If MRSx, y is constant at 5, then which of the following is false? wwwwwww poptions: The goods are perfect substitutes. The slope of the indifference curve is positive. For every unit of good x, the consumers are willing to give up 5 units of good y while remaining equally satisfied. The indifference curves are linear.
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- Draw indifference curves for two goods that are perfect complements and two goods thatare perfect substitutes. How do the indifference curves relate to utility functions?The utility-maximizing bundle of x and x2may, in some instances, be found at a point of tangency between the budget line and an indifference curve. In other instances, the utility-maximizing bundle will be found at a corner point-that is, where the quantity consumed of one good is zero. For which types of indifference curves shown below will the utility-maximizing bundle definitely be found at a corner point? Choose one or more: A. B. "C. D.Assume the demand for cherries is elastic and that the producer of cherries increases the price of cherries. As a result? A convex indifference curve implies what type of behavior? If a consumer always wishes to consume peanut butter and jam in fixed proportions, he treats these two goods as if they are? Assume PX= $3 and PY = $6 and income = $30. What is the relative price of an additional unit of good X in terms of the amount of good Y that has to be given up? Assume there are only two goods (X and Y). Assume the relative price of good X, is 2 of good Y. If income doubles, the price of X doubles and the price of Y doubles, what will be the relative price of good Y?
- Tom consumes only beer (B) and whisky (W). His utility function is U(B,W) = 2B + 5W, where B is the quantity of beer and W is the quantity of whisky. The price of beer is PB = 2, the price of whisky is PW = 5, and Tom’s income is M = 20 dollars. (a) Obtain the equation of Tom’s indifference curve for the utility U > 0 with beer in the horizontal axis and whisky in the vertical axis. What is the magnitude of the slope of Tom’s indifference curves? Explain the economic meaning of this magnitude. Are Tom’s indifference curves vertically parallel? Explain. (b) Obtain the equation of Tom’s budget line. What is the magnitude of the slope of the budget line? What is the economic interpretation of this magnitude? Does Tom consume beer at the current prices (indicated above)? Explain in detail. (c) Are Tom’s preferences quasi-linear? Are they homothetic? Justify each of your answers. (d) Tom’s brother, Jerry, has a utility function given by V (B, W ) = max{B, W }. (d.1) Are Jerry’s…Mariah consumes music downloads (M) and concert tickets (C). Her utility function is giveh by U = 0.5M? + 2C². a. Using calculus, what is the marginal utility of music downloads? b. Using calculus, what is the marginal utility of concert tickets? Write the equation for the MRSMC (i.e., the MRS of C for M; M is increasing, C is С. decreasing). d. Would the bundles of (M = 4 and C = 1) and (M = 2 and C = 2) be on the same %3D %3D %3D %3D indifference curve? How would you know? e. Calculate the MRSMC when M = 4 and C =1 and when M = 2 and C = 2. Explain why the %3D %3D values of MRSMC differ across these two bundles. f. Based on your answers above, are Mariah's indifference curves convex? Explain using the values calculated. er thisTom consumes only beer (B) and whisky (W). His utility function is U(B,W) = 2B + 5W, where B is the quantity of beer and W is the quantity of whisky. The price of beer is PB = 2, the price of whisky is PW = 5, and Tom’s income is M = 20 dollars. (a) Obtain the equation of Tom’s indifference curve for the utility U > 0 with beer in the horizontal axis and whisky in the vertical axis. What is the magnitude of the slope of Tom’s indifference curves? Explain the economic meaning of this magnitude. Are Tom’s indifference curves vertically parallel? Explain. (b) Obtain the equation of Tom’s budget line. What is the magnitude of the slope of the budget line? What is the economic interpretation of this magnitude? Does Tom consume beer at the current prices (indicated above)? Explain in detail. (c) Are Tom’s preferences quasi-linear? Are they homothetic? Justify each of your answers. (d) Tom’s brother, Jerry, has a utility function given by
- Does the quantity of the good on the y-axis affect the consumer's utility if the indifference curve is vertical?Bob views apples and oranges as perfect substitutes in his consumption, and MRS = 1 for all combinations of the two goods in his indifference map. Suppose the price of apples is $2 per pound, the price of oranges is $3 per pound, and Bob's budget is $30 per week. What is Bob's utility-maximizing choice between these two goods?Bob views apples and oranges as perfect substitutes in his consumption, and MRS = 1 for all combinations of the two goods in his indifference map. Suppose the price of apples is €2 per pound, the price of oranges is €3 per pound, and Bob's budget is $24 per week. What is Bob's utility maximizing choice between these two goods? A. 12 pounds of apples and no oranges B. 8 pounds of oranges and no apples C. 4 pounds of oranges and 6 pounds of apples D. 12 pounds of oranges and no apples Fiona uses her entire budget to purchase food and clothing. The price of food is €1 per unit and the price of clothing is €2 per unit. Fiona's marginal utility from food is 2 and her marginal utility from clothing is 6. She currently spends all her money on food and clothing. Her objective is to maximise her utility. Which of the following statements is correct? Fiona should buy more food and more clothing. A. B. C. D. E. Fiona is currently maximsing her utility and should continue to consume her current…
- Which of the following statements is not true?A) If tea and coffee are perfect substitutes in your consumption, then you will only consumethe good with the lowest price.B) If tea and coffee are perfect substitutes in your consumption, then you will consume somequantity of both goods if the prices of tea and coffee are equal.C) You view coffee and donuts as perfect complements, and the corners of your indifferencecurves follow the 45-degree line. As long as your income and the prices of coffee and donutsare positive, you will not choose a corner solution.D) You view coffee and donuts as perfect complements, and the corners of your indifferencecurves follow the 45-degree line. You will consume coffee and donuts at some point alongthe 45-degree line where your MRS equals the price ratio for the two goods.When the price of one'good Increases and the price of the other goot and income are held constant, the budget line Select one: rotates so that the intercept is farther from the origin on the axis representing the good that has experienced an increase in price shifts parallel to the original budget line so that the new budget line is closer to the origin b. rotates so that the intercept is closer to the origin on the axis representing the good that has experienced an increase in price C. d shifts parallel to the original budget line so that the new budget line is farther from the origin CLEAR MY CHOICEJerry spends his entire budget on bread and gasoline. His preferences are complete, transitive, monotonic, and convex. For Jerry, bread is an inferior good that follows the law of demand. Moreover, his cross-price elasticity of demand for gasoline with respect to the price of bread is negative. Suppose the price of bread increases, all else constant. a. Create a chart to show the total, income, and substitution effects on bread and gasoline of the increase in the price of bread. b. Use budget lines and indifference curves to graphically illustrate the three effects. Be sure to label each effect on your graph (or through the chart from part a) and plot bread on the x-axis and gasoline on the y-axis
