Deck 7: B: Revealed Preference

Question 1

In Problem 3,Pierre's friend Marcel lives in a town where he has to pay 3 francs per glass of wine and 5 francs per loaf of bread.Marcel consumes 9 glasses of wine and 4 loaves of bread per day.Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine.If Bob has the same tastes as Marcel and if the only thing that either of them cares about is the consumption of bread and wine,

A) both of them violate the weak axiom of revealed preferences.
B) there is not enough information to determine whether one is better off than the other.
C) Bob is better off than Marcel.
D) Marcel is better off than Bob.
E) Bob and Marcel are equally well off.

Answer 1

there is not enough information to determine whether one is better off than the other.

Question 2

In Problem 3,Pierre's friend Jean lives in a town where he has to pay 3 francs per glass of wine and 2 francs per loaf of bread.Jean consumes 7 glasses of wine and 4 loaves of bread per day.Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine.If Bob has the same tastes as Jean and if the only thing that either of them cares about is the consumption of bread and wine,

A) there is not enough information to determine whether one is better off than the other.
B) Jean is better off than Bob.
C) Bob is better off than Jean.
D) both of them violate the weak axiom of revealed preferences.
E) Bob and Jean are equally well off.

Answer 2

there is not enough information to determine whether one is better off than the other.

Question 3

In Problem 1,if the only information we had about Goldie were that she chooses the bundle (6,6)when prices are (6,7)and she chooses the bundle (10,0)when prices are (1,5),then we could conclude that

A) Goldie violates WARP.
B) neither bundle is revealed preferred to the other.
C) the bundle (6,6)is revealed preferred to (10,0)but there is no evidence that she violates WARP.
D) the bundle (10,0)is revealed preferred to (6,6)and she violates WARP.
E) the bundle (10,0)is revealed preferred to (6,6)but there is no evidence that she violates WARP.

Answer 3

the bundle (6,6)is revealed preferred to (10,0)but there is no evidence that she violates WARP.

Question 4

Let us reconsider the case of Ronald in Problem 4.Let the prices and consumptions in the base year be as in situation D,where p₁ =$3,p₂=$1,x₁ = 5,and x₂ = 15.If in the current year,the price of good 1 is $1 and the price of good 2 is $1,and his current consumptions of good 1 and good 2 are 25 and 20 respectively,what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer. )

A) 0.67
B) 1.50
C) 0.25
D) 0.50
E) 1

Question 5

In Problem 1,if the only information we had about Goldie were that she chooses the bundle (6,6)when prices are (6,7)and she chooses the bundle (10,0)when prices are (5,5),then we could conclude that

A) the bundle (6,6)is revealed preferred to (10,0)but there is no evidence that she violates WARP.
B) Goldie violates WARP.
C) the bundle (10,0)is revealed preferred to (6,6)and she violates WARP.
D) neither bundle is revealed preferred to the other.
E) the bundle (10,0)is revealed preferred to (6,6)but there is no evidence that she violates WARP.

Question 6

In Problem 3,Pierre's friend Jacques lives in a town where he has to pay 3 francs per glass of wine and 3 francs per loaf of bread.Jacques consumes 8 glasses of wine and 4 loaves of bread per day.Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine.If Bob has the same tastes as Jacques and if the only thing that either of them cares about is the consumption of bread and wine,

A) there is not enough information to determine whether one is better off than the other.
B) both of them violate the weak axiom of revealed preferences.
C) Jacques is better off than Bob.
D) Bob is better off than Jacques.
E) Bob and Jacques are equally well off.

Question 7

Let us reconsider the case of Ronald in Problem 4.Let the prices and consumptions in the base year be as in situation D,where p₁ = $3,p₂ =$1,x₁ =5,and x₂ = 15.If in the current year,the price of good 1 is $1 and the price of good 2 is $3,and his current consumptions of good 1 and good 2 are 25 and 20 respectively,what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer. )

A) 1
B) 1.67
C) 0.75
D) 2.83
E) 2.50

Question 8

In Problem 3,Pierre's friend Henri lives in a town where he has to pay 3 francs per glass of wine and 2 francs per loaf of bread.Henri consumes 10 glasses of wine and 4 loaves of bread per day.Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine.If Bob has the same tastes as Henri and if the only thing that either of them cares about is the consumption of bread and wine,

A) Henri is better off than Bob.
B) both of them violate the weak axiom of revealed preferences.
C) there is not enough information to determine whether one is better off than the other.
D) Bob is better off than Henri.
E) Bob and Henri are equally well off.

