Question 1

Draw the indifference curves for rock concerts and food for each of the following:
a.a typical 17-year-old
b.a typical 75-year-old

Accepted Answer

@#IMG-DLM& a.and b.See the above figures

Question 2

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 3

Which of the following is an example of the endowment effect?

Accepted Answer

A) A consumer places a higher value on a good currently owned as compared to a good they are considering purchasing. 
B) A consumer uses a portion of income in order to provide income to future generations. 
C) As a consumer's income increases,they increase consumption of most goods. 
D) Consumers will tend to value objects the same for buying and selling. 
A) A consumer places a higher value on a good currently owned as compared to a good they are considering purchasing. 
B) A consumer uses a portion of income in order to provide income to future generations. 
C) As a consumer's income increases,they increase consumption of most goods. 
D) Consumers will tend to value objects the same for buying and selling.

Question 4

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 5

Explain the difference between the marginal rate of substitution and the marginal rate of transformation.

Accepted Answer

The marginal rate of substitution is a c

Question 6

If MRS > MRT,then the consumer is better off than at equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) "x" and "y" are perfect complements. 
B) "x" 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 horizontal where "x" is measured on the horizontal axis. 
A) "x" and "y" are perfect complements. 
B) "x" 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 horizontal where "x" is measured on the horizontal axis.

Question 8

Johnny has $100 to spend on books and all other goods.Books cost $20 each and Johnny is at equilibrium consuming 3 books and $40 worth of other goods.Johnny's grandmom wants to give Johnny either a book or $20 for his birthday.Which gift does Johnny prefer? Explain using an indifference map and budget lines.

Accepted Answer

@#IMG-DLM& See the above figure.Since Johnny's equ

Question 9

Measuring "y" on the vertical axis and "x" on the horizontal axis,convexity of indifference curves imply that the magnitude of MRS of "y" for "x"

Accepted Answer

A) is decreasing as "x" increases. 
B) is increasing as "x" increases. 
C) is constant as "x" increases. 
D) cannot be calculated for large levels of "x". 
A) is decreasing as "x" increases. 
B) is increasing as "x" increases. 
C) is constant as "x" increases. 
D) cannot be calculated for large levels of "x".

Question 10

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 11

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

Accepted Answer

A) a,b,c 
B) b,d,e 
C) a,b,d 
D) None of the above 
A) a,b,c 
B) b,d,e 
C) a,b,d 
D) None of the above

Question 12

Clifford lives by the motto "Eat,drink and be merry today,for tomorrow doesn't matter." If today's consumption is measured on the horizontal axis and tomorrow's consumption is measured on the vertical axis,Clifford's indifference curves

Accepted Answer

A) are horizontal straight lines. 
B) are vertical straight lines. 
C) show decreasing utility as one moves upward. 
D) cannot be determined from the information given. 
A) are horizontal straight lines. 
B) are vertical straight lines. 
C) show decreasing utility as one moves upward. 
D) cannot be determined from the information given.

Question 13

Suppose Charley only purchases boardgames (B)and haircuts (H)with his income.If the price of boardgames increases by 100% while the price of haircuts increases by 300%,how will the MRT change (consider the budget constraint drawn on a graph with boardgames on the horizontal axis)?

Accepted Answer

Before the price change,the MR

Question 14

Show that the utility functions V(X,Y)= XaY1-a and U(X,Y)= a ln(X)+ (1-a)ln(Y)represent the same ordering of bundles.

Accepted Answer

ln(V(X,Y))= ln(X^aY^1-a)= ln(X^a)+ ln(

Question 15

Lisa consumes only pizzas and burritos.In equilibrium,her marginal utility of pizza is 20 and her marginal utility of a burrito is 10.The price of a pizza is $4.What is the price of a burrito?

Accepted Answer

In equilibrium,the ratio of the marginal

Question 16

An increase in a consumer's income will increase the Marginal Rate of Transformation.

Accepted Answer

A) True 
 B)False

Question 17

If the utility function (U)between food (F)and clothing (C)can be represented as U =  
,the marginal rate of substitution of clothing for food will ________ if more food and less clothing are consumed.

Accepted Answer

A) increase in absolute terms 
B) decrease in absolute terms 
C) remain the same 
D) Not enough information. 
A) increase in absolute terms 
B) decrease in absolute terms 
C) remain the same 
D) Not enough information.

