Question 1

If utility is given by $U ( x , y ) = x ^ { 2 } + y ^ { 2 }$ 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). C

Question 2

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 these is correct. 
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 these is correct. B

Question 3

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. C

Question 4

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 5

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 6

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 254.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 7

If an individual's utility function for coffee (x)and cream (y)is given by U(x,y)= min (x,5y),the demand function for coffee is given by

Accepted Answer

A) X = I/2px . 
B) X = I/(px + py). 
C) X = I/(px + 0.2py). 
D) X = I/(px + py)2. 
A) X = I/2px . 
B) X = I/(px + py). 
C) X = I/(px + 0.2py). 
D) X = I/(px + py)2.

Question 8

If an individual's utility function is given by $U ( x , y ) = \sqrt { x y }$ 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).

Question 9

Suppose utility is given by U(x,y)= ln x + ln y 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.

Question 10

An individual has a utility function for tennis rackets (x)and tennis balls (y)of the form U(x,y)= min (3x,y).His or her expenditure function is given by

Accepted Answer

A) $E = \left( \frac { 1 } { 3 } p _ { x } + p _ { y } \right) U$ . 
B) $E = \left( p _ { x } + 3 p _ { y } \right) U$ . 
C) $E = \left( p _ { x } + \frac { 1 } { 3 } p _ { y } \right) U$ . 
D) $E = \left( p _ { x } + p _ { y } \right) U / 3$ . 
A) $E = \left( \frac { 1 } { 3 } p _ { x } + p _ { y } \right) U$ . 
B) $E = \left( p _ { x } + 3 p _ { y } \right) U$ . 
C) $E = \left( p _ { x } + \frac { 1 } { 3 } p _ { y } \right) U$ . 
D) $E = \left( p _ { x } + p _ { y } \right) U / 3$ .

Question 11

Suppose that an individual has a constant MRS of shoes for sneakers of : (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 12

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 13

"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 all goods. 
C) that no goods are "inferior." 
D) that saving is impossible and that the individual is not satiated in all goods. 
A) that saving is impossible. 
B) that the individual is not satiated in all goods. 
C) that no goods are "inferior." 
D) that saving is impossible and that the individual is not satiated in all goods.

If utility is given by $U ( x , y ) = x ^ { 2 } + y ^ { 2 }$ and p_x = 2,p_y = 3,I = 50,this person will choose

The slope of the budget constraint line is

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

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

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 254.Then in order to increase utility the individual should

If an individual's utility function for coffee (x)and cream (y)is given by U(x,y)= min (x,5y),the demand function for coffee is given by

If an individual's utility function is given by $U ( x , y ) = \sqrt { x y }$ and I = 100, p_x = 1,p_y = 4,his or her preferred consumption bundle will be:

Suppose utility is given by U(x,y)= ln x + ln y 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?

An individual has a utility function for tennis rackets (x)and tennis balls (y)of the form U(x,y)= min (3x,y).His or her expenditure function is given by

Suppose that an individual has a constant MRS of shoes for sneakers of : (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 the price of x falls,the budget constraint

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

Preferences and Utility

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty and Information

Strategy and 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

If utility is given by U(x,y)=x2+y2U ( x , y ) = x ^ { 2 } + y ^ { 2 }U(x,y)=x2+y2 and px = 2,py = 3,I = 50,this person will choose

The slope of the budget constraint line is

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

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

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 254.Then in order to increase utility the individual should

If an individual's utility function for coffee (x)and cream (y)is given by U(x,y)= min (x,5y),the demand function for coffee is given by

If an individual's utility function is given by U(x,y)=xyU ( x , y ) = \sqrt { x y }U(x,y)=xy​ and I = 100, px = 1,py = 4,his or her preferred consumption bundle will be:

Suppose utility is given by U(x,y)= ln x + ln y 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?

An individual has a utility function for tennis rackets (x)and tennis balls (y)of the form U(x,y)= min (3x,y).His or her expenditure function is given by

Suppose that an individual has a constant MRS of shoes for sneakers of : (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 the price of x falls,the budget constraint

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

Preferences and Utility

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty and Information

Strategy and 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

If utility is given by $U ( x , y ) = x ^ { 2 } + y ^ { 2 }$ and p_x = 2,p_y = 3,I = 50,this person will choose

If an individual's utility function is given by $U ( x , y ) = \sqrt { x y }$ and I = 100, p_x = 1,p_y = 4,his or her preferred consumption bundle will be:

Suppose utility is given by U(x,y)= ln x + ln y 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?