Question 1

A consumer has the utility function U(x, y)= min{x, 2y}.If the price of good x is zero and the price of good y is p, then the consumer's demand function for good y is m/2p.

Accepted Answer

A) True 
 B)False

Question 2

Casper's utility function is 3x + y, where x is his consumption of cocoa and y is his consumption of cheese.If the total cost of x units of cocoa is x2, the price of cheese is $10, and Casper's income is $260, how many units of cocoa will he consume?

Accepted Answer

A) 12 
B) 15 
C) 29 
D) 14 
E) 30 
A) 12 
B) 15 
C) 29 
D) 14 
E) 30

Question 3

Let w be the number of whips and j the number of leather jackets.If Kinko's utility function is U(x, y)= min{7w, 4w + 12j}, then if the price of whips is $20 and the price of leather jackets is $40, Kinko will demand

Accepted Answer

A) 4 times as many whips as leather jackets. 
B) 6 times as many whips as leather jackets. 
C) 3 times as many whips as leather jackets. 
D) 5 times as many leather jackets as whips. 
E) only leather jackets. 
A) 4 times as many whips as leather jackets. 
B) 6 times as many whips as leather jackets. 
C) 3 times as many whips as leather jackets. 
D) 5 times as many leather jackets as whips. 
E) only leather jackets.

Question 4

If Charlie's utility function is X 5A XB, the price of apples is pA, the price of bananas is pB, and his income is m, then Charlie's demand for apples will be

Accepted Answer

A) 0.83m/pA. 
B) m/2pA. 
C) m/(pA + p
B) . 
D)  0./20pS1U1B1AS1U1B0m. 
E)  1.20pB m/pA. 
A) 0.83m/pA. 
B) m/2pA. 
C) m/(pA + p
B) . 
D)  0./20pS1U1B1AS1U1B0m. 
E)  1.20pB m/pA.

Question 5

Regardless of his income and regardless of prices, Smedley always spends 25% of his income on housing, 10% on clothing, 30% on food, 15% on transportation, and 20% on recreation.This behavior is consistent with which of the following?

Accepted Answer

A) All goods are perfect substitutes. 
B) Smedley's demands for commodities do not change when their prices change. 
C) Smedley consumes all goods in fixed proportions. 
D) Smedley has a Cobb-Douglas utility function. 
E) More than one of the above. 
A) All goods are perfect substitutes. 
B) Smedley's demands for commodities do not change when their prices change. 
C) Smedley consumes all goods in fixed proportions. 
D) Smedley has a Cobb-Douglas utility function. 
E) More than one of the above.

Question 6

Wanda Lott's utility function is U(x, y)= max{x, y}.Draw some of Wanda's indifference curves.If the price of x is 1, the price of y is p, and her income is m, how much of y does Wanda demand?

Accepted Answer

Wanda's indifference curves are rectangl

Question 7

Walt consumes strawberries and cream but only in the fixed ratio of three boxes of strawberries to two cartons of cream.At any other ratio, the excess goods are totally useless to him.The cost of a box of strawberries is $10 and the cost of a carton of cream is $10.Walt's income is $200.

Accepted Answer

A) Walt demands 10 cartons of cream. 
B) Walt demands 10 boxes of strawberries. 
C) Walt considers strawberries and cartons of cream to be perfect substitutes. 
D) Walt demands 12 boxes of strawberries. 
E) None of the above. 
A) Walt demands 10 cartons of cream. 
B) Walt demands 10 boxes of strawberries. 
C) Walt considers strawberries and cartons of cream to be perfect substitutes. 
D) Walt demands 12 boxes of strawberries. 
E) None of the above.

Question 8

Alfredo lives on apples and bananas only.His utility function is U(a, b)= min{a + b, 2b}.He maximizes his utility subject to his budget constraint and consumes the bundle (a, b)= (4, 4).

Accepted Answer

A) pa > pb. 
B) pa is less than or equal to pb. 
C) pa = pb. 
D) pa =  2pb. 
E) None of the above. 
A) pa > pb. 
B) pa is less than or equal to pb. 
C) pa = pb. 
D) pa =  2pb. 
E) None of the above.

Question 9

Ambrose's brother Bartholomew has a utility function U(x1, x2)= 40x1/21 + x2, where x1 is his consumption of nuts and x2 is his consumption of berries.His income is $115, the price of nuts is $5, and the price of berries is $1.How many units of berries will Bartholomew demand?

Accepted Answer

A) 35 
B) 16 
C) 70 
D) 22 
E) There is not enough information to determine the answer. 
A) 35 
B) 16 
C) 70 
D) 22 
E) There is not enough information to determine the answer.

Question 10

Miss Muffet insists on consuming 2 units of whey per 1 unit of curds.If the price of curds is $5 and the price of whey is $3, then if Miss Muffet's income is m, her demand for curds will be

Accepted Answer

A) m/5. 
B) 3m/5. 
C) 5c + 3w = m. 
D) 5m. 
E) m/11. 
A) m/5. 
B) 3m/5. 
C) 5c + 3w = m. 
D) 5m. 
E) m/11.

Question 11

When other variables are held fixed, the demand for a Giffen good rises when income increases.

Accepted Answer

A) True 
 B)False

Question 12

If the price elasticity of demand for a good is -1, then doubling the price of that good will leave total expenditures on that good unchanged.

Accepted Answer

A) True 
 B)False

Question 13

Daisy received a tape recorder as a birthday gift and is not able to return it.Her utility function is U(x, y, z)= x + z1/2 f(y), where z is the number of tapes she buys, y is the number of tape recorders she has, and x is the amount of money she has left to spend.f(y)= 0 if y < 1 and f(y)= 24 if y is 1 or greater.The price of tapes is $4 and she can easily afford to buy dozens of tapes.How many tapes will she buy?

Accepted Answer

A) 9 
B) 11 
C) 7 
D) 13 
E) We need to know the price of tape recorders to solve this problem. 
A) 9 
B) 11 
C) 7 
D) 13 
E) We need to know the price of tape recorders to solve this problem.

Question 14

Martha has the utility function U = min{4x, 2y}.Write down her demand function for x as a function of the variables m, px, and py, where m is income, px is the price of x, and py is the price of y.

Accepted Answer

x = m/(p<s

Question 15

Mickey is considering buying a tape recorder.His utility function is U(x, y, z)= x + f(y)z.5, where x is the amount of money he spends on other goods, y is the number of tape recorders he buys, and z is the number of tapes he buys.Let f (y)= 0 if y < 1 and f (y)= 8 if y is greater than or equal to 1.The price of tape recorders is $20, the price of tapes is $1, and Mickey can easily afford to buy a tape recorder and several tapes.Will he buy a tape recorder?

Accepted Answer

A) He should buy a tape recorder at these prices, but if tapes were any more expensive, it would not pay to buy one. 
B) He should not buy a tape recorder. 
C) He is indifferent to buying a tape recorder or not. 
D) Even if the price of tapes doubled, he should still buy a tape recorder. 
E) There is not enough information here for us to be able to tell. 
A) He should buy a tape recorder at these prices, but if tapes were any more expensive, it would not pay to buy one. 
B) He should not buy a tape recorder. 
C) He is indifferent to buying a tape recorder or not. 
D) Even if the price of tapes doubled, he should still buy a tape recorder. 
E) There is not enough information here for us to be able to tell.

Question 16

Madonna buys only two goods.Her utility function is Cobb-Douglas.Her demand functions have which of the following properties?

Accepted Answer

A) Her demand for one of the two goods does not depend on income. 
B) Her demand for neither good depends on income. 
C) Her demand for each of the goods depends on income and on the prices of both goods. 
D) Her demand for each of the two goods depends only on her income and on the price of that good itself. 
E) One of the goods is an inferior good and the other is a normal good. 
A) Her demand for one of the two goods does not depend on income. 
B) Her demand for neither good depends on income. 
C) Her demand for each of the goods depends on income and on the prices of both goods. 
D) Her demand for each of the two goods depends only on her income and on the price of that good itself. 
E) One of the goods is an inferior good and the other is a normal good.

Question 17

Will Feckless unexpectedly inherits $10,000 from a rich uncle.He is observed to consume fewer hamburgers than he used to.

Accepted Answer

A) Hamburgers are a Giffen good for Will. 
B) Hamburgers are a normal good for Will. 
C) Will's Engel curve for hamburgers is vertical. 
D) Will's Engel curve for hamburgers is horizontal. 
E) Will's preferences are not homothetic. 
A) Hamburgers are a Giffen good for Will. 
B) Hamburgers are a normal good for Will. 
C) Will's Engel curve for hamburgers is vertical. 
D) Will's Engel curve for hamburgers is horizontal. 
E) Will's preferences are not homothetic.

Question 18

Clarissa's utility function is U(r, z)= z + 160r - r2, where r is the number of rose plants she has in her garden and z is the number of zinnias.She has 250 square feet to allocate to roses and zinnias.Roses each take up 4 square feet and zinnias each take up 1 square foot.She gets the plants for free from a generous friend.If she acquires another 100 square feet of land for her garden and her utility function remains unchanged, she will plant

Accepted Answer

A) 100 more zinnias and no more roses. 
B) 25 more roses and no more zinnias. 
C) max(1, min(99, zdem + 100))more zinnias and some more roses. 
D) 20 more roses and 20 more zinnias. 
E) None of the above. 
A) 100 more zinnias and no more roses. 
B) 25 more roses and no more zinnias. 
C) max(1, min(99, zdem + 100))more zinnias and some more roses. 
D) 20 more roses and 20 more zinnias. 
E) None of the above.

Question 19

Katie Kwasi's utility function is U(x1, x2)= 5(ln x1)+ x2.Given her current income and the current relative prices, she consumes 10 units of x1 and 15 units of x2.If her income doubles, while prices stay constant, how many units of x1 will she consume after the change in income?

