Question 1

Darlene's utility function is U(x, y, z)= x3y7z.If her income doubles and prices remain unchanged, her demand for good y will more than double.

Accepted Answer

A) True 
 B)False  False

Question 2

An inferior good is less durable than a normal good.

Accepted Answer

A) True 
 B)False  False

Question 3

Where x is the quantity of good X demanded, the inverse demand function for X

Accepted Answer

A) expresses 1/x as a function of prices and income. 
B) expresses the demand for x as a function of 1/px and income, where px is the price of x. 
C) expresses the demand for x as a function of 1/px and 1/m, where m is income. 
D) specifies 1/x as a function of 1/px and 1/m, where m is income. 
E) None of the above. 
A) expresses 1/x as a function of prices and income. 
B) expresses the demand for x as a function of 1/px and income, where px is the price of x. 
C) expresses the demand for x as a function of 1/px and 1/m, where m is income. 
D) specifies 1/x as a function of 1/px and 1/m, where m is income. 
E) None of the above. E

Question 4

Donald's utility function is U(x, y)= x + y1/2.Currently he is buying some of both goods.If his income rises and prices don't change, he will buy more of both goods.

Accepted Answer

A) True 
 B)False

Question 5

If preferences are homothetic, then the slope of the Engel curve for any good will decrease as income increases.

Accepted Answer

A) True 
 B)False

Question 6

Georgina consumes only grapefruits and pineapples.Her utility function is U(x, y)= x2y8, where x is the number of grapefruits consumed and y is the number of pineapples consumed.Georgina's income is $105, and the prices of grapefruits and pineapples are $1 and $3, respectively.How many grapefruits will she consume?

Accepted Answer

A) 10.5 
B) 7 
C) 63 
D) 21 
E) None of the above. 
A) 10.5 
B) 7 
C) 63 
D) 21 
E) None of the above.

Question 7

Quasilinear preferences are homothetic when the optimal amount of one of the goods is not affordable.

Accepted Answer

A) True 
 B)False

Question 8

Prudence was maximizing her utility subject to her budget constraint.Then prices changed.After the price change she was better off.Therefore the new bundle costs more at the old prices than the old bundle did.

Accepted Answer

A) True 
 B)False

Question 9

Ambrose's brother Sebastian has a utility function U(x1, x2) = 28x1/21 + x2, where x1 is his consumption of nuts and x2 is his consumption of berries.His income is $128, the price of nuts is $2, and the price of berries is $1.How many units of berries will Sebastian demand?

Accepted Answer

A) 30 
B) 60 
C) 55 
D) 49 
E) There is not enough information to determine the answer. 
A) 30 
B) 60 
C) 55 
D) 49 
E) There is not enough information to determine the answer.

Question 10

Let w be the number of whips and j the number of leather jackets.If Kinko's utility function is U(x, y)=min{7w, 4w + 12j}, then if the price of whips is $20 and the price of leather jackets is $40, Kinko will demand

Accepted Answer

A) 6 times as many whips as leather jackets. 
B) 5 times as many leather jackets as whips. 
C) 3 times as many whips as leather jackets. 
D) 4 times as many whips as leather jackets. 
E) only leather jackets. 
A) 6 times as many whips as leather jackets. 
B) 5 times as many leather jackets as whips. 
C) 3 times as many whips as leather jackets. 
D) 4 times as many whips as leather jackets. 
E) only leather jackets.

Question 11

Briefly explain in a sentence or two how you could tell
a.whether a good is a normal good or an inferior good.
b.whether a good is a luxury or a necessity.
c.whether two goods are complements or substitutes.

Accepted Answer

a.If prices are left constant and income

Question 12

If income is doubled and all prices are doubled, then the demand for luxury goods will more than double.

Accepted Answer

A) True 
 B)False

Question 13

Between 1990 and 2000, a particular consumer's income increased by 25%, while the price of X and of "all other goods" both increased by 10%.It was observed that the consumer's consumption of X and of all other goods both increased by 15%.

