Question 1

Max's utility function is U = 6XY, where the MU_X = 6Y and MU_Y = 6X. The prices of good X and good Y are $12 and $15, respectively. Suppose that Max's indifference curve is tangent to his budget constraint, where he is consuming 20 units of good X. How many units of good Y must Max be consuming?

Accepted Answer

MRS_XY = P_X/P_Y Y/20 = 12/15 Y = 16

Question 2

For the utility function U(X,Y) = 6X + Y0.5, the marginal utility of Y is:

Accepted Answer

A)   6X + 0.5Y-0.5.
B)   6 + 0.5Y-0.5.
C)   Y-0.5.
D)   0.5Y-0.5. D

Question 3

A consumer buys coffee (C) for $3 each and bagels (B) for $1.50 each. If she has income of $40, what is the equation of her budget constraint? If a tax of $0.25 were placed on the purchase of bagels, what would be the equation of her new budget constraint?

Accepted Answer

The generic form of the budget constraint is Income = P_XX + P_YY Using the information given, the budget constraint without the tax would be 40 = 3C+ 1.5B, or solving for the quantity of bagels: B = 26.67 - 2C. According to this information, the budget constraint with the tax would be 40 = 3C+ (1.5 + 0.25B) or, solving for the quantity of bagels: B = 22.86 - 1.71C

Question 4

Suppose that Bruce cares only about barbecued chicken (B) and fish (F). His utility function is U = B^0.4F^0.6. The price of barbecued chicken is $5, and the price of fish is $10. Bruce has a budget of $100. a. What Lagrangian equation can be used to solve Bruce's utility maximization problem? b. Derive the first-order conditions for the maximization problem. c. What is the solution to Bruce's maximization problem?

Accepted Answer

The answer of Suppose that Bruce cares only about barbecued...

Question 5

Use the following to answer question:
Figure 4.12 
-(Figure 4.12) The three-legged Ork, a space creature from the universe Warhammer, wears 1 right shoe and 2 left shoes. His indifference curves are presented in Figure 4.12. Based on the shape of the Ork's indifference curves, right and left shoes are:

Accepted Answer

A)   perfect substitutes.
B)   perfect complements.
C)   consumed in changing proportions.
D)   neither perfect substitutes nor perfect complements.

Question 6

Suppose that Angie's MU_X = Y² and MU_Y = 2XY. The price of good X is $10 and the price of good Y is $2. If Angie is consuming 8 units of good X and 16 units of good Y, is she maximizing utility? Explain your answer.

Accepted Answer

The answer of Suppose that Angie's MU_X = Y² and...

Question 7

Suppose that MUX = Y and MUY = X. The prices of good X and good Y are $5 and $4, respectively. How many units of good X does the consumer buy if she has $410 of income?

Accepted Answer

A)   15
B)   41
C)   25
D)   33

Question 8

Suppose that U = XY^0.5. Which of the following bundles lie on the same indifference curve? bundle A: (X = 10, Y = 9) bundle B: (X = 9, Y = 16) bundle C: (X = 12, Y = 9) bundle D: (X = 3, Y = 100) bundle E: (X = 6, Y = 25) bundle F: (X = 6, Y = 36)

Accepted Answer

The answer of Suppose that U = XY^0.5. Which of...

Question 9

The consumer's utility function for goods X and Y is U = 3X + 15Y. Good X is placed on the x-axis and good Y is placed on the y-axis. Which of the following statements is TRUE? I. The marginal utility of good Y is 15.
II) The MRSXY = 5.
III) The consumer is always willing to trade away 5 units of good X for 1 unit of good Y.

Accepted Answer

A)   I and II
B)   II only
C)   I and III
D)   I, II, and III

Question 10

Sonia says she prefers two theater tickets and one bottle of French wine to three games of bowling and one pitcher of draft beer. In this example, Sonia is demonstrating the _____ assumption of consumer behavior.

Accepted Answer

A)   more is better than less
B)   completeness and rankability
C)   transitivity
D)   diminishing marginal utility

Question 11

Use the following to answer question:
Figure 4.8 
-(Figure 4.8) Which of the following statements is FALSE?

Accepted Answer

A)   I only
B)   I and II
C)   III
D)   IV

Question 12

Use the following to answer question:
Figure 4.10 
-(Figure 4.10) _____ is willing to give up a lot guitars for a small number of video games, and _____ is willing to give up a lot of video games for a small number of guitars.

Accepted Answer

A)   John; Paul
B)   Paul; John
C)   Paul; Paul
D)   John; John

Question 13

Pedro loves leather belts but neither likes nor dislikes additional silk ties. Draw Pedro's indifference curve, using a well-labeled diagram.

Accepted Answer

The answer of Pedro loves leather belts but neither likes...

Question 14

A consumer spends his limited income on three goods such that the MUX = 4, MUY = 4, MUZ = 4; and PX = 4, PY = 2, PZ = 1. Which of the following statements is (are) TRUE?

