If both prices increases by 50%, A) budget constraint will be unchanged. B) slope of the budget constraint stay the same. C) slope of the budget constraint will decrease. D) budget constraint will shift outward in a parallel fashion. ANSWER B
Date: September 9th, 2020
Quotas, such as limiting the amount of residential water use during a drought, restricts an individual’s preference set and A) reduces utility because an individual cannot consume as much as they would without the quota. B) increases utility because quotas restrict output and raise profits for the water company. C) reduces utility because an individual […]
Date: September 9th, 2020
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
If the consumer’s income increases while the prices of both goods remain unchanged, what will happen to the budget line? A) The budget line rotates inward from the intercept on the horizontal axis. B) The budget line rotates outward from the intercept on the vertical axis. C) The budget line shifts inward without a change […]
Date: September 9th, 2020
The absolute value of the slope of an indifference curve equals the ratio of the marginal utilities of the two goods involved. Indicate whether the statement is true or false ANSWER True . The MRS can be represented as the ratio of both those quantities.
Date: September 9th, 2020
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 […]
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
