Deck 4: Consumer Behavior

Question 1

Which of the following statements is FALSE?

A) Utility is the difference between the consumer's assets and her liabilities.
B) One person's utility cannot be compared to another person's utility.
C) A utility function gives the relationship between a consumer's well-being and the quantities of goods consumed.
D) Inputs into a utility function may include wool socks, DVD rentals, roller coaster rides, asparagus, and Sunday church services.

Answer 1

A

Question 2

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

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

Answer 2

C

Question 3

Use the following to answer question:
Figure 4.1
(Figure 4.1) Sam's grandmother, who is visiting from Florida, gives Sam 10 oranges and 1 pineapple. As a result, Sam will be willing to:

A) trade away more than one orange for an additional pineapple.
B) trade lots of pineapples for an additional orange.
C) trade his only pineapple for one more orange.
D) give up all of his oranges for several more pineapples.

Answer 3

A

Question 4

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

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.

Question 5

Monroe consumes crab cakes and tuna. Monroe's utility increases with the consumption of crab cakes, but his utility neither increases nor decreases with the consumption of tuna. Assuming tuna is on the x-axis and crab cake is on the y-axis, what do Monroe's indifference curves look like?

A) horizontal lines
B) vertical lines
C) upward-sloping lines from the origin
D) downward-sloping lines

Question 6

Use the following to answer question:
Figure 4.7
(Figure 4.7) Which of these indifference curves is convex to the origin?

A) U₁
B) U₂
C) U₃
D) U₄

Question 7

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.

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

Question 8

Kyle's utility function is U = 4X + 3.7Y, where X is units of good X and Y is units of good Y. What is the marginal utility of good X?

A) 4X + 3.7
B) 4
C) 0.3X
D) U/4

Question 9

Use the following to answer question:
Figure 4.2
(Figure 4.2) Joanne's utility function is U = TC, where T is baskets of tomatoes and C is bags of carrots. One of Joanne's indifference curves will go through points:

A) A, B, and F.
B) B, D, and E.
C) A, D, and E.
D) D, C, and E.

Question 10

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

A) $\Delta$ U(X,Y)/ $\Delta$ X.
B) - $\Delta$ Y/ $\Delta$ X.
C) $\Delta$ Y × $\Delta$ X.
D) -X/Y.

Question 11

Use the following to answer question:
Figure 4.4
(Figure 4.4) This figure violates the assumption:

A) of convex indifference curves.
B) of transitivity.
C) of rankability.
D) that the more you have of a good, the less you are willing to give up to get even more of it.

Question 12

Carleton is presented with two bundles of goods: silk ties and cufflinks. Which of the following statements satisfies the assumption of rankability?

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

Question 13

Use the following to answer question:
Figure 4.5
(Figure 4.5) Which of the following statements is TRUE?

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

Question 14

Use the following to answer question:
Figure 4.3
(Figure 4.3) Which of the following statements is FALSE?

A) Indifference curve U₂ provides a higher level of utility than indifference curve U₁.
B) Bundle C is preferred to bundle D.
C) Bundle A is preferred to bundle C.
D) The consumer is indifferent between bundle A and bundle D.

Question 15

Suppose that U = U(P, M), where P and M are peanuts and marshmallows. The marginal utility of marshmallows, MU_M, is given by:

A) P + M.
B) P/M.
C) $\Delta$ U(P, M)/ $\Delta$ M.
D) $\Delta$ U(P, M) × $\Delta$ M.

Question 16

Maggie prefers cheese to crayons, and she prefers crayons to coconuts. To satisfy the assumption of _____, Maggie must also prefer _____.

A) rankability; cheese to coconuts
B) transitivity; cheese to coconuts
C) transitivity; coconuts to cheese
D) rankability; coconuts to cheese

Question 17

Use the following to answer question:
Figure 4.6
(Figure 4.6) What type of good is good X?

A) perfect substitute
B) perfect complement
C) bad
D) neutral good

Question 18

Randy likes baseball more than football, football more than basketball, and basketball more than baseball. Which assumption about consumer preferences does this violate?

