Question 1

Why is it true that indifference curves farther from the origin contain higher levels of utility?

Accepted Answer

The answer of Why is it true that indifference curves...

Question 2

-Refer to Exhibit 3-2. Which figure illustrates goods for which the consumer has nonconvex preferences?
A) (a)
B) (b)
C) (c)
D) (d)

Accepted Answer

The answer of 
-Refer to Exhibit 3-2. Which figure illustrates...

Question 3

Understanding tipping requires analysis of
A) only the customer's utility
B) both the customer's and the server's utilities
C) only the server's utility

Accepted Answer

Tipping involves both the customer's and the server's utilities. Customers consider factors such as the quality of the service, the social norms of tipping, and their budget when deciding how much to tip. Servers, on the other hand, rely on tips as a significant portion of their income and thus have a vested interest in receiving higher tips. Therefore, understanding tipping requires analyzing both the customer's and the server's utilities.

Question 4

What is the name of the axiom that states that, if bundle x is ever directly revealed to be preferred to bundle y when the two bundles are not identical, then y can never be directly revealed to be preferred to x?
A) Weak Axiom of Revealed Preference (WARP)
B) Strong Axiom of Revealed Preference (SARP)
C) Generalized Axiom of Revealed Preference (GARP)

Accepted Answer

The Weak Axiom of Revealed Preference (WARP) states that if a consumer chooses bundle x over bundle y when both are available, then the consumer should not choose y over x in any other circumstance, assuming no changes in income or prices. This axiom prevents cyclical preferences and ensures consistency in choice behavior.

Question 5

Give the tip that, if left by all other customers, would provide the server with the income that you feel is best, considering your preferences and your income. This is known as the
A) categorical imperative tipping rule
B) unselfishness assumption tipping rule
C) irrationality complex

Accepted Answer

The categorical imperative tipping rule is based on the idea that your decision about how much to tip should be based on what you would recommend as a general rule that all other customers should follow. In other words, you should tip in a way that would lead to a sustainable income for servers, while also taking into account your own preferences and budget. This approach is grounded in ethical principles and helps to ensure that servers are fairly compensated for their work, while also allowing customers to make informed and consistent tipping decisions.

Question 6

What is the name of the axiom that modifies SARP to allow for the possibility that the person making choices may have convex indifference curves, but not strictly convex ones?
A) Weak Axiom of Revealed Preference (WARP)
B) Strong Axiom of Revealed Preference (SARP)
C) Generalized Axiom of Revealed Preference (GARP)

Accepted Answer

The Generalized Axiom of Revealed Preference (GARP) modifies SARP to allow for the possibility that the person making choices may have convex indifference curves, but not strictly convex ones. GARP is a more general framework than SARP and is used to test for consistency of choices even in cases where preferences are not strictly convex.

Question 7

Explain what convexity of preferences implies about marginal rates of substitution.

Accepted Answer

The answer of Explain what convexity of preferences implies about...

Question 8

A server can increase a tip by the greatest amount by
A) giving a positive weather forecast when presenting the bill
B) wearing something unique and with flair
C) putting a smiling face on a bill

Accepted Answer

A positive weather forecast has no impact on the tip.

Question 9

Describe the shape of indifference curves for a good that yields no utility.

Accepted Answer

The answer of Describe the shape of indifference curves for...

Question 10

-Refer to Exhibit 3-4. Interpret the relationship between the two goods.

Accepted Answer

The answer of 
-Refer to Exhibit 3-4. Interpret the relationship...

Question 11

Tipping violates the psychological assumption of
A) nonsatiation
B) selfishness
C) convexity of preferences

Accepted Answer

Tipping is often seen as an act that goes against the assumption of selfishness in economic theory, as individuals voluntarily give up their own resources (money) without a direct personal material benefit, showing a willingness to reward service beyond the transactional exchange.

Question 12

What is the name of the axiom that states that, if bundle x is revealed to be preferred to bundle y (either directly or indirectly) and bundle y is different from x, then bundle y cannot be directly or indirectly revealed to be preferred to x?
A) Weak Axiom of Revealed Preference (WARP)
B) Strong Axiom of Revealed Preference (SARP)
C) Generalized Axiom of Revealed Preference (GARP)

Accepted Answer

The axiom described is the Strong Axiom of Revealed Preference (SARP). The SARP states that if bundle x is revealed to be preferred to bundle y (either directly or indirectly) and bundle y is different from x, then bundle y cannot be directly or indirectly revealed to be preferred to x.

