Question 1

If the utility function (U)between food (F)and clothing (C)can be represented as U =  ,the marginal utility of food equals
A)  .
B)  .
C) 1/2  .
D) 1/2  .

Accepted Answer

The answer of If the utility function (U)between food (F)and...

Question 2

If two bundles are on the same indifference curve,then
A) the consumer derives the same level of utility from each.
B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility.
C) no comparison can be made between the two bundles since utility cannot really be measured.
D) B and C.

Accepted Answer

If two bundles are on the same indifference curve, it implies that the consumer is indifferent between the two, and derives the same level of utility from each. Therefore, option A is the correct choice. Option B is incorrect because ordinal utility does not involve measurement; it only indicates preferences. And, option C is not correct as utility can be relatively measured through the method of marginal utility.

Question 3

Explain why most indifference curves are convex.

Accepted Answer

The answer of Explain why most indifference curves are convex....

Question 4

Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis,if the utility for the two goods "x" and "y" can be measured as U = y,then it can be concluded that
A) "x" and "y" are perfect complements.
B) "x" is a "bad".
C) the indifference curves on the x,y graph are upward sloping.
D) the indifference curves on the x,y graph are horizontal.

Accepted Answer

The utility function U = y indicates that the consumer's utility depends only on the quantity of good y, and not on the quantity of good x. This means that changes in the quantity of x do not affect the consumer's utility. Therefore, indifference curves, which represent combinations of x and y that give the consumer the same level of utility, will be horizontal lines. Horizontal indifference curves imply that the consumer's utility changes only with changes in y, not x.

Question 5

Utility is the set of numerical values that
A) yields an absolute level of pleasure from a bundle of goods.
B) reflects the relative ranking of various bundles of goods.
C) describes how much more a consumer prefers one bundle to another.
D) yields a cardinal ranking of bundles.

Accepted Answer

Utility reflects the relative ranking of various bundles of goods, rather than an absolute level of pleasure or a cardinal ranking of bundles. The concept of utility is used to explain how consumers make choices between different bundles of goods based on their preferences and the satisfaction or value they derive from them. Therefore, the best choice is B, which describes utility as a relative ranking of bundles.

Question 6

If Fred's marginal rate of substitution of salad for pizza equals 5,then
A) he would give up 5 pizzas to get the next salad.
B) he would give up 5 salads to get the next pizza.
C) he will eat five times as much pizza as salad.
D) he will eat five times as much salad as pizza.

Accepted Answer

Marginal rate of substitution (MRS) is the rate at which a consumer is willing to exchange one good for another while maintaining the same level of satisfaction. In this case, Fred's MRS of salad for pizza is 5, which means he is willing to give up 5 salads to get the next pizza slice. This is choice B.

Question 7

Draw the indifference curves for nickels and dimes.Would they ever have a non-constant slope? Explain.

Accepted Answer

The answer of Draw the indifference curves for nickels and...

Question 8

If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?
A) U = x + y
B) U = x ∗ y
C) U =  + 
D) Any of the above.

Accepted Answer

When two goods are perfect substitutes, the consumer is indifferent between the two goods and is willing to consume them in equal quantities. Therefore, the utility function for perfect substitutes will be a linear function where the two goods are added together. Thus, U = x + y represents the utility function for two perfect substitutes. Option B is not correct as it represents the utility function for perfect complements. Option C is not correct as it does not represent a linear function.

Question 9

Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis,if the utility for the two goods "x" and "y" can be measured as U = x,then it can be concluded that
A) "x" and "y" are perfect complements.
B) "y" is a "bad".
C) the indifference curves on the x,y graph are upward sloping.
D) the indifference curves on the x,y graph are vertical.

Accepted Answer

The utility function U = x indicates that utility depends solely on the quantity of good x, with no regard for good y. This means that the consumer's satisfaction increases with more of good x and is unaffected by changes in the quantity of good y. Therefore, indifference curves, which represent combinations of goods x and y that give the consumer the same level of utility, will be vertical lines. This is because moving along a vertical line changes the quantity of good y while keeping the quantity of good x constant, which does not affect the consumer's utility according to the given utility function.

Question 10

People view alcohol and marijuana as perfect substitutes.This means that
A) individuals will consume either alcohol or marijuana, but not both, regardless of price.
B) as the price of alcohol decreases, marijuana use decreases.
C) the marginal utility for alcohol and marijuana is constant.
D) Both B and C.

Accepted Answer

The answer of People view alcohol and marijuana as perfect...

Question 11

Some people view cosmetic surgery (c)and facials (f)as perfect substitutes as measured by the utility function U(c,f)= 5c + 10f.What is the marginal utility of cosmetic surgery?
A) MU = 5.
B) MU = 10.
C) MU = 15.
D) None of the above.

Accepted Answer

The marginal utility of cosmetic surgery is the coefficient of c in the utility function, which is 5.

Question 12

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then
A) he would give up 5 pizzas to get the next salad.
B) he would give up 5 salads to get the next pizza.
C) he will eat five times as much pizza as salad.
D) he will eat five times as much salad as pizza.

