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Suppose Paul's utility depends on the amount of time spent playing on the Internet (x)and the amount of time playing video games (y),and his utility function is U(x,y)= 3x⁰.² y⁰.⁸ He has 15 hours of free time to spend on these two activities each week,and his goal is to maximize his utility. a.Set up the Lagrangian for this constrained maximization problem. b.What are the necessary conditions for the optimum from the Lagrangian? c.What is the optimal amount of time spent surfing the Internet and playing video games each week?

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a.L = 3x⁰.² y⁰.⁸ + λ[15 - x - y]
b.The o...

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All of the following utility functions rank bundles (q₁,q₂) in the same order except for which one?


A) q₁1/2 + q₂1/2
B) q₁1/2q₂1/2
C) ln(q₁) + ln(q₂)
D) All of the above rank bundles (q1,q2) in the same order

E) A) and B)
F) A) and C)

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Blutarsky is throwing a party at his Fraternity and is trying to choose what booze to buy.A bottle of vodka has four times the alcohol as a six-pack of beer.If Blutarsky only cares about the total amount of alcohol in his basket,what is his marginal rate of substitution of bottles of vodka for six-packs of beer? Devise a utility function to represent these preferences.

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Blutarsky is willing to trade ...

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If two bundles are on the same indifference curve,then


A) the consumer derives the same level of utility from each.
B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility.
C) no comparison can be made between the two bundles since utility cannot really be measured.
D) the MRS between the two bundles equals one.

E) B) and D)
F) None of the above

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-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e, A) his MRS is less than the trade-off offered by the market. B) he is willing to give up more burger than he has to, given market prices. C) he is not maximizing his utility. D) All of the above. -Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e,


A) his MRS is less than the trade-off offered by the market.
B) he is willing to give up more burger than he has to, given market prices.
C) he is not maximizing his utility.
D) All of the above.

E) A) and D)
F) A) and C)

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If the utility function (U) between food (F) and clothing (C) can be represented as U = If the utility function (U) between food (F) and clothing (C) can be represented as U = ,holding the consumption of clothing fixed,the utility will A) increase at an increasing speed when more food is consumed. B) increase at an decreasing speed when more food is consumed. C) increase at an constant speed when more food is consumed. D) remain the same. ,holding the consumption of clothing fixed,the utility will


A) increase at an increasing speed when more food is consumed.
B) increase at an decreasing speed when more food is consumed.
C) increase at an constant speed when more food is consumed.
D) remain the same.

E) B) and C)
F) None of the above

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A consumer's budget line for food (F) and shelter (S) is represented as F = 250 - 5S.If this consumer's income increases by $10 and consumption of shelter remains unchanged,how many more units of shelter can be purchased at most?


A) 10
B) 20
C) 50
D) 2

E) C) and D)
F) A) and D)

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Which of the following is an example of the endowment effect?


A) A consumer places a higher value on a good currently owned as compared to a good they are considering purchasing.
B) A consumer uses a portion of income in order to provide income to future generations.
C) As a consumer's income increases, they increase consumption of most goods.
D) Consumers will tend to value objects the same for buying and selling.

E) None of the above
F) A) and C)

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-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.Which of the following bundles are in Max's opportunity set? A) a, b, c B) b, d, e C) a, b, d D) None of the above. -Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.Which of the following bundles are in Max's opportunity set?


A) a, b, c
B) b, d, e
C) a, b, d
D) None of the above.

E) B) and D)
F) A) and B)

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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.

E) All of the above
F) C) and D)

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Lisa views pizzas and burritos as goods.If she prefers a bundle of four burritos and four pizzas to a bundle of four burritos and five pizzas,which property of consumer preference is violated? What change in the assumptions could lead a rational consumer to prefer the first bundle?

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The property of more-is-better...

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The principle that "More is better" results in indifference curves


A) sloping down.
B) not intersecting.
C) reflecting greater preferences the further they are from the origin.
D) All of the above.

E) B) and D)
F) A) and B)

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If the utility function (U) between food (F) and clothing (C) can be represented as U = If the utility function (U) between food (F) and clothing (C) can be represented as U = ,the marginal rate of substitution of clothing for food equals A) -C/F. B) -F/C. C) - D) - ,the marginal rate of substitution of clothing for food equals


A) -C/F.
B) -F/C.
C) - If the utility function (U) between food (F) and clothing (C) can be represented as U = ,the marginal rate of substitution of clothing for food equals A) -C/F. B) -F/C. C) - D) -
D) - If the utility function (U) between food (F) and clothing (C) can be represented as U = ,the marginal rate of substitution of clothing for food equals A) -C/F. B) -F/C. C) - D) -

E) None of the above
F) All of the above

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-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What is the price of chicken? A) $0.80/lb B) $1.25/lb C) $4/lb D) $5/lb -Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What is the price of chicken?


A) $0.80/lb
B) $1.25/lb
C) $4/lb
D) $5/lb

E) A) and B)
F) None of the above

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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.

E) A) and D)
F) None of the above

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Joe subscribes to an Internet provider that charges $2 per hour.He has $100 per month to spend and is at equilibrium by buying 10 hours of Internet access and $80 worth of other goods.Draw the indifference curve and budget line.If the company switches to a $20 monthly fee for unlimited Internet access,is Joe better off?

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blured image See the above figure.Under the new plan...

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-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.If the price of burger increases, A) Max will buy less burger and more chicken. B) Max will buy less burger and the same quantity of chicken. C) Max will buy less of both meats. D) More information is needed to answer the question. -Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.If the price of burger increases,


A) Max will buy less burger and more chicken.
B) Max will buy less burger and the same quantity of chicken.
C) Max will buy less of both meats.
D) More information is needed to answer the question.

E) A) and B)
F) C) and D)

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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."
D) All of the above.

E) B) and C)
F) All of the above

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Lisa consumes only pizzas and burritos.In equilibrium,her marginal utility of pizza is 20 and her marginal utility of a burrito is 10.The price of a pizza is $4.What is the price of a burrito?

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In equilibrium,the ratio of the marginal...

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Convexity of indifference curves imply that consumers are willing to


A) give up more "y" to get an extra "x" the more "x" they have.
B) give up more "y" to get an extra "x" the less "x" they have.
C) settle for less of both "x" and "y".
D) acquire more "x" only if they do not have to give up any "y".

E) A) and B)
F) A) and D)

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