Question 1

With quasilinear preferences, the slope of indifference curves is constant along all rays through the origin.

Accepted Answer

A) True 
 B)False

Question 2

If one utility function is a monotonic transformation of another, then the former must assign a higher utility number to every bundle than the latter.

Accepted Answer

A) True 
 B)False

Question 3

If someone has a utility function U = 2min{x, y}, then x and y are perfect complements for that person.

Accepted Answer

A) True 
 B)False

Question 4

A person with the utility function U(x1, x2)= min+x1 + 2x2, 2x1 + x2} has convex but not strictly convex preferences.

Accepted Answer

A) True 
 B)False

Question 5

Ernie's utility function is U(x, y)= 32xy.He has 10 units of good x and 8 units of good y.Waldo's utility function for the same two goods is U(x, y)= 3x +5y.Waldo has 9 units of x and 13 units of y.

Accepted Answer

A) Waldo prefers Ernie's bundle to his own, but Ernie prefers his own bundle to Waldo's. 
B) Each prefers the other's bundle to his own. 
C) Neither prefers the other's bundle to his own. 
D) Ernie prefers Waldo's bundle to his own bundle, but Waldo prefers his own bundle to Ernie's. 
E) Since they have different preferences, there is not enough information to determine who envies whom. 
A) Waldo prefers Ernie's bundle to his own, but Ernie prefers his own bundle to Waldo's. 
B) Each prefers the other's bundle to his own. 
C) Neither prefers the other's bundle to his own. 
D) Ernie prefers Waldo's bundle to his own bundle, but Waldo prefers his own bundle to Ernie's. 
E) Since they have different preferences, there is not enough information to determine who envies whom.

Question 6

Mark strictly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A.These preferences can be represented by a utility function.

Accepted Answer

A) True 
 B)False

Question 7

Emily's utility function is U(x, y)= 3min{x, y} + y.If we draw her indifference curves with x on the horizontal axis and y on the vertical axis, these indifference curves are

Accepted Answer

A) made up of two line segments that meet where x = 4y.One of these line segments is vertical and the other has slope -1. 
B) L-shaped with kinks where x =4y. 
C) L-shaped with kinks where x = y. 
D) made up of two line segments that meet where x = y.One of these line segments is horizontal and the other has slope -3. 
E) V-shaped with kinks where x = 3y. 
A) made up of two line segments that meet where x = 4y.One of these line segments is vertical and the other has slope -1. 
B) L-shaped with kinks where x =4y. 
C) L-shaped with kinks where x = y. 
D) made up of two line segments that meet where x = y.One of these line segments is horizontal and the other has slope -3. 
E) V-shaped with kinks where x = 3y.

Question 8

Fiery Demon is a rotgut whisky made in Kentucky.Smoothy is an unblended malt whisky imported from Scotland.Ed regards these brands as perfect substitutes.When he goes into a bar, he sometimes buys only Fiery Demon.Other times he buys only Smoothy.This shows that Ed has unstable preferences.

Accepted Answer

A) True 
 B)False

Question 9

The absolute value of Mar's MRS at his current consumption bundle is greater than 3.(That is, MU1/MU2 F1> 3).Mars has convex preferences and is currently consuming positive amounts of both goods.

Accepted Answer

A) Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him worse off. 
B) Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him better off. 
C) Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him worse off. 
D) Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him better off. 
E) More than one of the above is true. 
A) Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him worse off. 
B) Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him better off. 
C) Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him worse off. 
D) Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him better off. 
E) More than one of the above is true.

Question 10

Harry Mazzola has the utility function U(x1, x2)=min{x1 + 2x2, 2x1 + x2}.He has $40 to spend on corn chips and french fries.If the price of corn chips is $3 per unit and the price of french fries is $4, then Harry will

Accepted Answer

A) definitely spend all of his income on corn chips. 
B) definitely spend all of his income on french fries. 
C) consume at least as many corn chips as french fries but might consume both. 
D) consume at least as many french fries as corn chips but might consume both. 
E) consume equal amounts of french fries and corn chips. 
A) definitely spend all of his income on corn chips. 
B) definitely spend all of his income on french fries. 
C) consume at least as many corn chips as french fries but might consume both. 
D) consume at least as many french fries as corn chips but might consume both. 
E) consume equal amounts of french fries and corn chips.

Question 11

Phil Rupp's sister Ethel has the utility function U(x, y)= min{5x + y, 6y}.Where x is measured on the horizontal axis and y on the vertical axis, her indifference curves consist of a

Accepted Answer

A) horizontal line segment and a negatively sloped line segment which meet in a kink along the line x = y. 
B) vertical line segment and a horizontal line segment which meet in a kink along the line y = 5x. 
C) positively sloped line segment and a negatively sloped line segment which meet along the line x = y. 
D) vertical line segment and a horizontal line segment which meet in a kink along the line x = 5y. 
E) horizontal line segment and a positively sloped line segment which meet in a kink along the line x = 5y. 
A) horizontal line segment and a negatively sloped line segment which meet in a kink along the line x = y. 
B) vertical line segment and a horizontal line segment which meet in a kink along the line y = 5x. 
C) positively sloped line segment and a negatively sloped line segment which meet along the line x = y. 
D) vertical line segment and a horizontal line segment which meet in a kink along the line x = 5y. 
E) horizontal line segment and a positively sloped line segment which meet in a kink along the line x = 5y.