Accepted Answer

A) 10 
B) 15 
C) 5 
D) 20 
E) There is not enough information to determine how many. 
A) 10 
B) 15 
C) 5 
D) 20 
E) There is not enough information to determine how many.

Question 20

If Charlie's utility function were X 6A XB and if apples cost 40 cents each and bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever

Accepted Answer

A) 6XB = 4XA. 
B) XA = 6XB. 
C) XB = XA. 
D) XB = 6XA. 
E) 40XA + 10XB = M. 
A) 6XB = 4XA. 
B) XA = 6XB. 
C) XB = XA. 
D) XB = 6XA. 
E) 40XA + 10XB = M.

Exam 5: Demand-Part A

A consumer has the utility function U(x, y)= min{x, 2y}.If the price of good x is zero and the price of good y is p, then the consumer's demand function for good y is m/2p.

Casper's utility function is 3x + y, where x is his consumption of cocoa and y is his consumption of cheese.If the total cost of x units of cocoa is x2, the price of cheese is $10, and Casper's income is $260, how many units of cocoa will he consume?

Let w be the number of whips and j the number of leather jackets.If Kinko's utility function is U(x, y)= min{7w, 4w + 12j}, then if the price of whips is $20 and the price of leather jackets is $40, Kinko will demand

If Charlie's utility function is X 5A XB, the price of apples is pA, the price of bananas is pB, and his income is m, then Charlie's demand for apples will be

Regardless of his income and regardless of prices, Smedley always spends 25% of his income on housing, 10% on clothing, 30% on food, 15% on transportation, and 20% on recreation.This behavior is consistent with which of the following?

Wanda Lott's utility function is U(x, y)= max{x, y}.Draw some of Wanda's indifference curves.If the price of x is 1, the price of y is p, and her income is m, how much of y does Wanda demand?

Walt consumes strawberries and cream but only in the fixed ratio of three boxes of strawberries to two cartons of cream.At any other ratio, the excess goods are totally useless to him.The cost of a box of strawberries is $10 and the cost of a carton of cream is $10.Walt's income is $200.

Alfredo lives on apples and bananas only.His utility function is U(a, b)= min{a + b, 2b}.He maximizes his utility subject to his budget constraint and consumes the bundle (a, b)= (4, 4).

Ambrose's brother Bartholomew has a utility function U(x1, x2)= 40x1/21 + x2, where x1 is his consumption of nuts and x2 is his consumption of berries.His income is $115, the price of nuts is $5, and the price of berries is $1.How many units of berries will Bartholomew demand?

Miss Muffet insists on consuming 2 units of whey per 1 unit of curds.If the price of curds is $5 and the price of whey is $3, then if Miss Muffet's income is m, her demand for curds will be

When other variables are held fixed, the demand for a Giffen good rises when income increases.

If the price elasticity of demand for a good is -1, then doubling the price of that good will leave total expenditures on that good unchanged.

Martha has the utility function U = min{4x, 2y}.Write down her demand function for x as a function of the variables m, px, and py, where m is income, px is the price of x, and py is the price of y.

Madonna buys only two goods.Her utility function is Cobb-Douglas.Her demand functions have which of the following properties?

Will Feckless unexpectedly inherits $10,000 from a rich uncle.He is observed to consume fewer hamburgers than he used to.

Katie Kwasi's utility function is U(x1, x2)= 5(ln x1)+ x2.Given her current income and the current relative prices, she consumes 10 units of x1 and 15 units of x2.If her income doubles, while prices stay constant, how many units of x1 will she consume after the change in income?

If Charlie's utility function were X 6A XB and if apples cost 40 cents each and bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Casper's utility function is 3x + y, where x is his consumption of cocoa and y is his consumption of cheese.If the total cost of x units of cocoa is x², the price of cheese is $10, and Casper's income is $260, how many units of cocoa will he consume?

If Charlie's utility function is X ⁵_AX_B, the price of apples is p_A, the price of bananas is p_B, and his income is m, then Charlie's demand for apples will be

Ambrose's brother Bartholomew has a utility function U(x₁, x₂)= 40x^1/2₁ + x₂, where x₁ is his consumption of nuts and x₂ is his consumption of berries.His income is $115, the price of nuts is $5, and the price of berries is $1.How many units of berries will Bartholomew demand?

Martha has the utility function U = min{4x, 2y}.Write down her demand function for x as a function of the variables m, p_x, and p_y, where m is income, p_x is the price of x, and p_y is the price of y.

Katie Kwasi's utility function is U(x₁, x₂)= 5(ln x₁)+ x₂.Given her current income and the current relative prices, she consumes 10 units of x₁ and 15 units of x₂.If her income doubles, while prices stay constant, how many units of x₁ will she consume after the change in income?

If Charlie's utility function were X ⁶_AX_B and if apples cost 40 cents each and bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever