Loose-leaf Microeconomics With Connect Access Card
2nd Edition
ISBN: 9780077716325
Author: B. Douglas Bernheim Lewis & Virginia Eaton Professor
Publisher: McGraw-Hill Education
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Chapter 4, Problem 6P
To determine
Derive the consumer ‘A’s indifference curve.
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Anthony spends all his income on two goods, X and Y and his tastes don't change between 2008 and 2009. The prices he paid and the quantities he consumed in 2008 are as follows: PX = 15, X = 20, PY = 25 and Y = 30. Suppose the prices in 2009 are PX = 6 and PY = 30, and his income in 2009 is €1,020,
Anthony is as well off in 2009 as he is in 2008
Anthony is better off in 2009 than in 2008
Anthony is better off in 2008 than in 2009
There is not enough information to answer this question
Siobhan divides her spending between lemons and limes. If the price of lemons falls, the income effect predicts she will buy
Question 15 options:
Fewer limes.
The same number of limes.
More limes.
Megan
is a college student who consumes food and transportation. Last year, she consumed 90 meals and purchased 100 gallons of gasoline per month. Suppose that last year the price of a meal was
$5
and the price of a gallon of gasoline was
$2.23.
However, this year, the price of a meal is
$6
and the price of a gallon of gasoline is
$3.92.
As a result,
Megan
consumes 100 meals and 80 gallons of gasoline. For this example, assume
Megan's
utility this year is the same as her utility last year (and that her preferences have not changed).
Calculate a Laspeyres cost-of-living index for
Megan
using 100 as the base for last year. In particular, the Laspeyres index for this year is
nothing.
(Enter
your response rounded to two decimal
places.)
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- Joyce consumes x1 and x2 together in fixed proportions. She always consumes 1 unit of x2 for 2 units of x1. What is the utility function that describes her preference?arrow_forwardSienna gets a total of 20 utils per week from her consumption of pizza and a total of 40 utils per week from her consumption of yogurt. The price of pizza is $1 per slice, the price of yogurt is $1 per cup, and she consumes 10 slices of pizza and 20 cups of yogurt each week. Which of the following statements is correct regarding Sienna's current consumption of pizza and yogurt? Sienna should eat more yogurt and less pizza, as she is getting more utils from the $20 spent on yogurt than from the $10 spent on pizza. Sienna should eat more pizza and less yogurt, as she is getting more utils from her last dollar spent on pizza than her last dollar spent on yogurt. We cannot determine if Sienna is maximizing her total utility with the information provided. Sienna should eat more yogurt and less pizza, as she is getting more utils from her last dollar spent on yogurt than her last dollar spent on pizza.arrow_forwardQ43 Laurie spends all of her money buying bread and cheese. The marginal utility she receives from the last loaf of bread is 60 and from the last block of cheese is 30. The price of bread is $3 and the price of cheese is $2. Laurie... a. Should buy more cheese and less bread to maximise her utility. b. Should buy more bread and more cheese in order to maximise her utility. c. Spends too much money on bread and cheese. d. Should buy more bread and less cheese in order to maximise her utility. e. Is buying currently the utility-maximising amount of bread and cheese.arrow_forward
- Q19 Suppose a consumer can purchase only two goods: pasta and rice. Let the quantity of pasta be measured on the vertical axis and the quantity of rice be measured on the horizontal axis. If the price of pasta falls, with no change in the price of rice or in the consumer's money income, then the budget line for the consumer will rotate... a. Outward parallel to the existing budget line. b. Toward the origin and become flatter. c. Away from the origin and become steeper. d. Away from the origin and become flatter. e. Toward the origin and become steeper.arrow_forwardTom is willing to forego two gallons of milk in order to try his first container of rice pudding. However, he would only give up a gallon of milk for each additional container of rice pudding. What will be the MRS on Tom’s indifference curve over the range from where he consumes zero rice pudding to where he consumes one container of rice pudding?arrow_forwardIf the price of a slice of cake is $4, the price of a slice of pie is $2, and Latasha spends her entire budget of $10, she will choose to buy of pie and of cake.arrow_forward
- Bottles of water sell for 1 euro and slices of chocolate cake sells for 3 euros. Suppose Jack, whose preferences satisfy all of the basic assumptions of consumer choice theory, buys 5 bottles of water and one slice of chocolate cake every day. At this consumption bundle, his MRS of bottles of water for slices of chocolate cake is 3 (i.e. he is willing to give up 3 bottles of water to get an additional slice of cake). Which of the following is true? (Hint: draw this situation with bottles of water on the vertical axis and slices of cake on the horizonal axis). A. Jack could increase his utility by buying fewer bottles of water and more slices of cake. B. Jack could increase his utility by buying more bottles of water and less chocolate cake. C. Jack could not increase his utility because it is already at a maximum level. D. Jack could increase his utility by buying more bottles of water and more chocolate cake.arrow_forwardBottles of water sell for 1 euro and slices of chocolate cake sells for 5 euros. Suppose Jack, whose preferences satisfy all of the basic assumptions of consumer choice theory, buys 5 bottles of water and one slice of chocolate cake every day. At this consumption bundle, his MRS of bottles of water for slices of chocolate cake is 3 (i.e. he is willing to give up 3 bottles of water to get an additional slice of cake). Which of the following is true? (Hint: draw this situation with bottles of water on the vertical axis and slices of cake on the horizontal axis). Jack could not increase his utility because it is already at a maximum level. Jack could increase his utility by buying more bottles of water and less chocolate cake. Jack could increase his utility by buying more bottles of water and more chocolate cake. Jack could increase his utility by buying fewer bottles of water and more slices of cake.arrow_forwardA consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $30, and T-shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 60, and the marginal utility of T-shirts is 30. Is this consumer maximizing his or her utility? Would you suggest that he buy more jeans and fewer T-shirts, or more T-shirts and fewer jeans?arrow_forward
- Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S + T) = 2ST, so Mus = 2T and Mut = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing What is the equation for her budget line? Draw it (with T on the vertical axis), and label the slope and intercepts. What is Linda’s marginal rate of substitution? Explain. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget linearrow_forwardLinda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T) = 2ST, so MUs = 2T and MUT = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing. A. What is the equation for her budget line? Draw it (with T on the vertical axis) and label the slope and intercepts. B. What is Linda's marginal rate of substitution? Explain. C. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget line.arrow_forwardQuestion Ebrima gets $3 per month as an allowance to spend any way he pleases. Because he likes only peanut butter and jelly sandwiches, he spends the entire amount on peanut butter (at $.05 per ounce) and jelly (at $.10 per ounce). Bread is provided free of charge by a concerned neighbor. Ebrima is a picky eater and makes his sandwiches with exactly 1 ounce of jelly and 2 ounces of peanut butter. He is set in his ways and will never change these proportions. How much peanut butter and jelly will Ebrima buy with his $3 allowance in a week? Suppose the price of jelly were to rise to $.15 per ounce. How much of each commodity would be bought? By how much should Ebrima’s allowance be increased to compensate for the rise in the price of jelly in part b? Graph your results of part a through part c. In what sense does this problem involve only a single commodity—peanut butter and jelly sandwiches? Graph the demand curve for this single commodity. Discuss the results of this problem…arrow_forward
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