Question 12

Phil Rupp's sister Ethel has the utility function U(x, y)= min{4x + y, 5y}.Where x is measured on the horizontal axis and y on the vertical axis, her indifference curves consist of a

Accepted Answer

A) vertical line segment and a horizontal line segment which meet in a kink along the line y = 4x. 
B) vertical line segment and a horizontal line segment which meet in a kink along the line x = 4y. 
C) horizontal line segment and a negatively sloped line segment which meet in a kink along the line x = y. 
D) positively sloped line segment and a negatively sloped line segment which meet along the line x = y. 
E) horizontal line segment and a positively sloped line segment which meet in a kink along the line x = 4y. 
A) vertical line segment and a horizontal line segment which meet in a kink along the line y = 4x. 
B) vertical line segment and a horizontal line segment which meet in a kink along the line x = 4y. 
C) horizontal line segment and a negatively sloped line segment which meet in a kink along the line x = y. 
D) positively sloped line segment and a negatively sloped line segment which meet along the line x = y. 
E) horizontal line segment and a positively sloped line segment which meet in a kink along the line x = 4y.

Question 13

Ambrose has the utility function U(x1, x2)= 4x1/21 + x2.If Ambrose is initially consuming 25 units of nuts and 17 units of berries, then what is the largest number of berries that he would be willing to give up in return for an additional 39 units of nuts?

Accepted Answer

A) 8 
B) 12 
C) 25 
D) 6 
E) 3 
A) 8 
B) 12 
C) 25 
D) 6 
E) 3

Question 14

Angela's utility function is U(x1, x2)=(x1 + x2)3.Her indifference curves are downward-sloping, parallel straight lines.

Accepted Answer

A) True 
 B)False

Question 15

Ike's utility function is U(x, y)= 25xy.He has 12 units of good x and 8 units of good y.Ben's utility function for the same two goods is U(x, y)=0 4x + 4y.Ben has 9 units of x and 13 units of y.

Accepted Answer

A) Ike prefers Ben's bundle to his own bundle, but Ben prefers his own bundle to Ike's. 
B) Ben prefers Ike's bundle to his own, but Ike prefers his own bundle to Ben's. 
C) Each prefers the other's bundle to his own. 
D) Neither prefers the other's bundle to his own. 
E) Since they have different preferences, there is not enough information to determine who envies whom. 
A) Ike prefers Ben's bundle to his own bundle, but Ben prefers his own bundle to Ike's. 
B) Ben prefers Ike's bundle to his own, but Ike prefers his own bundle to Ben's. 
C) Each prefers the other's bundle to his own. 
D) Neither prefers the other's bundle to his own. 
E) Since they have different preferences, there is not enough information to determine who envies whom.

Question 16

Joe Bob's cousin Peter consumes goods 1 and 2.Peter thinks that 4 units of good 1 is always a perfect substitute for 2 units of good 2.Which of the following utility functions is the only one that would not represent Peter's preferences?

Accepted Answer

A) U(x1, x2)= min{2x1, 4x2}. 
B) U(x1, x2)=20x1 + 40x2 - 10,000. 
C) U(x1, x2)=2x1 + 4x2 + 1,000. 
D) U(x1, x2)= 4x21 +16x1x2 + 16x22. 
E) More than one of the above does not represent Peter's preferences. 
A) U(x1, x2)= min{2x1, 4x2}. 
B) U(x1, x2)=20x1 + 40x2 - 10,000. 
C) U(x1, x2)=2x1 + 4x2 + 1,000. 
D) U(x1, x2)= 4x21 +16x1x2 + 16x22. 
E) More than one of the above does not represent Peter's preferences.

Question 17

Mac's utility function is U(x, y)=max{2x - y, 2y - x}.

Accepted Answer

A) Mac's preferences are quasilinear. 
B) If Mac has more x than y, any increase in his consumption of y would lower his utility. 
C) If Mac has more x than y, a decrease in his consumption of y would raise his utility. 
D) Mac always prefers more of each good to less. 
E) Goods x and y are perfect substitutes. 
A) Mac's preferences are quasilinear. 
B) If Mac has more x than y, any increase in his consumption of y would lower his utility. 
C) If Mac has more x than y, a decrease in his consumption of y would raise his utility. 
D) Mac always prefers more of each good to less. 
E) Goods x and y are perfect substitutes.

