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Consumer

This document contains 11 multiple choice or true/false questions related to consumer choice theory and utility maximization. The questions cover topics such as calculating amounts needed to maintain utility given changes in consumption, using budget constraints and indifference curves to determine consumer equilibrium, and applying marginal rates of substitution and prices to determine optimal consumption bundles.

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Lucian Nuta
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246 views1 page

Consumer

This document contains 11 multiple choice or true/false questions related to consumer choice theory and utility maximization. The questions cover topics such as calculating amounts needed to maintain utility given changes in consumption, using budget constraints and indifference curves to determine consumer equilibrium, and applying marginal rates of substitution and prices to determine optimal consumption bundles.

Uploaded by

Lucian Nuta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. Lily has the utility function U(x, y) = 4x + y. She has 6 units of good x and 13 units of good y.

If her
consumption of good x is lowered to 1, how many units of y must she have in order to be exactly as well as
before?: a) 57 units of good y; b) 21 units of good y; c) 33 units of good y; d) 30 units of good y; e) 50
units of good y.
2. Anne consumes at her lunch only tomatoes and apricots. Her utility function is: U (x, y) = x 4*y5 where x is
the number of tomatoes and y the number of apricots consumed. Anne's income is 72 $ and the price of
tomatoes and apricots are 2 and, respectively, 3. How many tomatoes will she consume?: a) 15; b) 48; c)
18; d) 16; e) 20.
3. Anca consumes apples and bananas and is supposed to be in the consumer equilibrium. The marginal utility
of the last apple is 10 and the marginal utility of the last banana is 5. If the price of an apple is 0.50 m.u.,
then the price of a banana will be: a) 0,05; b) 0,10; c) 0,25; d) 0,50; e) 1,00.
4. Tom’s utility function is: U(x, y) = y + 4*x1/2. He can have 25 units of x and 12 units of y. If his
consumption of x is reduced to 0, how much y would he need in order to be exactly as well off as before?:
a) 48 units; b) 37units; c) 32 units; d) 50 units; e) 15 units.
5. Alexandra's utility function is: U(x, y) = y + 5*X1/2. She has one unit of x and two units of y. If her
consumption of x is reduced to zero, how much y must she have in order to be exactly as well off as before?:
a) 14 units; b) 9 units; c) 11units; d) 7 units; e) 15 units.
6. True, False, Uncertain? Dursley’s marginal utility of a bottle of vodka is 10 and his marginal utility of a
basket of apples is 5. Assuming that the price of vodka is 20 and the price of apples is 8, Dursley should buy
more apples and less vodka.
7. Ron has a monthly income of £150 which he allocates among his two favorite meals: fish and chips (f ) and
curry (c).
(a). Suppose that a plate of fish and chips costs £5 and a bowl of curry costs £3. Draw Ron’s budget constraint.
Label the the axes of your graph and the intercepts of the budget line.
(b). Suppose that Ron’s utility function is given by the equation u(f, c) = 3f + 2c, where f is the quantity of fish
and chips and c is the quantity of curry. How many plates of fish and chips and how many bowls of curry should
he buy each month to maximize his utility? Explain.
(c). A shortage of cod fish raises the price of a fish and chips meal to £6. Now how many plates of fish and chips
and how many bowls of curry should Ron purchase (assuming his utility is still given by the function in part
(b))? Explain.
8. Kristoff spends all of his weekly income on two goods – carrots and whiskey. In the past when the price of
carrots was pc = 4 and the price of whiskey was pw = 8, he bought 20 carrots (c = 20) and 6 bottles of whiskey
(w = 6). His weekly income ever changes, but this week he just learned that the price of carrots has dropped to
p0= 2 and the price of whiskey has risen to p0=11 Explain how this price change (i) impacts Kristoff’s choice
of carrots and whiskey and (ii) whether or not the price change makes Kristoff worse off, better off or leaves
Kristoff’s utility unchanged.
9. The price of ale is $15 and the price of bread is $10. Primrose spends all of her income buying 2 pints of ale
and 6 loaves of bread each week (and nothing else). (For simplicity, assume that these goods are finely
divisible.)
Determine Prim’s weekly income and draw her budget line indicating the values of the intercepts on your
graph and the slope of the budget line, placing ale (A) on the horizontal axis and bread
(B) on the vertical axis. Also draw an indifference curve which is consistent with Primrose’s choice
of 2 pints of ale and 6 loaves of bread.
10. True, False, Uncertain? Oxfords and Brogues are types of shoes. Arthur purchases “Oxfords” (O) but not
“Brogues” (B). For Arthur, it must be that MRSO,B >= Po/PB
11. U(x,y)=2x2y2
Px=1, py=2, Y=12

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