Question 1

The Lagrangian method of optimization results in a new variable,$\lambda$,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words,$\lambda$ expresses the:
A)the budget constraint.
B)the cost of acquiring an additional util of satisfaction.
C)the marginal utility of income.
D)the optimal level of utility.

Accepted Answer

The Lagrangian multiplier, represented by λ in the Lagrangian method of optimization, represents the marginal utility of income. It shows how much additional utility can be obtained from an additional unit of income. Therefore, the correct answer is C.

Question 2

Explain the difference between diminishing marginal utility and diminishing marginal rate of substitution.

Accepted Answer

The answer of Explain the difference between diminishing marginal utility...

Question 3

Karen is at the supermarket buying her weekly groceries.Since she is on a budget,she wants to limit her purchases to canned soup (C)and prepackaged salad (S).A can of soup costs $1.2 and a tub of salad costs $2.Her utility function is expressed as U(C,S)= F × S.Given that she has only $10 to spend,derive the equilibrium condition using the utility approach.

Accepted Answer

The answer of Karen is at the supermarket buying her...

Question 4

(
A)Peter and Pip both like apples.Parker has one apple that he can give to either Pip or Peter but he thinks it is fair to give it to the person who gets the most utility from the apple.The decision presents Parker with a problem: since he cannot quantify the utility that Peter and Pip each get from the apple,he cannot compare their utilities and make a fair decision.Is Parker right? Explain.

Accepted Answer

The answer of (
A)Peter and Pip both like apples.Parker has...

Question 5

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?
A)Your marginal utility of hamburger is 20 and for pizza it is 20.
B)Your marginal utility of hamburger is 5 and for pizza it is 10.
C)Your marginal utility of hamburger is 20 and for pizza it is 5.
D)Your marginal utility of hamburger is one-fifth that of pizza.

Accepted Answer

The answer of Suppose hamburger is on the horizontal axis...

Question 6

At his current consumption of lobster and hamburgers,Ike's marginal utility from eating lobster is 30 and from hamburger is 5.If the price of a hamburger is $3,and the price of lobster is $20,Ike should:
A)purchase less lobster and hamburger in equal amounts.
B)purchase more lobster and fewer hamburgers.
C)purchase less lobster and more hamburgers.
D)purchase more lobster and hamburger in equal amounts.

Accepted Answer

Ike should choose the option that maximizes his total utility per dollar spent. We can find the marginal utility per dollar of each item by dividing the marginal utility by the price. For lobster, it is 30/20 = 1.5, and for hamburger, it is 5/3 = 1.67.

Since the marginal utility per dollar of hamburger is higher, Ike should purchase more hamburgers and fewer lobsters. Therefore, option C- purchase less lobster and more hamburgers, is the best choice.

Question 7

Dana likes spending time at the museum (M)as well as the park (P).Given that her utility function takes the form U = U (M,P)use the utility theory approach to algebraically show the condition for her optimal consumption choice.

Accepted Answer

The answer of Dana likes spending time at the museum...

Question 8

Prove that the slope of the budget line is equal to the negative of the price ratio.

Accepted Answer

The answer of Prove that the slope of the budget...

Question 9

You buy only apples and bananas.Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas.Write down the equation for the budget line with bananas on the Y-axis.Is that equation unique?

Accepted Answer

The answer of You buy only apples and bananas.Your budget...

Question 10

Define indifference curves and explain their properties.

Accepted Answer

The answer of Define indifference curves and explain their properties....

Question 11

Tim gets constant marginal utility of 4 utils from eating apples and a constant marginal utility of 5 utils from eating bananas.In other words,he considers them perfect substitutes and is willing to substitute 5 apples for 4 bananas and remain equally well off.He has $10 to spend on apples and bananas.The price of bananas is $1.Assume he can consume fractional amounts.Plot the demand curve for apples.(Hint: consider several different prices for apples. )

Accepted Answer

The answer of Tim gets constant marginal utility of 4...