Question 13

-Refer to Exhibit 3-2. Which figure illustrates goods that are perfect complements?
A) (a)
B) (b)
C) (c)
D) (d)

Accepted Answer

Perfect complements are illustrated by a right-angle indifference curve, as seen in figure (c), indicating that the goods are consumed in fixed proportions.

Question 14

A microeconomic method that a student could use to decide how to study for final exams is
A) the selfishness assumption
B) optimal allocation of time
C) the concavity principle

Accepted Answer

Optimal allocation of time is the most appropriate microeconomic method for a student to decide how to study for final exams. This method involves evaluating the benefits and costs of different study strategies and allocating time towards the most efficient and effective methods. In other words, the student considers the trade-offs involved in investing time in each study method and chooses the one that maximizes their overall study performance.

Question 15

Research shows ________________ connection between the size of tips and the quality of service.
A) a very weak
B) no
C) a very strong

Accepted Answer

Research indicates that there is a very weak connection between the size of tips and the quality of service, suggesting other factors may influence tipping behavior.

Question 16

Assume an indifference map of convex indifference curve. What is the significance of the optimal consumption bundle being at a point where one indifference curve is tangent to the budget line?

Accepted Answer

The answer of Assume an indifference map of convex indifference...

Question 17

-Refer to Exhibit 3-3. Which point is the optimal consumption bundle?
A) (a)
B) (b)
C) (c)

Accepted Answer

The optimal consumption bundle is typically where the consumer's budget line is tangent to the highest possible indifference curve, indicating the best combination of goods that maximizes utility given the budget constraint.

Question 18

-Refer to Exhibit 3-3. Which point is not within the economically feasible set?
A) (a)
B) (b)
C) (c)

Accepted Answer

(a) is not within the economically feasible set because it is not attainable with the given resources.

Question 19

The optimal allocation of time for studying for final exams is always situated at a tangency point between an indifference curve and the
A) time constraint line
B) origin
C) indifference curve with the maximum value of utility

Accepted Answer

The optimal allocation of time for studying for final exams is determined by the point where the highest level of utility (indifference curve) is achieved while staying within the constraint of the limited amount of time available (time constraint line). Therefore, the correct answer is A, as it represents the time constraint line. The origin (B) is not directly relevant to the decision of how to allocate studying time, and the indifference curve with the maximum value of utility (C) may not be attainable given the time constraint, and as such is not the best choice.

Question 20

-Refer to Exhibit 3-3. At Point (b) the slope of the indifference curve is equal to the slope of the
A) vertical axis
B) budget line
C) horizontal axis

Accepted Answer

At point (b), the slope of the indifference curve represents the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility. This slope is equal to the slope of the budget line, indicating the rate at which the market allows the consumer to substitute between the two goods, reflecting the consumer's optimal choice given their budget constraint.

Quiz 3: Utilities Indifference Curves

Why is it true that indifference curves farther from the origin contain higher levels of utility?

-Refer to Exhibit 3-2. Which figure illustrates goods for which the consumer has nonconvex preferences?

Understanding tipping requires analysis of

What is the name of the axiom that states that, if bundle x is ever directly revealed to be preferred to bundle y when the two bundles are not identical, then y can never be directly revealed to be preferred to x?

Give the tip that, if left by all other customers, would provide the server with the income that you feel is best, considering your preferences and your income. This is known as the

What is the name of the axiom that modifies SARP to allow for the possibility that the person making choices may have convex indifference curves, but not strictly convex ones?

Explain what convexity of preferences implies about marginal rates of substitution.

A server can increase a tip by the greatest amount by

Describe the shape of indifference curves for a good that yields no utility.

-Refer to Exhibit 3-4. Interpret the relationship between the two goods.

Tipping violates the psychological assumption of

What is the name of the axiom that states that, if bundle x is revealed to be preferred to bundle y (either directly or indirectly) and bundle y is different from x, then bundle y cannot be directly or indirectly revealed to be preferred to x?

-Refer to Exhibit 3-2. Which figure illustrates goods that are perfect complements?

A microeconomic method that a student could use to decide how to study for final exams is

Research shows ________________ connection between the size of tips and the quality of service.

Assume an indifference map of convex indifference curve. What is the significance of the optimal consumption bundle being at a point where one indifference curve is tangent to the budget line?

-Refer to Exhibit 3-3. Which point is the optimal consumption bundle?

-Refer to Exhibit 3-3. Which point is not within the economically feasible set?

The optimal allocation of time for studying for final exams is always situated at a tangency point between an indifference curve and the

-Refer to Exhibit 3-3. At Point (b) the slope of the indifference curve is equal to the slope of the