Questions 11-13 are based on the following information: Jennifer\'s budget line
ID: 1138462 • Letter: Q
Question
Questions 11-13 are based on the following information: Jennifer's budget line has intercepts of X-20 and Y-30, and Px-S10, 11. Jennifer's budget (income) is A. 100 B. 200 C. 250 D. 300 1S A. 10/3 B. 20/3 C. 25/3 D. 10 13. What is the slope of the budget line (Y on vertical)? .-1 14. Indifference curves a. may sometimes intersect b. are contour lines only of a linear utility function. c. are convex if the utility function is a Cobb-Douglas function. d. shift when prices change. 15. For an individual who consumes only two goods, x and y, the opportunity cost of consuming one more unit of x in terms of how much y must be given up is reflected by the individual's marginal rate of substitution the market prices of x and y. the slope of the individual's indifference curve. none of the above a. . 16. If bundles of goods A and B lie on the same indifference curve, one can assume the individual a. prefers bundle A to bundle B prefers bundle B to bundle A enjoys bundle A and B equally bundle A contains the same goods as bundle B. c. d.Explanation / Answer
Answer : 11) The correct option is B.
Given, X intercept = 20 ; Y intercept = 30; Px = $10.
To get one goog's intercept other good remain zero. This means that the whole budget amount should be spent on one good to get it's intercept.
Therefore,
X*Px + Y*Py = Budget (M)
=> 20*10 + 0 = Budget (M)
=> Budget (M) = 200
$200 is the budget of Jennifer.
12) The correct option is B.
We get M = $200 in question (11). Y intercept = 30 (given). As to get one good's intercept other remain zero, hence
X*Px + Y*Py = M
=> 0 + 30*Py = 200
=> Py = 200/30
=> Py = 20/3.
Therefore, Py = 20/3.
13) The correct option is A.
Slope of budget line = - Px / Py = - [10 / (20/3)] = - [10 × 3/20] = - 3/2.
Therefore, here the budget line slope is - 3/2.
14) The correct option is c.
Because for Cobb-Douglas utility function the slope of indifference curve is negative. For convex indifference curves the slope is negative. Hence indifference curves becomes convex for Cobb-Douglas utility function.
15) The correct option is d.
Because the slope of budget constraint shows the opportunity cost. The slope of budget constraint shows that if consumption of one more unit of good X increase then this decreases the consumption of good Y. This decreased consumption units of good Y is the opportunity cost of increased in consumption of good X.
16) The correct option is c.
Indifference curve shows the utility level of two good's consumption bundles. Any consumption bundle of same indifference curve gives same utility level. Here A and B are the bundles of two goods which are on the same indifference curve. Hence A and B both bundles are enjoyed by the individual.
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