Accepted Answer

A)   I
B)   II
C)   III
D)   II and III

Question 15

Use the following to answer questions 38-40:
Figure 4.14 
-(Figure 4.14) For budget constraint 2, suppose that the price of good Y is $90 per unit. What is the price of good X?

Accepted Answer

A)   $92
B)   $88
C)   $81
D)   $102.24

Question 16

Use the following to answer questions 21-22:
Figure 4.9 
-(Figure 4.9) Suppose that the consumer moves from point A to point B along her indifference curve. If the marginal utility of winter coats is 25, the marginal utility of wool sweaters is:

Accepted Answer

A)   12.5.
B)  2) 
C)  16.
D)   50.

Question 17

The utility function for Morris is U = min{4M, T}, where M is pints of milk and T is cans of tuna. Morris has $90 to spend on tuna (priced at $2 per can) and milk (priced at $1 per pint). What is Morris's utility-maximizing consumption bundle?

Accepted Answer

A)   M = 30 and T = 30
B)   M = 40 and T = 25
C)   M = 10 and T = 40
D)   M = 15 and T = 65

Question 18

Use the following to answer questions 21-22:
Figure 4.9 
-(Figure 4.9) What is the marginal rate of substitution between points A and B?

Accepted Answer

A)   4
B)   6
C)   2
D)   8

Question 19

The equation for the marginal rate of substitution of good X for good Y (that is, MRSXY) is given by:

Accepted Answer

A)    Δ\DeltaΔ U(X,Y) / Δ\DeltaΔ X.
B)   - Δ\DeltaΔ Y/ Δ\DeltaΔ X.
C)    Δ\DeltaΔ Y ×  Δ\DeltaΔ X.
D)   -X/Y.

Question 20

Cher's marginal rate of substitution of necklaces (N) for earrings (E) is 5 (MRSEN = 5). This information implies that:

Accepted Answer

A)   Cher is willing to trade away five necklaces for one more pair of earrings, holding her utility constant.
B)   Cher will move to a higher indifference curve if she trades away five necklaces for one more pair of earrings.
C)   Cher should own five times as many necklaces as pairs of earrings.
D)   the slope of the indifference curve is 5 and thus upward sloping.

Exam 4: Consumer Behavior

Max's utility function is U = 6XY, where the MU_X = 6Y and MU_Y = 6X. The prices of good X and good Y are $12 and $15, respectively. Suppose that Max's indifference curve is tangent to his budget constraint, where he is consuming 20 units of good X. How many units of good Y must Max be consuming?

For the utility function U(X,Y) = 6X + Y^0.5, the marginal utility of Y is:

A consumer buys coffee (C) for $3 each and bagels (B) for $1.50 each. If she has income of $40, what is the equation of her budget constraint? If a tax of $0.25 were placed on the purchase of bagels, what would be the equation of her new budget constraint?

Suppose that Angie's MU_X = Y² and MU_Y = 2XY. The price of good X is $10 and the price of good Y is $2. If Angie is consuming 8 units of good X and 16 units of good Y, is she maximizing utility? Explain your answer.

Suppose that MU_X = Y and MU_Y = X. The prices of good X and good Y are $5 and $4, respectively. How many units of good X does the consumer buy if she has $410 of income?

Suppose that U = XY^0.5. Which of the following bundles lie on the same indifference curve? bundle A: (X = 10, Y = 9) bundle B: (X = 9, Y = 16) bundle C: (X = 12, Y = 9) bundle D: (X = 3, Y = 100) bundle E: (X = 6, Y = 25) bundle F: (X = 6, Y = 36)

Sonia says she prefers two theater tickets and one bottle of French wine to three games of bowling and one pitcher of draft beer. In this example, Sonia is demonstrating the _____ assumption of consumer behavior.

Use the following to answer question: Figure 4.8 -(Figure 4.8) Which of the following statements is FALSE?

Use the following to answer question: Figure 4.10 -(Figure 4.10) _ is willing to give up a lot guitars for a small number of video games, and _ is willing to give up a lot of video games for a small number of guitars.

Pedro loves leather belts but neither likes nor dislikes additional silk ties. Draw Pedro's indifference curve, using a well-labeled diagram.

A consumer spends his limited income on three goods such that the MU_X = 4, MU_Y = 4, MU_Z = 4; and P_X = 4, P_Y = 2, P_Z = 1. Which of the following statements is (are) TRUE?

Use the following to answer questions 38-40: Figure 4.14 -(Figure 4.14) For budget constraint 2, suppose that the price of good Y is $90 per unit. What is the price of good X?

Use the following to answer questions 21-22: Figure 4.9 -(Figure 4.9) Suppose that the consumer moves from point A to point B along her indifference curve. If the marginal utility of winter coats is 25, the marginal utility of wool sweaters is:

The utility function for Morris is U = min{4M, T}, where M is pints of milk and T is cans of tuna. Morris has $90 to spend on tuna (priced at $2 per can) and milk (priced at $1 per pint) . What is Morris's utility-maximizing consumption bundle?

Use the following to answer questions 21-22: Figure 4.9 -(Figure 4.9) What is the marginal rate of substitution between points A and B?

