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A:
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- Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.Question 1 Considering a consumer's indifference curves, which statement is true? O utility is the same along any given indifference curve O indifference curves can cross, but only at the axes O a consumer is indifferent between any bundles on an indifference curve O both a and care correct O all of the above Question 2 Consider a utility function given by U = X2 x2. what is the marginal utility of good 2? O MU; = x^ x;2 O MU; = X2 X;2 -1/2 O MU = O MU: = X x2 O MU: = xA consumer’s preferences between goods x and y are representedby the utility function u(x, y) = 2min{x, y}+10. Suppose this consumer hasincome of $16, the price of good x is $3 and the price of good y is $1. Suppose the price of good x increases to $7 while the price of good y andthe consumer’s income stay constant. Calculate the magnitudes of the compensating and the equivalent variations. Explain what each measures.
- Vinny consumes tacos and chicken wings. To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings. This means that O Vinny's indifference curve for tacos and chicken wings must have a negative slope. Vinny's marginal utility from each good must be constant along his convex indifference curves for tacos and chicken wings. O the prices Vinny pays for tacos and chicken wings are always the same. O Vinny's marginal rate of substitution must be constant along his indifference curves for tacos and chicken wings.QUESTION 4 Diminishing marginal utility provides an explanation for the slope of the demand curve. O True O False QUESTION 5 Diminishing marginal utility provides a theory of consumer behavior. O True O False QUESTION 6 If total utility is increasing, marginal utility must be increasing. O True O FalseSuppose that the following utility function is given U(X,Y) = -X-ywhich of the following is correct? X is a good and Y is a bad and indifference curve is negatively sloped. Both X and Y are goods and indifference curve is negatively sloped. Both X and Y are bads and indifference curve is negatively sloped, OYisa good and X is a bad and indifference.curve is positively sloped.
- I like drinking Smirnoff and Stoli Vodka, but I really only careabout the total amount of alcohol I get out of it. They areperfect substitutes. Smirnoff is sold in liter bottles that are100 proof (that’s 50% alcohol). Stoli is sold in liter bottlesthat are 80 proof (40% alcohol). What is my utility functionfor bundles of these two vodkas? What do my indifferencecurves look like?Suppose the price of Xylophones is $3 and the price of Yoyos is $7. Robin's marginal utility of Xylophones is 15 and the marginal utility of Yoyos is 21. In order to maximize utility, Robin should O Buy fewer Xylophones and fewer Yoyos O Buy fewer Xylophones and more Yoyos Buy fewer Yoyos and more Xylophones Continue to buy the same number of Xylophones and Yoyos.Evelyn loves to eat chocolate. However, every piece of chocolate that Evelyn eats provides her with less total utility. What can we conclude about Evelyn's utility from this information? O Her marginal utility is negative. Her marginal utility is constant. O Her marginal utility is diminishing. Her marginal utility is increasing.
- Total utility O diminished as the quantity of a good increases increases as long as more goods are acquired increases as long as marginal utility increases O increases as long as marginal utility is positive diminishes as consumption of some good risesQUESTION 1 Goods 1 and 2 are perfect complements in Linda's preferences. Suppose that after a change in prices and income, Linda has revised her optimal choice ending up with the same level of utility as before. The price of good 1 has increased proportionally more than the price of good 2 O a. After the change, Linda consumes the same quantity of both goods as before O b. After the change, Linda consumes more of good 1 and less of good 2 OC After the change, Linda consumes more of good 2 and less of good 1 Od. After the change, Linda consumes more of good 1, and she may consume a larger, smaller or equal amount of good 2 than before Oe. None of the proposed answers is correctAs more of a good is consumed in a given period, its... total utility remains constant total utility decreases then increases O marginal utility decreases O marginal utility increases