Question 1

If two bundles are on the same indifference curve,then

Accepted Answer

A) the consumer derives the same level of utility from each. 
B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility. 
C) no comparison can be made between the two bundles since utility cannot really be measured. 
D) the MRS between the two bundles equals one. 
A) the consumer derives the same level of utility from each. 
B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility. 
C) no comparison can be made between the two bundles since utility cannot really be measured. 
D) the MRS between the two bundles equals one.

Question 2

-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 3

Jane has the utility function U = F0.5 C0.5,then her expenditure function would be

Accepted Answer

A) E = 2 PF0.5 PC0.5. 
B) E = 0.5  
F0.5 C0.5. 
C) E = 0.5  
PF0.5 PC0.5. 
D) E = 2  
PF0.5 PC0.5. 
A) E = 2 PF0.5 PC0.5. 
B) E = 0.5  
F0.5 C0.5. 
C) E = 0.5  
PF0.5 PC0.5. 
D) E = 2  
PF0.5 PC0.5.

Question 4

A friend whom you are studying with for this class has drawn three sets of indifference curves.Explain what he has done wrong on each graph and what assumption of preferences is violated by each particular graph.
(a)(b)(c)

Accepted Answer

The first graph (a)has portions that are

Question 5

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 6

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 7

Indifference curves on the same indifference map can have different shapes.

Accepted Answer

A) True 
 B)False

Question 8

Joe consumes crawfish and shrimp.His utility function exhibits diminishing marginal utility of crawfish but the marginal utility of shrimp is constant.Will Joe's indifference curves be convex?

Accepted Answer

Yes,Joe has quasi-linear utility-linear

Question 9

Convexity of indifference curves imply that consumers are willing to

Accepted Answer

A) give up more "y" to get an extra "x" the more "x" they have. 
B) give up more "y" to get an extra "x" the less "x" they have. 
C) settle for less of both "x" and "y". 
D) acquire more "x" only if they do not have to give up any "y". 
A) give up more "y" to get an extra "x" the more "x" they have. 
B) give up more "y" to get an extra "x" the less "x" they have. 
C) settle for less of both "x" and "y". 
D) acquire more "x" only if they do not have to give up any "y".

Question 10

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e,

Accepted Answer

A) his MRS is less than the trade-off offered by the market. 
B) he is willing to give up more burger than he has to,given market prices. 
C) he is not maximizing his utility. 
D) All of the above. 
A) his MRS is less than the trade-off offered by the market. 
B) he is willing to give up more burger than he has to,given market prices. 
C) he is not maximizing his utility. 
D) All of the above.

Question 11

A consumer buys food (F)and shelter (S).If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Accepted Answer

A) increase. 
B) decrease. 
C) stay the same. 
D) change,but there is not enough information to know how. 
A) increase. 
B) decrease. 
C) stay the same. 
D) change,but there is not enough information to know how.

Question 12

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 13

Consider Jen,a consumer with preferences U(H,F)= F1/3H2/3,where H is the quantity of housing and F is the quantity of food (per month).Suppose Jen has a stipend of $600/month which she uses to purchase food at a price of $1/unit and housing at a price of $10/unit.
a.Compute Jen's utility-maximizing bundle of goods.
b.Suppose that Jen's employer subsidizes housing by paying 50% of her total housing costs,thereby effectively lowering the price Jen pays for housing to $5/unit.Compute Jen's new optimal consumption bundle.
c.How much does Jen's employer pay in total for this subsidy? How much utility does Jen enjoy with this subsidy (compute her utility at the optimal bundle).
d.Suppose that her employer simply gave Jen the dollar cost you found in (c)as a lump sum (instead of subsidizing housing).Will Jen gain a higher utility from the housing subsidy or the lump-sum equivalent transfer?

Accepted Answer

a.Jen will consume 40 units of housing a

Question 14

Adrian's total utilities of two consumption bundles are 50 and 100.This implies that

Accepted Answer

A) the consumer prefers the first bundle. 
B) the consumer prefers the second bundle. 
C) the consumer likes the second bundle twice as much. 
D) the consumer likes the first bundle twice as much. 
A) the consumer prefers the first bundle. 
B) the consumer prefers the second bundle. 
C) the consumer likes the second bundle twice as much. 
D) the consumer likes the first bundle twice as much.

Question 15

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 16

-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 10 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 17

For which of the following pairs of goods would most people likely have convex indifference curves?

Accepted Answer

A) nickels and dimes 
B) left shoes and right shoes 
C) movie tickets and concert tickets 
D) None of the above. 
A) nickels and dimes 
B) left shoes and right shoes 
C) movie tickets and concert tickets 
D) None of the above.

Question 18

Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

Accepted Answer

A) True 
 B)False

Question 19

If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?

Accepted Answer

A) U = x + y 
B) U = x ∗ y 
C) U = x2 + y2 
D) Any of the above. 
A) U = x + y 
B) U = x ∗ y 
C) U = x2 + y2 
D) Any of the above.

Question 20

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.

If two bundles are on the same indifference curve,then

-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.

Jane has the utility function U = F^0.5 C^0.5,then her expenditure function would be

A friend whom you are studying with for this class has drawn three sets of indifference curves.Explain what he has done wrong on each graph and what assumption of preferences is violated by each particular graph. (a)(b)(c)

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.

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

Indifference curves on the same indifference map can have different shapes.

Joe consumes crawfish and shrimp.His utility function exhibits diminishing marginal utility of crawfish but the marginal utility of shrimp is constant.Will Joe's indifference curves be convex?

Convexity of indifference curves imply that consumers are willing to

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e,

A consumer buys food (F)and shelter (S).If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Adrian's total utilities of two consumption bundles are 50 and 100.This implies that

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 10 pounds of burger?

For which of the following pairs of goods would most people likely have convex indifference curves?

Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?

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

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 bundles are on the same indifference curve,then

-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.

Jane has the utility function U = F0.5 C0.5,then her expenditure function would be

A friend whom you are studying with for this class has drawn three sets of indifference curves.Explain what he has done wrong on each graph and what assumption of preferences is violated by each particular graph. (a)(b)(c)

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.

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

Indifference curves on the same indifference map can have different shapes.

Joe consumes crawfish and shrimp.His utility function exhibits diminishing marginal utility of crawfish but the marginal utility of shrimp is constant.Will Joe's indifference curves be convex?

Convexity of indifference curves imply that consumers are willing to

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e,

A consumer buys food (F)and shelter (S).If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Adrian's total utilities of two consumption bundles are 50 and 100.This implies that

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 10 pounds of burger?

For which of the following pairs of goods would most people likely have convex indifference curves?

Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?

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

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

Jane has the utility function U = F^0.5 C^0.5,then her expenditure function would be