The equation for the marginal rate of substitution of good X for good Y (that is, MRS_XY) is given by:

Cher's marginal rate of substitution of necklaces (N) for earrings (E) is 5 (MRS_EN = 5) . This information implies that:

Exam 4: Consumer Behavior

Max's utility function is U = 6XY, where the MUX = 6Y and MUY = 6X. The prices of good X and good Y are $12 and $15, respectively. Suppose that Max's indifference curve is tangent to his budget constraint, where he is consuming 20 units of good X. How many units of good Y must Max be consuming?

For the utility function U(X,Y) = 6X + Y0.5, the marginal utility of Y is:

A consumer buys coffee (C) for $3 each and bagels (B) for $1.50 each. If she has income of $40, what is the equation of her budget constraint? If a tax of $0.25 were placed on the purchase of bagels, what would be the equation of her new budget constraint?

Suppose that Angie's MUX = Y2 and MUY = 2XY. The price of good X is $10 and the price of good Y is $2. If Angie is consuming 8 units of good X and 16 units of good Y, is she maximizing utility? Explain your answer.

Suppose that MUX = Y and MUY = X. The prices of good X and good Y are $5 and $4, respectively. How many units of good X does the consumer buy if she has $410 of income?

Suppose that U = XY0.5. Which of the following bundles lie on the same indifference curve? bundle A: (X = 10, Y = 9) bundle B: (X = 9, Y = 16) bundle C: (X = 12, Y = 9) bundle D: (X = 3, Y = 100) bundle E: (X = 6, Y = 25) bundle F: (X = 6, Y = 36)

Sonia says she prefers two theater tickets and one bottle of French wine to three games of bowling and one pitcher of draft beer. In this example, Sonia is demonstrating the _____ assumption of consumer behavior.

Use the following to answer question: Figure 4.8 -(Figure 4.8) Which of the following statements is FALSE?

Use the following to answer question: Figure 4.10 -(Figure 4.10) _____ is willing to give up a lot guitars for a small number of video games, and _____ is willing to give up a lot of video games for a small number of guitars.

Pedro loves leather belts but neither likes nor dislikes additional silk ties. Draw Pedro's indifference curve, using a well-labeled diagram.

A consumer spends his limited income on three goods such that the MUX = 4, MUY = 4, MUZ = 4; and PX = 4, PY = 2, PZ = 1. Which of the following statements is (are) TRUE?

Use the following to answer questions 38-40: Figure 4.14 -(Figure 4.14) For budget constraint 2, suppose that the price of good Y is $90 per unit. What is the price of good X?

Use the following to answer questions 21-22: Figure 4.9 -(Figure 4.9) Suppose that the consumer moves from point A to point B along her indifference curve. If the marginal utility of winter coats is 25, the marginal utility of wool sweaters is:

The utility function for Morris is U = min{4M, T}, where M is pints of milk and T is cans of tuna. Morris has $90 to spend on tuna (priced at $2 per can) and milk (priced at $1 per pint) . What is Morris's utility-maximizing consumption bundle?

Use the following to answer questions 21-22: Figure 4.9 -(Figure 4.9) What is the marginal rate of substitution between points A and B?

The equation for the marginal rate of substitution of good X for good Y (that is, MRSXY) is given by:

Cher's marginal rate of substitution of necklaces (N) for earrings (E) is 5 (MRSEN = 5) . This information implies that:

Max's utility function is U = 6XY, where the MU_X = 6Y and MU_Y = 6X. The prices of good X and good Y are $12 and $15, respectively. Suppose that Max's indifference curve is tangent to his budget constraint, where he is consuming 20 units of good X. How many units of good Y must Max be consuming?

For the utility function U(X,Y) = 6X + Y^0.5, the marginal utility of Y is:

Suppose that Angie's MU_X = Y² and MU_Y = 2XY. The price of good X is $10 and the price of good Y is $2. If Angie is consuming 8 units of good X and 16 units of good Y, is she maximizing utility? Explain your answer.

Suppose that MU_X = Y and MU_Y = X. The prices of good X and good Y are $5 and $4, respectively. How many units of good X does the consumer buy if she has $410 of income?

Suppose that U = XY^0.5. Which of the following bundles lie on the same indifference curve? bundle A: (X = 10, Y = 9) bundle B: (X = 9, Y = 16) bundle C: (X = 12, Y = 9) bundle D: (X = 3, Y = 100) bundle E: (X = 6, Y = 25) bundle F: (X = 6, Y = 36)

Use the following to answer question: Figure 4.10 -(Figure 4.10) _ is willing to give up a lot guitars for a small number of video games, and _ is willing to give up a lot of video games for a small number of guitars.

A consumer spends his limited income on three goods such that the MU_X = 4, MU_Y = 4, MU_Z = 4; and P_X = 4, P_Y = 2, P_Z = 1. Which of the following statements is (are) TRUE?

The equation for the marginal rate of substitution of good X for good Y (that is, MRS_XY) is given by:

Cher's marginal rate of substitution of necklaces (N) for earrings (E) is 5 (MRS_EN = 5) . This information implies that: