QUESTION 14 1. TABLE B Budget = 10 Price =1 Price =2 Total Marginal Total Margin
ID: 1223273 • Letter: Q
Question
QUESTION 14
1. TABLE B
Budget = 10
Price
=1
Price
=2
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
2.
3. Now suppose the price of widgets goes back to $1 and the price of zercs rises to $2. The utility maiximizing combination of widgets and zercs is now widgets and zercs. (Enter a whole number, 0 - 10, no decimals, no words – just the number of widgets and zercs, respectively.)
1 point
QUESTION 15
1. The law of (three words) ______ ________ ________explains why an indifference curve is convex to the origin.
1 point
QUESTION 16
1. The budget constraint is negatively sloped because:
A.
Assuming that your tastes are constant, when you buy more of one good, you want less of another good.
B.
Assuming that your income is a given, when you buy more units of one product you can afford fewer units of the other.
C.
Neither of the above, the budget constraint is positively sloped.
D.
Neither of the above, the budget constraint is horizontal.
2 points
QUESTION 17
1. Refer to Graph. This consumer prefers combination D to combination C.
True
False
2 points
QUESTION 18
1. Refer to Graph If the price of good Y went up, the budget constraint would become flatter (i.e., less steep).
True
False
2 points
QUESTION 19
1. Refer to Graph This consumer is indifferent between combinations A, B & C.
True
False
2 points
QUESTION 20
1. Refer to Graph. Given his budget, relative prices of X & Y, and his preferences between X & Y, as indicated by this graph, the utility maximizing combination is C.
True
False
Budget = 10
Price
=1
Price
=2
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
Explanation / Answer
QUESTION 14
1. TABLE B
Budget = 10
Price
=1
Price
=2
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
-
0
0
0
-
1
500
500
500
1
100
100
50
2
900
400
400
2
190
90
45
3
1200
300
300
3
260
70
35
4
1380
180
180
4
300
60
30
5
1500
120
120
5
320
20
10
6
1580
80
80
6
330
10
5
7
1650
70
70
7
335
5
2.5
8
1700
50
50
8
338
3
1.5
9
1720
20
20
9
339
1
0.5
10
1730
10
10
10
340
1
0.5
Note: MU= MUn – MUn+1
3. Now suppose the price of widgets goes back to $1 and the price of zercs rises to $2. The utility maiximizing combination of widgets and zercs is now widgets and zercs.
The utility maximizing combination is one where
MUw/pw = MUz/Pz
At two combinations it is so:
The combination which exhausts the budget is the optimum combination
At A the money spent is: 8X1 + 1X2= 10 = buget of 10
At B however, the money required is 10X1 + 5X2= 20 > the budget
So the equilibrium combination is A= 8 widgets and 1 zerc
QUESTION 15
QUESTION 16
1. The budget constraint is negatively sloped because:
A.
Assuming that your tastes are constant, when you buy more of one good, you want less of another good.
B.
Assuming that your income is a given, when you buy more units of one product you can afford fewer units of the other. CORRECT ANSWER
C.
Neither of the above, the budget constraint is positively sloped.
D.
Neither of the above, the budget constraint is horizontal.
QUESTION 17
1. Refer to Graph. This consumer prefers combination D to combination C.
True
False- Because D is unaffordable being out of reach for the consumer. All combination above the budget line are unaffordable.
QUESTION 18
1. Refer to Graph If the price of good Y went up, the budget constraint would become flatter (i.e., less steep).
True- as he would now be able to buy less of Y if he spent all money on it and the inyetcept on Y-axis too would be lesser than now
False
QUESTION 19
1. Refer to Graph This consumer is indifferent between combinations A, B & C.
True
False- while he is indifferent between a and b being on the same indifference curve, he prefers c to both a and b as he is on a higher indifference curve depicting a higher consumer satisfaction.
2 points
QUESTION 20
1. Refer to Graph. Given his budget, relative prices of X & Y, and his preferences between X & Y, as indicated by this graph, the utility maximizing combination is C.
True- it is the highest attainable point where the combination of X and Y is such that MU/Px= MU/Py and budget is exhausted
False
Budget = 10
Price
=1
Price
=2
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
-
0
0
0
-
1
500
500
500
1
100
100
50
2
900
400
400
2
190
90
45
3
1200
300
300
3
260
70
35
4
1380
180
180
4
300
60
30
5
1500
120
120
5
320
20
10
6
1580
80
80
6
330
10
5
7
1650
70
70
7
335
5
2.5
8
1700
50
50
8
338
3
1.5
9
1720
20
20
9
339
1
0.5
10
1730
10
10
10
340
1
0.5
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