Question 12

Define a normal good and an inferior good and give an example of each.

Accepted Answer

The answer of Define a normal good and an inferior...

Question 13

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Accepted Answer

The answer of Graphically and mathematically illustrate the consumer's optimal...

Question 14

If the marginal utility of an extra hamburger is 8 utils,the marginal utility of a soft drink is 5 utils,the price of a hamburger is $1,and the price of a soft drink is 50 cents,then the consumer can achieve equilibrium when:
A)she buys more hamburgers.
B)she buys more soft drinks.
C)the price of soft drinks increases.
D)the price of hamburgers decreases.

Accepted Answer

In order to achieve equilibrium, the consumer should allocate their spending in a way that the marginal utility per dollar spent on each item is equal. Currently, the marginal utility per dollar spent on soft drinks (10 utils/$1) is higher than that of hamburgers (8 utils/$1). Therefore, the consumer should buy more soft drinks in order to balance their spending and achieve equilibrium. Buying more hamburgers would further decrease the marginal utility per dollar and move away from equilibrium. Increasing the price of soft drinks or decreasing the price of hamburgers may also affect the equilibrium, but the information provided does not allow for a definitive answer in this regard.

Question 15

(
A)Microeconomic theories of fertility explain that the number of children that a couple have is balanced against the opportunity cost of raising children: the foregone wages of the mother,the other goods that the couple could have bought with their money,the time cost of raising children,the total resources of the parents,etc.Draw indifference curves for a couple who prefer a smaller number of children to a higher number.

Accepted Answer

The answer of (
A)Microeconomic theories of fertility explain that the...

Quiz 1: An Introduction to Microeconomics

The Lagrangian method of optimization results in a new variable, $\lambda$ ,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words, $\lambda$ expresses the:

Explain the difference between diminishing marginal utility and diminishing marginal rate of substitution.

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

At his current consumption of lobster and hamburgers,Ike's marginal utility from eating lobster is 30 and from hamburger is 5.If the price of a hamburger is $3,and the price of lobster is $20,Ike should:

Dana likes spending time at the museum (M)as well as the park (P).Given that her utility function takes the form U = U (M,P)use the utility theory approach to algebraically show the condition for her optimal consumption choice.

Prove that the slope of the budget line is equal to the negative of the price ratio.

You buy only apples and bananas.Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas.Write down the equation for the budget line with bananas on the Y-axis.Is that equation unique?

Define indifference curves and explain their properties.

Define a normal good and an inferior good and give an example of each.

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

If the marginal utility of an extra hamburger is 8 utils,the marginal utility of a soft drink is 5 utils,the price of a hamburger is $1,and the price of a soft drink is 50 cents,then the consumer can achieve equilibrium when:

Quiz 1: An Introduction to Microeconomics

The Lagrangian method of optimization results in a new variable, λ\lambdaλ ,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words, λ\lambdaλ expresses the:

Explain the difference between diminishing marginal utility and diminishing marginal rate of substitution.

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

At his current consumption of lobster and hamburgers,Ike's marginal utility from eating lobster is 30 and from hamburger is 5.If the price of a hamburger is $3,and the price of lobster is $20,Ike should:

Dana likes spending time at the museum (M)as well as the park (P).Given that her utility function takes the form U = U (M,P)use the utility theory approach to algebraically show the condition for her optimal consumption choice.

Prove that the slope of the budget line is equal to the negative of the price ratio.

You buy only apples and bananas.Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas.Write down the equation for the budget line with bananas on the Y-axis.Is that equation unique?

Define indifference curves and explain their properties.

Define a normal good and an inferior good and give an example of each.

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

If the marginal utility of an extra hamburger is 8 utils,the marginal utility of a soft drink is 5 utils,the price of a hamburger is $1,and the price of a soft drink is 50 cents,then the consumer can achieve equilibrium when:

The Lagrangian method of optimization results in a new variable, $\lambda$ ,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words, $\lambda$ expresses the: