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 a consumer’s budget line for food (F) and shelter (S) is represented as F = 250 – 5S, we know that A) the consumer’s income is 250. B) the price of shelter is 5. C) the price of shelter is 5 times the price of food. D) All of the above. ANSWER C […]
Date: September 9th, 2020
Suppose a taco costs $4 and a burrito costs $2. Moreover, this Mexican restaurant has a special deal. After you’ve bought 6 burritos, you can buy each extra burrito for $1.50. Assume that tacos are on the vertical axis and burritos on the horizontal axis. What is the marginal rate of transformation (MRT) when 8 […]
Date: September 9th, 2020
The consumer is in equilibrium when A) MRT = MRS. B) Px/Py=MUx/MUy C) the budget line is tangent to the indifference curve at the bundle chosen. D) All of the above. ANSWER D
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
The marginal rate of transformation of y for x represents A) the slope of the budget constraint. B) the rate at which the consumer must give up y to get one more x. C) – / . D) All of the above. ANSWER D
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