A) completeness and rankability
B) more is better
C) transitivity
D) The more a consumer has of a particular good, the less she is willing to give up of something else to get even more of that good.

Question 19

Which assumption(s) allow(s) us to draw indifference curves?

A) cardinal measurement and cardinal ranking
B) rankability and completeness
C) that the more we have of a good, the less we are willing to give up to get even more of it
D) free disposal and more is better

Question 20

The additional utility obtained from consuming an extra unit of a good is called:

A) marginal utility.
B) marginal rate of substitution.
C) disutility.
D) population-averaged utility.

Question 21

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:

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

Question 22

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?

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

Question 23

Beth has $200 of income to spend on e-books (E), priced at $10 per book, and Zumba (Z) classes, priced at $8 per class. Which of the following consumption bundles is infeasible?

A) E = 20 and Z = 0
B) E = 2 and Z = 22
C) E = 10 and Z = 13
D) E = 8 and Z = 15

Question 24

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?

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

Question 25

Use the following to answer question:
Figure 4.11
(Figure 4.11) The indifference curve _____ indicates that the two goods, X and Y, are relatively poor substitutes for one another, whereas the indifference curve _____ indicates that the two goods are close substitutes for one another.

A) U₁; U₃
B) U₃; U₂
C) U₂; U₁
D) U₃; U₁

Question 26

Martha loves to eat chili, especially an award-winning chili recipe that calls for using 2 tablespoons of chili powder for 1 pound of ground buffalo. What is Martha's utility as a function of tablespoons of chili powder (P) and pounds of ground buffalo (B)?

A) U = min{2B, P}
B) U = min{0.50B, P}
C) U = 2P + B
D) U = 2PB

Question 27

Use the following to answer questions 38-40:
Figure 4.14
(Figure 4.14) For budget constraint 1, the price of good X and the price of good Y could equal _____, respectively.

A) $175 and $100
B) $80 and $140
C) $140 and $160
D) $6 and $4

Question 28

The utility function U = Y/X violates the assumption(s) of:

A) rankability.
B) completeness.
C) more is better.
D) rankability and completeness.

Question 29

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 MRS_XY = 5.
III) The consumer is always willing to trade away 5 units of good X for 1 unit of good Y.

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

Question 30

Brenda's utility function for regular-flavored toothpaste (R) and mint-flavored toothpaste (M) is given by U = 2R + 4M. Which of the following statements is TRUE?

A) MRS_MR = 2M/R.
B) Brenda's indifference curves are vertical.
C) Brenda's indifference curves are horizontal.
D) Brenda is willing to give up two tubes of regular-flavored toothpaste for one tube of mint-flavored toothpaste.

Question 31

The three-legged Ork, a space creature from the universe Warhammer, wears 1 right shoe and 2 left shoes. Which set of market bundles provides an Ork with the highest level of utility?

A) 15 right shoes and 14 left shoes
B) 10 right shoes and 16 left shoes
C) 12 right shoes and 12 left shoes
D) 6 right shoes and 12 left shoes

Question 32

Suppose that the marginal utility of good Y = 2X² and the marginal utility of good X = 4XY. What is the slope of the indifference curve when Y = 7 and X = 2? Assume that good X is on the horizontal axis and good Y is on the vertical axis.

A) 7
B) 0.143
C) -14
D) -0.143

Question 33

Jewel's utility is a function of golf (G) and music lessons (M), where MU_G = 1/G and MU_M = 1/M. What is MRS_GM when M = 10 and G = 4?

A) 2.5
B) 14
C) 0.4
D) 6

Question 34

Use the following to answer question:
Figure 4.13
(Figure 4.13) What rotated the budget constraint?

A) an increase in the price of good X
B) a decrease in the price of good Y
C) a decrease in income
D) an increase in the price of good Y

Question 35

Use the following to answer questions 38-40:
Figure 4.14
(Figure 4.14) Suppose the budget constraint shifted from constraint 2 to constraint 1. What could have caused this change?

A) a decrease in income
B) a decrease in the price of good X
C) a decrease in income and an increase in the price of good X relative to that of good Y
D) an increase in the relative price of good X to that of good Y

Question 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) John; Paul
B) Paul; John
C) Paul; Paul
D) John; John

Question 37

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:

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

Question 38

Fisher's utility function for trout (T) and salmon (S) is given by U = ST, where the MU_T = S and MU_S = T. Which set of consumption bundles lies on the same indifference curve?

A) bundles of (S = 2 and T = 4) and (S = 3 and T = 3)
B) bundles of (S = 5 and T = 5) and (S = 25 and T = 1)
C) bundles of (S = 10 and T = 2) and (S = 5 and T = 1)
D) bundles of (S = 8 and T = 6) and (S = 7 and T = 10)

Question 39

A graph of the utility function U = 4Y + X would reveal that goods X and Y are:

A) perfect substitutes.
B) near substitutes.
C) perfect complements.
D) near complements.

Question 40

Jewel's utility is a function of golf (G) and music lessons (M), where MU_G = 1/G and MU_M = 1/M. What is the equation for the marginal rate of substitution of music lessons for golf (MRS_GM)?

A) GM
B) M/G
C) G/M
D) M - G

Question 41

Suppose that U = min{2X, 0.5Y}, where X is units of good X and Y is units of good Y. The price of good X is $1 and the price of good Y is $2. What is the minimum expenditure necessary to achieve a utility level of 100?

A) $333.33
B) $550
C) $1,200
D) $450

Question 42

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?

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

Question 43

The consumer's budget constraint is $6 = 0.50G + P, where G is packs of gum and P is bags of pretzels. The marginal utility of pretzels is MU_P = G^0.5, and the marginal utility of gum is MU_G = 0.5G^-0.5P. The consumer's utility function is U = G^0.5P. the utility-maximizing bundle consists of _____ packs of gum and _____ bags of pretzels.

A) 8; 2
B) 4; 4
C) 2; 5
D) 6; 3

Question 44

If a consumer's budget constraint has a slope that is less than -1:

A) the consumer gets more utility from good X than from good Y.
B) the price of good X is less than the price of good Y.
C) the consumer gets less utility from good X than from good Y.
D) the price of good X is greater than the price of good Y.

Question 45

Use the following to answer question:
Figure 4.16
(Figure 4.16) To maximize utility, this consumer will buy _____ hockey tickets and _____ soccer tickets.

A) 5; 3
B) 3; 5
C) 8; 0
D) 0; 8

Question 46

Draw an indifference curve for the utility function U = 0.5XY when utility equals 5. Identify four consumption bundles on the indifference curve along with their respective values of X and Y.

Question 47

List the four properties of utility functions, giving an example of each property.

Question 48

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?

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 49

Larry's utility function is U = 4X + 12Y. Which property of consumer preferences does Larry's utility function violate? Explain your answer.

Question 50

Use the following to answer question:
Figure 4.15
(Figure 4.15) The consumer maximizes utility by consuming:

A) 7 mushrooms and no spinach.
B) 8 units of spinach and no mushrooms.
C) on indifference curve U₂.
D) approximately 4 mushrooms and 4 units of spinach.

Question 51

Suppose that MU_Y = 15, MU_X = 10, P_Y = $2, and P_X = $1. Which of the following statements is TRUE?

A) The consumer is maximizing utility.
B) The consumer could increase utility by giving up 1 unit of good Y for 2 units of good X.
C) The consumer could increase utility by giving up 2 units of good X for 1 unit of good Y.
D) The consumer is receiving more marginal utility per dollar from good Y than from good X.

Question 52

Nancy's ratio of marginal utility for coffee and lipstick is 3:1, while the price ratio of coffee to lipstick is 1.5:1. Which of the following statements is (are) TRUE?

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

Question 53

Peter's utility function is U = 5X + 2Y. What is Peter's marginal utility of good X and good Y? Interpret your answer.

Question 54

Jimi's utility function for guitars (G) and haircuts (H) is U = 1.05GH. Eddie's utility function for guitars and haircuts is U = GH + H^0.5. Does Jimi or Eddie receive more satisfaction from consuming 10 guitars and 9 haircuts?

Question 55

Frank's utility function is U = 10X + 6Y. Frank has a budget of $60 to spend on goods X and Y. The price of good X is $3 and the price of good Y is $2. How many units of good X and good Y does Frank purchase?

A) X = 20 and Y = 0
B) X = 0 and Y = 10
C) X = 15 and Y = 5
D) X = 10 and Y = 20

Question 56

Parker consumes goods X and Y. Her utility function is U = XY, which means that MU_X = Y and MU_Y = X. Prove that Parker's utility function satisfies all four assumptions of consumer preferences.

Question 57

Billy is maximizing utility subject to his limited income. As a result, which of the following statements is TRUE?

A) The slope of the indifference curve is twice the slope of the budget constraint.
B) The indifference curve intersects the budget constraint at precisely two points.
C) The budget constraint is tangent to the indifference curve.
D) The MRS_XY = P_XP_Y.

Question 58

Bertha's utility function for soccer balls (S) and tennis balls (T) is U = ST + 5S. Find five consumption bundles that give Bertha exactly 100 units of utility.

Question 59

Missy's utility increases with the size of her apartment. However, Missy is willing to sacrifice some apartment space if she can live closer to the beach. Draw Missy's indifference curves.

Question 60

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?

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

Question 61

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

Question 62

Cashews are sold in either 8-ounce (C₈) or 16-ounce (C₁₆) cans.

Question 63

The utility function for a consumer is U = XY/(X + Y), where the MU_X = Y²/(X + Y)² and MU_Y = X²/(X + Y)².

Question 64

Freddy's utility function for pizza (P) and tacos (T) is U = PT. Graph Freddy's indifference curve, using a well-labeled diagram.

Question 65

The ideal pheasant shell requires that lead shot (L) and gunpowder (G) be used in the following fixed proportion: 1 ounce of lead shot to 18 grains of gunpowder. Graph an indifference curve for 25 shells.

Question 66

Graph Sherman's indifference curve for beer and wine, assuming he has a strong preference for wine. Graph Rodger's indifference curve for beer and wine, assuming he has a very strong preference for beer.

Question 67

A consumer has $200 to spend on groceries and entertainment. The price of entertainment is $40 and the price of groceries is $20.

Question 68

Allen earns $1,000 per week and purchases health care (H) at $200 per unit and non-health-care (N) goods at $50 per unit.

Question 69

Esther has income of $80, and she consumes pizza (P) and soda (S). The price of pizza is $10 and the price of soda is $4.

Question 70

The marginal utility for a pair of black socks is 4 and the marginal utility for a pair of white socks is 1.

Question 71

Belle likes to wear either sandals or Crocs, but she always receives 3 times as much marginal utility from an additional pair of Crocs as from an additional pair of sandals. Draw Belle's indifference curve, using a well-labeled diagram.

Question 72

Bucky has $20 to spend on bowling and billiards. The prices of bowling and billiards are $4 and $1 per game, respectively. Graph Bucky's budget constraint, assuming he has a coupon for two free games of bowling. Place bowling on the x-axis and billiards on the y-axis.

Question 73

David's utility is U = 10S + T, where S is rounds of sporting clays and T is rounds of trap.

Question 74

Suppose that the marginal utility of good X and good Y is given by the following equations:
MU_X = 1/(X + 10)
MU_Y = 1/Y

Question 75

The three-legged Ork, a space creature from the universe Warhammer, wears 1 right shoe and 2 left shoes. Draw the Ork's indifference curves.

Question 76

Use the following to answer question:
Figure 4.17
(Figure 4.17) What, if any, property of utility functions is violated if:

Question 77

The utility function for a consumer is U = min{0.25X, Y}. What would be the marginal rate of substitution for this consumer in equilibrium?

Question 78

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)

Question 79

Justin buys water (W) at $2 per gallon and food (F) at $10 per unit. Justin has income of $50. Suppose that the government imposes a tax on water of $1 for each gallon consumed beyond 10 gallons. Graph Justin's budget constraint with water on the y-axis and food on the x-axis.

Question 80

Mickey loves cheese and crackers, consuming 2 ounces of cheese per cracker. Draw Mickey's indifference curve, using a well-labeled diagram.