Accepted Answer

To determine the best choice, we use the principle of equimarginal utility which states that a consumer will maximize satisfaction when the last dollar spent on each product yields the same marginal utility. In this case, Fred should give up pizzas for salad until the marginal utility of each product is equal. Since his marginal utility for pizza is higher (10) than salad (2), he should give up more pizzas to get the next salad. Therefore, he should give up 5 salads to get the next pizza, making choice B the best answer.

Question 13

Clifford lives by the motto "Eat,drink and be merry today,for tomorrow doesn't matter." If today's consumption is measured on the horizontal axis and tomorrow's consumption is measured on the vertical axis,Clifford's indifference curves
A) are horizontal straight lines.
B) are vertical straight lines.
C) show decreasing utility as one moves upward.
D) cannot be determined from the information given.

Accepted Answer

Clifford's motto suggests he places no value on tomorrow's consumption, so his indifference curves would be vertical straight lines, indicating he is indifferent to changes in tomorrow's consumption.

Question 14

If the utility function (U)between food (F)and clothing (C)can be represented as U =  ,the marginal rate of substitution of clothing for food equals
A) -C/F.
B) -F/C.
C) -  .
D) -  .

Accepted Answer

The answer of If the utility function (U)between food (F)and...

Question 15

If the utility function (U)between food (F)and clothing (C)can be represented as U =  ,the marginal utility of food
A) is not positive.
B) does not diminish as food increases.
C) is not affected by the amount clothing.
D) increases as one obtains more clothing.

Accepted Answer

The answer of If the utility function (U)between food (F)and...

Question 16

Draw the indifference curves for rock concerts and food for each of the following:
(a)a typical 17-year-old
(b)a typical 75-year-old

Accepted Answer

The answer of Draw the indifference curves for rock concerts...

Question 17

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?
A) U = x - y
B) U = x/y
C) U = x
D) U = y

Accepted Answer

Clifford's motto suggests that he only cares about maximizing his utility in the present and does not consider the future. Therefore, his utility function only depends on the consumption of today, which is represented by "x." Option C, U = x, is the only choice that reflects this behavior.

Question 18

If Johnny likes homework (H)but hates exercise (E),which of the following might best represent his utility function for homework and exercise?
A) U = H + E
B) U = H/E
C) U =  + 
D) U =  ×

Accepted Answer

The answer of If Johnny likes homework (H)but hates exercise...

Question 19

Adrian's total utilities of two consumption bundles are 50 and 100.This implies that
A) the consumer prefers the first bundle.
B) the consumer prefers the second bundle.
C) the consumer likes the second bundle twice as much.
D) the consumer likes the first bundle twice as much.

Accepted Answer

The higher total utility (100 vs. 50) indicates that the consumer prefers the second bundle over the first.

Question 20

If the utility for two goods "x" and "y" is measured as U = x + y,then it can be concluded that
A) "x" and "y" are perfect substitutes.
B) "x" and "y" are perfect complements.
C) "x" and "y" are both bads.
D) the indifference curves on the x,y graph will be upward sloping.

Accepted Answer

The utility function U = x + y implies that "x" and "y" are perfect substitutes, since the marginal utility of one good can completely replace the marginal utility of the other good. As a result, the indifference curves will be linear and downward sloping, reflecting the trade-off between the two goods.

Quiz 4: Consumer Choice

If the utility function (U) between food (F) and clothing (C) can be represented as U = ,the marginal utility of food equals

If two bundles are on the same indifference curve,then

Explain why most indifference curves are convex.

Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis,if the utility for the two goods "x" and "y" can be measured as U = y,then it can be concluded that

Utility is the set of numerical values that

If Fred's marginal rate of substitution of salad for pizza equals 5,then

Draw the indifference curves for nickels and dimes.Would they ever have a non-constant slope? Explain.

If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?

Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis,if the utility for the two goods "x" and "y" can be measured as U = x,then it can be concluded that

People view alcohol and marijuana as perfect substitutes.This means that

Some people view cosmetic surgery (c) and facials (f) as perfect substitutes as measured by the utility function U(c,f) = 5c + 10f.What is the marginal utility of cosmetic surgery?

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then

Clifford lives by the motto "Eat,drink and be merry today,for tomorrow doesn't matter." If today's consumption is measured on the horizontal axis and tomorrow's consumption is measured on the vertical axis,Clifford's indifference curves

If the utility function (U) between food (F) and clothing (C) can be represented as U = ,the marginal rate of substitution of clothing for food equals

If the utility function (U) between food (F) and clothing (C) can be represented as U = ,the marginal utility of food

Draw the indifference curves for rock concerts and food for each of the following: (a)a typical 17-year-old (b)a typical 75-year-old

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

If Johnny likes homework (H) but hates exercise (E) ,which of the following might best represent his utility function for homework and exercise?

Adrian's total utilities of two consumption bundles are 50 and 100.This implies that

If the utility for two goods "x" and "y" is measured as U = x + y,then it can be concluded that