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
Measuring “y” on the vertical axis and “x” on the horizontal axis, convexity of indifference curves implies that the MRS of “y” for “x” A) is decreasing as “x” increases. B) is increasing as “x” increases. C) is constant as “x” increases. D) cannot be calculated for large levels of “x”. ANSWER A
Date: September 9th, 2020
Lisa views pizzas and burritos as goods. If she prefers a bundle of 4 burritos and 4 pizzas to a bundle of 4 burritos and 5 pizzas, which property of consumer preference is violated? What change in the assumptions could lead a rational consumer to prefer the first bundle? What will be an ideal response? […]
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
Diminishing marginal rate of substitution can be seen when indifference curves A) cross. B) are convex. C) are downward sloping. D) become flatter as we move down and to the right. ANSWER D
Date: September 9th, 2020
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. ANSWER B
Date: September 9th, 2020
If two goods are perfect substitutes, then the indifference curves for those two goods would be A) upward sloping and concave to the origin. B) downward sloping and convex to the origin. C) downward sloping and straight. D) L-shaped. ANSWER C
Date: September 9th, 2020