Question 9

Let us reconsider the case of Ronald in Problem 4.Let the prices and consumptions in the base year be as in situation D,where p₁= $3,p₂=$1,x₁ = 5,and x₂ =15.If in the current year,the price of good 1 is $1 and the price of good 2 is $1,and his current consumptions of good 1 and good 2 are 25 and 20 respectively,what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer. )

A) 0.25
B) 0.67
C) 0.50
D) 1.50
E) 1

Question 10

In Problem 1,if the only information we had about Goldie were that she chooses the bundle (6,6)when prices are (6,2)and she chooses the bundle (10,0)when prices are (3,5),then we could conclude that

A) neither bundle is revealed preferred to the other.
B) Goldie violates WARP.
C) the bundle (6,6)is revealed preferred to (10,0)but there is no evidence that she violates WARP.
D) the bundle (10,0)is revealed preferred to (6,6)and she violates WARP.
E) the bundle (10,0)is revealed preferred to (6,6)but there is no evidence that she violates WARP.

Question 11

In Problem 1,if the only information we had about Goldie were that she chooses the bundle (6,6)when prices are (6,7)and she chooses the bundle (10,0)when prices are (2,5),then we could conclude that

A) Goldie violates WARP.
B) the bundle (6,6)is revealed preferred to (10,0)but there is no evidence that she violates WARP.
C) neither bundle is revealed preferred to the other.
D) the bundle (10,0)is revealed preferred to (6,6)and she violates WARP.
E) the bundle (10,0)is revealed preferred to (6,6)but there is no evidence that she violates WARP.

Question 12

In Problem 1,if the only information we had about Goldie were that she chooses the bundle (6,6)when prices are (6,7)and she chooses the bundle (10,0)when prices are (2,5),then we could conclude that

A) the bundle (6,6)is revealed preferred to (10,0)but there is no evidence that she violates WARP.
B) neither bundle is revealed preferred to the other.
C) Goldie violates WARP.
D) the bundle (10,0)is revealed preferred to (6,6)and she violates WARP.
E) the bundle (10,0)is revealed preferred to (6,6)but there is no evidence that she violates WARP.

Question 13

In Problem 3,Pierre's friend Henri lives in a town where he has to pay 3 francs per glass of wine and 7 francs per loaf of bread.Henri consumes 10 glasses of wine and 4 loaves of bread per day.Recall that Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine.If Bob has the same tastes as Henri and if the only thing that either of them cares about is the consumption of bread and wine,

A) both of them violate the weak axiom of revealed preferences.
B) Bob is better off than Henri.
C) Henri is better off than Bob.
D) there is not enough information to determine whether one is better off than the other.
E) Bob and Henri are equally well off.

Question 14

Let us reconsider the case of Ronald in Problem 4.Let the prices and consumptions in the base year be as in situation D,where p₁=$3,p₂ =$1,x₁ = 5,and x₂ =15.If in the current year,the price of good 1 is $1 and the price of good 2 is $1,and his current consumptions of good 1 and good 2 are 25 and 10 respectively,what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer. )

A) 0.50
B) 0.25
C) 1.17
D) 0.67
E) 1

Question 15

Let us reconsider the case of Ronald in Problem 4.Let the prices and consumptions in the base year be as in situation D,where p₁ = $3,p₂ =$1,x₁ =5,and x₂ =15.If in the current year,the price of good 1 is $1 and the price of good 2 is $2,and his current consumptions of good 1 and good 2 are 25 and 20 respectively,what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer. )

A) 1.17
B) 2.17
C) 0.75
D) 0.50
E) 1.75