Accepted Answer

A) The consumer did not regard X and "all other goods" as perfect complements. 
B) The consumer's preferences cannot be represented by a Cobb-Douglas utility function. 
C) The consumer's preferences can be represented by a Cobb-Douglas utility function. 
D) The consumer's preferences cannot be represented by a quasilinear utility function. 
E) More than one of the above options is true. 
A) The consumer did not regard X and "all other goods" as perfect complements. 
B) The consumer's preferences cannot be represented by a Cobb-Douglas utility function. 
C) The consumer's preferences can be represented by a Cobb-Douglas utility function. 
D) The consumer's preferences cannot be represented by a quasilinear utility function. 
E) More than one of the above options is true.

Question 14

Ray Starr has the utility function U(x, y)= y/(100 - x).
a.Does Ray prefer more to less of both goods?
b.Draw a diagram showing Ray's indifference curves corresponding to the utility levels U = 1/2, U = 1, and U = 2.
c.How can you describe the set of indifference curves for Ray?
d.If the price of x is $1 and the price of y is $1, find Ray's demand for x as a function of his income and draw a diagram showing his Engel curve for x.

Accepted Answer

a.Yes.
b.These curves are straight lines

Question 15

Natalie consumes only apples and tomatoes.Her utility function is U(x, y)= x2y8, where x is the number of apples consumed and y is the number of tomatoes consumed.Natalie's income is $320, and the prices of apples and tomatoes are $4 and $3, respectively.How many apples will she consume?

Accepted Answer

A) 21.33 
B) 16 
C) 8 
D) 48 
E) None of the above. 
A) 21.33 
B) 16 
C) 8 
D) 48 
E) None of the above.

Question 16

Ambrose's brother Patrick has a utility function U(x1, x2)= 16x1/21 + x2.His income is $82, the price of good 1 (nuts)is $2, and the price of good 2 (berries)is $1.How many units of nuts will Patrick demand?

Accepted Answer

A) 26 
B) 12 
C) 14 
D) 16 
E) 30 
A) 26 
B) 12 
C) 14 
D) 16 
E) 30

Question 17

Seppo consumes brandy and saunas.Neither is an inferior good.Seppo has a total of $30 a day and 6 hours a day to spend on brandy and saunas.Each brandy costs $2 and takes half an hour to consume.Each sauna costs $1 and takes 1 hour to consume.(It is, unfortunately, impossible to consume a brandy in the sauna.)Seppo suddenly inherits a lot of money and now has $50 a day to spend on brandy and saunas.Since Seppo is a rational consumer, he will

Accepted Answer

A) increase brandy consumption only. 
B) increase sauna consumption only. 
C) increase consumption of both. 
D) consume the same amounts of both goods as before. 
E) We can't tell since we are told nothing about his indifference curves. 
A) increase brandy consumption only. 
B) increase sauna consumption only. 
C) increase consumption of both. 
D) consume the same amounts of both goods as before. 
E) We can't tell since we are told nothing about his indifference curves.

Question 18

Mike consumes two commodities, x and y, and his utility function is min{x + 2y, y + 2x}.He chooses to buy 8 units of good x and 16 units of good y.The price of good y is $.50.What is his income?

Accepted Answer

A) $32 
B) $40 
C) $24 
D) $16 
E) Mike's income cannot be found unless the price of x is given too. 
A) $32 
B) $40 
C) $24 
D) $16 
E) Mike's income cannot be found unless the price of x is given too.

Question 19

Fred consumes pork chops and lamb chops and nothing else.When the price of pork chops rises with no change in his income or in the price of lamb chops, Fred buys fewer lamb chops and fewer pork chops.

Accepted Answer

A) Pork chops are a normal good for Fred. 
B) Lamb chops are a normal good for Fred. 
C) Pork chops are an inferior good for Fred. 
D) Lamb chops are an inferior good for Fred. 
E) Fred prefers pork chops to lamb chops. 
A) Pork chops are a normal good for Fred. 
B) Lamb chops are a normal good for Fred. 
C) Pork chops are an inferior good for Fred. 
D) Lamb chops are an inferior good for Fred. 
E) Fred prefers pork chops to lamb chops.

Question 20

An Engel curve is a demand curve with the vertical and horizontal axes reversed.

Accepted Answer

A) True 
 B)False

Exam 5: Demand-Part A

Darlene's utility function is U(x, y, z)= x3y7z.If her income doubles and prices remain unchanged, her demand for good y will more than double.

An inferior good is less durable than a normal good.

Where x is the quantity of good X demanded, the inverse demand function for X

Donald's utility function is U(x, y)= x + y1/2.Currently he is buying some of both goods.If his income rises and prices don't change, he will buy more of both goods.

If preferences are homothetic, then the slope of the Engel curve for any good will decrease as income increases.

Quasilinear preferences are homothetic when the optimal amount of one of the goods is not affordable.

Prudence was maximizing her utility subject to her budget constraint.Then prices changed.After the price change she was better off.Therefore the new bundle costs more at the old prices than the old bundle did.

Ambrose's brother Sebastian has a utility function U(x1, x2) = 28x1/21 + x2, where x1 is his consumption of nuts and x2 is his consumption of berries.His income is $128, the price of nuts is $2, and the price of berries is $1.How many units of berries will Sebastian demand?

Let w be the number of whips and j the number of leather jackets.If Kinko's utility function is U(x, y)=min{7w, 4w + 12j}, then if the price of whips is $20 and the price of leather jackets is $40, Kinko will demand

Briefly explain in a sentence or two how you could tell a.whether a good is a normal good or an inferior good. b.whether a good is a luxury or a necessity. c.whether two goods are complements or substitutes.

If income is doubled and all prices are doubled, then the demand for luxury goods will more than double.

Between 1990 and 2000, a particular consumer's income increased by 25%, while the price of X and of "all other goods" both increased by 10%.It was observed that the consumer's consumption of X and of all other goods both increased by 15%.

Natalie consumes only apples and tomatoes.Her utility function is U(x, y)= x2y8, where x is the number of apples consumed and y is the number of tomatoes consumed.Natalie's income is $320, and the prices of apples and tomatoes are $4 and $3, respectively.How many apples will she consume?

Ambrose's brother Patrick has a utility function U(x1, x2)= 16x1/21 + x2.His income is $82, the price of good 1 (nuts)is $2, and the price of good 2 (berries)is $1.How many units of nuts will Patrick demand?

Mike consumes two commodities, x and y, and his utility function is min{x + 2y, y + 2x}.He chooses to buy 8 units of good x and 16 units of good y.The price of good y is $.50.What is his income?

Fred consumes pork chops and lamb chops and nothing else.When the price of pork chops rises with no change in his income or in the price of lamb chops, Fred buys fewer lamb chops and fewer pork chops.

An Engel curve is a demand curve with the vertical and horizontal axes reversed.

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

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

Welfare-Part A

Welfare-Part B

Darlene's utility function is U(x, y, z)= x³y⁷z.If her income doubles and prices remain unchanged, her demand for good y will more than double.

Donald's utility function is U(x, y)= x + y^1/2.Currently he is buying some of both goods.If his income rises and prices don't change, he will buy more of both goods.

Ambrose's brother Sebastian has a utility function U(x₁, x₂) = 28x^1/2₁ + x₂, where x₁ is his consumption of nuts and x₂ is his consumption of berries.His income is $128, the price of nuts is $2, and the price of berries is $1.How many units of berries will Sebastian demand?

Natalie consumes only apples and tomatoes.Her utility function is U(x, y)= x²y⁸, where x is the number of apples consumed and y is the number of tomatoes consumed.Natalie's income is $320, and the prices of apples and tomatoes are $4 and $3, respectively.How many apples will she consume?

Ambrose's brother Patrick has a utility function U(x₁, x₂)= 16x^1/2₁ + x₂.His income is $82, the price of good 1 (nuts)is $2, and the price of good 2 (berries)is $1.How many units of nuts will Patrick demand?