Question 18

Charlie's utility function is U(A, B)= AB, where A and B are the numbers of apples and bananas, respectively, that he consumes.When Charlie is consuming 15 apples and 90 bananas, if we put apples on the horizontal axis and bananas on the vertical axis, the slope of his indifference curve at his current consumption is

Accepted Answer

A) 215. 
B) -6. 
C) -12. 
D) -1/6. 
E) -1/12. 
A) 215. 
B) -6. 
C) -12. 
D) -1/6. 
E) -1/12.

Question 19

Jeans utility function is U(x, y) x + y 2 - y.If we draw her indifference curves with x on the horizontal axis and y on the vertical axis, then these indifference curves are everywhere downward sloping and get flatter as one moves from left to right.

Accepted Answer

A) True 
 B)False

Question 20

Use separate graphs to sketch two indifference curves for people with each of the following utility functions:
a.U(x, y)= x + 2y.
b.U(x, y)=min{x,2y}.
c.U(x, y)= max{x,2y}.

Accepted Answer

a.These are straight lines with slope 1/

Exam 3: Utility-Part A

With quasilinear preferences, the slope of indifference curves is constant along all rays through the origin.

If one utility function is a monotonic transformation of another, then the former must assign a higher utility number to every bundle than the latter.

If someone has a utility function U = 2min{x, y}, then x and y are perfect complements for that person.

A person with the utility function U(x1, x2)= min+x1 + 2x2, 2x1 + x2} has convex but not strictly convex preferences.

Ernie's utility function is U(x, y)= 32xy.He has 10 units of good x and 8 units of good y.Waldo's utility function for the same two goods is U(x, y)= 3x +5y.Waldo has 9 units of x and 13 units of y.

Mark strictly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A.These preferences can be represented by a utility function.

Emily's utility function is U(x, y)= 3min{x, y} + y.If we draw her indifference curves with x on the horizontal axis and y on the vertical axis, these indifference curves are

Fiery Demon is a rotgut whisky made in Kentucky.Smoothy is an unblended malt whisky imported from Scotland.Ed regards these brands as perfect substitutes.When he goes into a bar, he sometimes buys only Fiery Demon.Other times he buys only Smoothy.This shows that Ed has unstable preferences.

The absolute value of Mar's MRS at his current consumption bundle is greater than 3.(That is, MU1/MU2 F1> 3).Mars has convex preferences and is currently consuming positive amounts of both goods.

Harry Mazzola has the utility function U(x1, x2)=min{x1 + 2x2, 2x1 + x2}.He has $40 to spend on corn chips and french fries.If the price of corn chips is $3 per unit and the price of french fries is $4, then Harry will

Phil Rupp's sister Ethel has the utility function U(x, y)= min{5x + y, 6y}.Where x is measured on the horizontal axis and y on the vertical axis, her indifference curves consist of a

Phil Rupp's sister Ethel has the utility function U(x, y)= min{4x + y, 5y}.Where x is measured on the horizontal axis and y on the vertical axis, her indifference curves consist of a

Ambrose has the utility function U(x1, x2)= 4x1/21 + x2.If Ambrose is initially consuming 25 units of nuts and 17 units of berries, then what is the largest number of berries that he would be willing to give up in return for an additional 39 units of nuts?

Angela's utility function is U(x1, x2)=(x1 + x2)3.Her indifference curves are downward-sloping, parallel straight lines.

Ike's utility function is U(x, y)= 25xy.He has 12 units of good x and 8 units of good y.Ben's utility function for the same two goods is U(x, y)=0 4x + 4y.Ben has 9 units of x and 13 units of y.

Joe Bob's cousin Peter consumes goods 1 and 2.Peter thinks that 4 units of good 1 is always a perfect substitute for 2 units of good 2.Which of the following utility functions is the only one that would not represent Peter's preferences?

Mac's utility function is U(x, y)=max{2x - y, 2y - x}.

Jeans utility function is U(x, y) x + y 2 - y.If we draw her indifference curves with x on the horizontal axis and y on the vertical axis, then these indifference curves are everywhere downward sloping and get flatter as one moves from left to right.

Use separate graphs to sketch two indifference curves for people with each of the following utility functions: a.U(x, y)= x + 2y. b.U(x, y)=min{x,2y}. c.U(x, y)= max{x,2y}.

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

A person with the utility function U(x₁, x₂)= min+x₁ + 2x₂, 2x₁ + x₂} has convex but not strictly convex preferences.

Harry Mazzola has the utility function U(x₁, x₂)=min{x₁ + 2x₂, 2x₁ + x₂}.He has $40 to spend on corn chips and french fries.If the price of corn chips is $3 per unit and the price of french fries is $4, then Harry will

Ambrose has the utility function U(x₁, x₂)= 4x^1/2₁ + x₂.If Ambrose is initially consuming 25 units of nuts and 17 units of berries, then what is the largest number of berries that he would be willing to give up in return for an additional 39 units of nuts?

Angela's utility function is U(x₁, x₂)=(x₁ + x₂)³.Her indifference curves are downward-sloping, parallel straight lines.