By selecting a bundle where MRS = MRT, the consumer is A) achieving a corner solution. B) reaching the highest possible indifference curve she can afford. C) not behaving in an optimal way. D) All of the above. ANSWER B
Date: September 9th, 2020
Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS of tea for coffee equals 2. If coffee and tea sell for the same price, Johnny will A) spend all $30 on tea. B) spend all $30 on coffee. C) […]
Date: September 9th, 2020
By selecting a bundle where MRS = MRT, the consumer is saying A) “I value my last unit of each good equally.” B) “I am willing to trade one good for the other at the same rate that I am required to do so.” C) “I will equate the amounts spent on all goods consumed.” […]
Date: September 9th, 2020
If both prices decreases by 50%, A) budget constraint will be unchanged. B) slope of the budget constraint will increase. C) slope of the budget constraint will decrease. D) budget constraint will shift outward in a parallel fashion. ANSWER D
Date: September 9th, 2020
If the utility function (U) between bananas (B) and jam (J) can be represented as U(B,J) = 3ln(B)+4ln(J), what is the marginal rate of substitution (MRS) between bananas and jam? A) 4B. B) -3J/(4B). C) 4/(3J). D) 3B/J. ANSWER B
Date: September 9th, 2020
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. ANSWER A
Date: September 9th, 2020
If the prices of both goods and income increase by the same percentage, what will happen to the budget line? A) The budget line rotates inward from the intercept on the axis of the good that did not change in price. B) The budget line rotates outward from the intercept on the axis of the […]
Date: September 9th, 2020
If the price of one good increases while the price of the other good and the consumer’s income remain unchanged, what will happen to the budget line? A) The budget line rotates inward from the intercept on the axis of the good that did not change in price. B) The budget line rotates outward from […]
Date: September 9th, 2020
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. ANSWER D
Date: September 9th, 2020
Individuals derive utility from picnics, p, and kayak trips, k. Assuming that an individual’s utility is U(p,k) = k0.5p0.5 and income is $100, what is the marginal rate of substitution (MRS) between picnics and kayak trips? A) MRS = 1. B) MRS = -1. C) MRS = -1/2 D) There is no substitution because picnics […]
Date: September 9th, 2020
