropriate indifference curve. 
A) the individual will not maximize utility. 
B) the individual will buy none of good x. 
C) tangencies of indifference curves to the budget constraint may not be points of utility maximization. 
D) the budget constraint cannot be tangent to an appropriate indifference curve.

Question 11

Suppose that at current consumption levels an individual's marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2.Then the MRS (of soft drinks for hot dogs)-that is,the number of hot dogs the individual is willing to give up to get one more soft drink-is:

Accepted Answer

A) 5. 
B) 2. 
C) 1/2. 
D) 1/5. 
A) 5. 
B) 2. 
C) 1/2. 
D) 1/5.

Question 12

The slope of the budget constraint line is:

Accepted Answer

A) the ratio of the prices (px/py). 
B) the negative of the ratio of the prices (px/py). 
C) the ratio of income divided by price of y (I/py). 
D) none of the above. 
A) the ratio of the prices (px/py). 
B) the negative of the ratio of the prices (px/py). 
C) the ratio of income divided by price of y (I/py). 
D) none of the above.

Question 13

An increase in an individual's income without changing relative prices will:

Accepted Answer

A) rotate the budget constraint about the X-axis. 
B) shift the indifference curves outward. 
C) shift the budget constraint outward in a parallel way. 
D) rotate the budget constraint about the Y-axis. 
A) rotate the budget constraint about the X-axis. 
B) shift the indifference curves outward. 
C) shift the budget constraint outward in a parallel way. 
D) rotate the budget constraint about the Y-axis.

Question 14

If utility is given by  
And px = 2,py = 3,I = 50,this person will choose:

Accepted Answer

A) (10,10). 
B) (15,6.67). 
C) (25,0). 
D) (0,50/3). 
A) (10,10). 
B) (15,6.67). 
C) (25,0). 
D) (0,50/3).

Question 15

If an individual's utility function is given by  
And I = 100,px = 1,py = 4,his or her preferred consumption bundle will be:

Accepted Answer

A) (20,20). 
B) (50,12.5). 
C) (40,15). 
D) (30,15). 
A) (20,20). 
B) (50,12.5). 
C) (40,15). 
D) (30,15).

Suppose utility is given by And p_x = 1,I = 10.If y must be purchased in whole units,what is the maximum price this person would pay for that good?

assume that a person has a quasi-linear utility function of the form -If ,what is the utility maximizing commodity bundle?

An individual has a utility function for tennis rackets (x)and tennis balls (y)of the form His or her expenditure function is given by:

If the price of x falls,the budget constraint:

Suppose that an individual has a constant MRS of shoes for sneakers of 4:3 (that is,he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of shoes).Then,if sneakers and shoes are equally costly,he or she will:

"If an individual is to maximize the utility received from consumption,he or she should spend all available income...." This statement assumes:

assume that a person has a quasi-linear utility function of the form -If this person starts from a utility maximizing position,an increase in income will cause:

If an individual's utility function for coffee (x)and cream (y)is given by ,the demand function for coffee is given by:

Suppose an individual's MRS (of steak for beer)is 2:1.That is,at the current consumption choices he or she is willing to give up 2 beers to get an extra steak.Suppose also that the price of a steak is $1 and a beer is $4.Then in order to increase utility the individual should:

If an individual's indifference curve map does not obey the assumption of a diminishing MRS,then:

The slope of the budget constraint line is:

An increase in an individual's income without changing relative prices will:

If utility is given by And p_x = 2,p_y = 3,I = 50,this person will choose:

If an individual's utility function is given by And I = 100,p_x = 1,p_y = 4,his or her preferred consumption bundle will be:

Preferences and Utility

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 2: Utility Maximization and Choice

Suppose utility is given by And px = 1,I = 10.If y must be purchased in whole units,what is the maximum price this person would pay for that good?

assume that a person has a quasi-linear utility function of the form -​If ,what is the utility maximizing commodity bundle?

An individual has a utility function for tennis rackets (x)and tennis balls (y)of the form His or her expenditure function is given by:

If the price of x falls,the budget constraint:

Suppose that an individual has a constant MRS of shoes for sneakers of 4:3 (that is,he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of shoes).Then,if sneakers and shoes are equally costly,he or she will:

"If an individual is to maximize the utility received from consumption,he or she should spend all available income...." This statement assumes:

assume that a person has a quasi-linear utility function of the form -If this person starts from a utility maximizing position,an increase in income will cause:​

If an individual's utility function for coffee (x)and cream (y)is given by ,the demand function for coffee is given by:

Suppose an individual's MRS (of steak for beer)is 2:1.That is,at the current consumption choices he or she is willing to give up 2 beers to get an extra steak.Suppose also that the price of a steak is $1 and a beer is $4.Then in order to increase utility the individual should:

If an individual's indifference curve map does not obey the assumption of a diminishing MRS,then:

The slope of the budget constraint line is:

An increase in an individual's income without changing relative prices will:

If utility is given by And px = 2,py = 3,I = 50,this person will choose:

If an individual's utility function is given by And I = 100,px = 1,py = 4,his or her preferred consumption bundle will be:

Preferences and Utility

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Suppose utility is given by And p_x = 1,I = 10.If y must be purchased in whole units,what is the maximum price this person would pay for that good?

assume that a person has a quasi-linear utility function of the form -If ,what is the utility maximizing commodity bundle?

assume that a person has a quasi-linear utility function of the form -If this person starts from a utility maximizing position,an increase in income will cause:

If utility is given by And p_x = 2,p_y = 3,I = 50,this person will choose:

If an individual's utility function is given by And I = 100,p_x = 1,p_y = 4,his or her preferred consumption bundle will be: