Question 1

For the utility function U(X,Y) = 2X + 10Y, the marginal rate of substitution MRS_XY is:

Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. For the utility function U(X,Y) = 2X + 10Y, the MRS is the ratio of the marginal utility of X to the marginal utility of Y, which is 2/10 = 1/5.

Question 2

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

Accepted Answer

The answer of Peter's utility function is U = 5X...

Question 3

(Figure: Good Y and Good X V) For budget constraint 2, suppose that the price of good Y is $90 per unit. What is the price of good X?

Accepted Answer

The answer of (Figure: Good Y and Good X V)...

Question 4

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

Accepted Answer

Marginal utility refers to the additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service.

Question 5

Nikolai enjoys eating sandwiches that have one slice of meat and two slices of cheese. Which set of market bundles provides Nikolai with the highest level of utility?

Accepted Answer

Given Nikolai's preference for sandwiches with one slice of meat and two slices of cheese, option B allows him to make the most sandwiches according to his preference, with 3 sandwiches possible.

Question 6

Suppose a consumer spends all income on goods X and Y. Suppose the price of good X increases and the consumer's income increases. Which of the following must be true?

Accepted Answer

The answer of Suppose a consumer spends all income on...

Question 7

(Figure: Left Shoes and Right Shoes I) Nikolai enjoys eating sandwiches that have one slice of meat and two slices of cheese. His indifference curves are presented in Figure 4.12. Based on the shape of Nikolai's indifference curves, meat and cheese are:

Accepted Answer

The answer of (Figure: Left Shoes and Right Shoes I)...

Question 8

Suppose that Arthur cares only about video games and coffee. His utility function is U = VC, where V is the number of video games that he plays and C is the number of cups of coffee that he drinks. The price of video games is $50, and the price of coffee is $3. Arthur has a budget of $800. What is the Lagrangian equation that can be used to solve Arthur's utility maximization problem?

Accepted Answer

The answer of Suppose that Arthur cares only about video...

Question 9

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.

Accepted Answer

The answer of Parker consumes goods X and Y. Her...

Question 10

Suppose that Eugene cares only about action figures and ice cream. His utility function is U = A^0.33C^0.67, where A is the number of action figures he owns and C is the number of scoops of ice cream he eats. The price of action figures is $10, and the price of ice cream is $4. Eugene has a budget of $100. How can Eugene's utility maximization problem be expressed as a Lagrangian equation?

Accepted Answer

The answer of Suppose that Eugene cares only about action...

Question 11

The marginal utility for a pair of black socks is 4 and the marginal utility for a pair of white socks is 1. a. What is the MRS_WB? b. If the consumer traded 8 pairs of white socks for 1 pair of black socks, what would happen to the consumer's utility?

Accepted Answer

The answer of The marginal utility for a pair of...

Question 12

(Figure: Tomatoes and Carrots II) Which of the following statements is FALSE given the two goods tomatoes and carrots?

Accepted Answer

The answer of (Figure: Tomatoes and Carrots II) Which of...

Question 13

Allen earns $1,000 per week and purchases healthcare (H) goods at $200 per unit and non-healthcare (N) goods at $50 per unit.
a. What is the equation for Allen's budget constraint?
b. Graph Allen's budget constraint.

Accepted Answer

The answer of Allen earns $1,000 per week and purchases...

Question 14

Sarinda consumes crab cakes and tuna. Sarinda's utility increases with the consumption of crab cakes, but her 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 Sarinda's indifference curves look like?

Accepted Answer

Indifference curves show combinations of goods that give a consumer the same level of utility. Since Sarinda's utility neither increases nor decreases with the consumption of tuna, her indifference curves will be horizontal lines, indicating that she is indifferent between different amounts of tuna.

Question 15

Which of the following statements is FALSE?

Accepted Answer

Utility is a measure of satisfaction or happiness that a consumer gets from consuming goods and services, not the difference between assets and liabilities.

Question 16

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?

Accepted Answer

The answer of Suppose that MU_X = Y and MU_Y...

Question 17

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

Accepted Answer

The answer of The utility function for Raj is U...

Question 18

Suppose a consumer spends all income on goods X and Y. Suppose the price of good Y decreases and the consumer's income increases. Which of the following must be true?

Accepted Answer

With an increase in income and a decrease in the price of good Y, the consumer can afford more of both goods X and Y, assuming the price of X remains constant and the consumer's preferences do not change.

Question 19

Suppose that Eugene cares only about action figures and ice cream. His utility function is U = A^0.33C^0.67, where A is the number of action figures he owns and C is the number of scoops of ice cream he eats. The price of action figures is $10, and the price of ice cream is $4. Eugene has a budget of $100. Which levels of A and C maximize Eugene's utility?

Accepted Answer

Eugene's utility function suggests a Cobb-Douglas form, which typically involves spending a constant proportion of income on each good. The utility maximization problem can be solved by setting up the budget constraint $10A + $4C = $100 and using the utility function's properties to find the optimal bundle. Given the prices and budget, the solution involves allocating the budget in a way that balances the marginal utility per dollar spent on each good. Without the exact utility function's calculation, the choice that fits the typical outcome of such a problem, considering the budget and prices, is B) A = 3.33 and C = 16.66, as it reflects a distribution of spending that is likely to maximize utility given the prices and budget constraint.

Question 20

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

Accepted Answer

Indifference curves are based on the assumption of rankability and completeness, meaning consumers can rank their preferences in a complete order, allowing for the graphical representation of these preferences through indifference curves.

Quiz 4: Consumer Behavior

For the utility function U(X,Y) = 2X + 10Y, the marginal rate of substitution MRS_XY is:

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

(Figure: Good Y and Good X V) For budget constraint 2, suppose that the price of good Y is $90 per unit. What is the price of good X?

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

Nikolai enjoys eating sandwiches that have one slice of meat and two slices of cheese. Which set of market bundles provides Nikolai with the highest level of utility?

Suppose a consumer spends all income on goods X and Y. Suppose the price of good X increases and the consumer's income increases. Which of the following must be true?

(Figure: Left Shoes and Right Shoes I) Nikolai enjoys eating sandwiches that have one slice of meat and two slices of cheese. His indifference curves are presented in Figure 4.12. Based on the shape of Nikolai's indifference curves, meat and cheese are:

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.

The marginal utility for a pair of black socks is 4 and the marginal utility for a pair of white socks is 1. a. What is the MRS_WB? b. If the consumer traded 8 pairs of white socks for 1 pair of black socks, what would happen to the consumer's utility?

(Figure: Tomatoes and Carrots II) Which of the following statements is FALSE given the two goods tomatoes and carrots?

Allen earns $1,000 per week and purchases healthcare (H) goods at $200 per unit and non-healthcare (N) goods at $50 per unit. a. What is the equation for Allen's budget constraint? b. Graph Allen's budget constraint.

Sarinda consumes crab cakes and tuna. Sarinda's utility increases with the consumption of crab cakes, but her 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 Sarinda's indifference curves look like?

Which of the following statements is FALSE?

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?

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

Suppose a consumer spends all income on goods X and Y. Suppose the price of good Y decreases and the consumer's income increases. Which of the following must be true?

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

Quiz 4: Consumer Behavior

For the utility function U(X,Y) = 2X + 10Y, the marginal rate of substitution MRSXY is:

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

(Figure: Good Y and Good X V) For budget constraint 2, suppose that the price of good Y is $90 per unit. What is the price of good X?

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

Nikolai enjoys eating sandwiches that have one slice of meat and two slices of cheese. Which set of market bundles provides Nikolai with the highest level of utility?

Suppose a consumer spends all income on goods X and Y. Suppose the price of good X increases and the consumer's income increases. Which of the following must be true?

(Figure: Left Shoes and Right Shoes I) Nikolai enjoys eating sandwiches that have one slice of meat and two slices of cheese. His indifference curves are presented in Figure 4.12. Based on the shape of Nikolai's indifference curves, meat and cheese are:

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

The marginal utility for a pair of black socks is 4 and the marginal utility for a pair of white socks is 1. a. What is the MRSWB? b. If the consumer traded 8 pairs of white socks for 1 pair of black socks, what would happen to the consumer's utility?

(Figure: Tomatoes and Carrots II) Which of the following statements is FALSE given the two goods tomatoes and carrots?

Allen earns $1,000 per week and purchases healthcare (H) goods at $200 per unit and non-healthcare (N) goods at $50 per unit. a. What is the equation for Allen's budget constraint? b. Graph Allen's budget constraint.

Sarinda consumes crab cakes and tuna. Sarinda's utility increases with the consumption of crab cakes, but her 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 Sarinda's indifference curves look like?

Which of the following statements is FALSE?

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?

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

Suppose a consumer spends all income on goods X and Y. Suppose the price of good Y decreases and the consumer's income increases. Which of the following must be true?

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

For the utility function U(X,Y) = 2X + 10Y, the marginal rate of substitution MRS_XY is:

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.

The marginal utility for a pair of black socks is 4 and the marginal utility for a pair of white socks is 1. a. What is the MRS_WB? b. If the consumer traded 8 pairs of white socks for 1 pair of black socks, what would happen to the consumer's utility?

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?