Question 18

All of the following utility functions rank bundles (q1,q2)in the same order except for which one?

Accepted Answer

A) q11/2 + q21/2 
B) q11/2 q21/2 
C) ln(q1)+ ln(q2) 
D) All of the above rank bundles (q1,q2)in the same order 
A) q11/2 + q21/2 
B) q11/2 q21/2 
C) ln(q1)+ ln(q2) 
D) All of the above rank bundles (q1,q2)in the same order

Question 19

The marginal rate of transformation of y for x represents

Accepted Answer

A) the slope of the budget constraint. 
B) the rate at which the consumer must give up x to get one more y. 
C) -Py/Px. 
D) All of the above. 
A) the slope of the budget constraint. 
B) the rate at which the consumer must give up x to get one more y. 
C) -Py/Px. 
D) All of the above.

Question 20

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.

Draw the indifference curves for rock concerts and food for each of the following: a.a typical 17-year-old b.a typical 75-year-old

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

Which of the following is an example of the endowment effect?

Explain the difference between the marginal rate of substitution and the marginal rate of transformation.

If MRS > MRT,then the consumer is better off than at equilibrium.

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

Measuring "y" on the vertical axis and "x" on the horizontal axis,convexity of indifference curves imply that the magnitude of MRS of "y" for "x"

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

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

Clifford lives by the motto "Eat,drink and be merry today,for tomorrow doesn't matter." If today's consumption is measured on the horizontal axis and tomorrow's consumption is measured on the vertical axis,Clifford's indifference curves

Suppose Charley only purchases boardgames (B)and haircuts (H)with his income.If the price of boardgames increases by 100% while the price of haircuts increases by 300%,how will the MRT change (consider the budget constraint drawn on a graph with boardgames on the horizontal axis)?

Show that the utility functions V(X,Y)= X^aY^1-a and U(X,Y)= a ln(X)+ (1-a)ln(Y)represent the same ordering of bundles.

Lisa consumes only pizzas and burritos.In equilibrium,her marginal utility of pizza is 20 and her marginal utility of a burrito is 10.The price of a pizza is $4.What is the price of a burrito?

An increase in a consumer's income will increase the Marginal Rate of Transformation.

If the utility function (U)between food (F)and clothing (C)can be represented as U = ,the marginal rate of substitution of clothing for food will ________ if more food and less clothing are consumed.

All of the following utility functions rank bundles (q₁,q₂)in the same order except for which one?

The marginal rate of transformation of y for x represents

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

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 rock concerts and food for each of the following: a.a typical 17-year-old b.a typical 75-year-old

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

Which of the following is an example of the endowment effect?

Explain the difference between the marginal rate of substitution and the marginal rate of transformation.

If MRS > MRT,then the consumer is better off than at equilibrium.

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

Measuring "y" on the vertical axis and "x" on the horizontal axis,convexity of indifference curves imply that the magnitude of MRS of "y" for "x"

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

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

Clifford lives by the motto "Eat,drink and be merry today,for tomorrow doesn't matter." If today's consumption is measured on the horizontal axis and tomorrow's consumption is measured on the vertical axis,Clifford's indifference curves

Suppose Charley only purchases boardgames (B)and haircuts (H)with his income.If the price of boardgames increases by 100% while the price of haircuts increases by 300%,how will the MRT change (consider the budget constraint drawn on a graph with boardgames on the horizontal axis)?

Show that the utility functions V(X,Y)= XaY1-a and U(X,Y)= a ln(X)+ (1-a)ln(Y)represent the same ordering of bundles.

Lisa consumes only pizzas and burritos.In equilibrium,her marginal utility of pizza is 20 and her marginal utility of a burrito is 10.The price of a pizza is $4.What is the price of a burrito?

An increase in a consumer's income will increase the Marginal Rate of Transformation.

If the utility function (U)between food (F)and clothing (C)can be represented as U = ,the marginal rate of substitution of clothing for food will ________ if more food and less clothing are consumed.

All of the following utility functions rank bundles (q1,q2)in the same order except for which one?

The marginal rate of transformation of y for x represents

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

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

Show that the utility functions V(X,Y)= X^aY^1-a and U(X,Y)= a ln(X)+ (1-a)ln(Y)represent the same ordering of bundles.

All of the following utility functions rank bundles (q₁,q₂)in the same order except for which one?