Quiz 4: Consumer Preferences
Business
Q 1Q 1
Which of the following is NOT a reason why economists are interested in understanding consumer behavior?
A) Economists are often called upon to evaluate public policies that impact the well-being of consumers.
B) It is important for businesses to be able to accurately predict consumers' choices.
C) Economists want to understand the conditions under which trade will take place.
D) Economists want to predict the value of a company's stock.
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Multiple Choice
D
Q 2Q 2
The idea that all potentially available alternatives can be ordered according to a consumer's preferences is called:
A) the consumption principle.
B) the ranking principle.
C) the choice principle.
D) the more-is-better principle.
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Multiple Choice
B
Q 3Q 3
When comparing two alternatives X and Y,a consumer either prefers X to Y,prefers Y to X,or is indifferent between them.This property is called:
A) transitivity.
B) completeness.
C) the ranking principle.
D) the choice principle.
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Multiple Choice
B
Q 4Q 4
If an individual prefers X to Y and prefers Y to Z then the consumer must also prefer X to Z.This property is called:
A) transitivity.
B) completeness.
C) the ranking principle.
D) the choice principle.
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Multiple Choice
Q 5Q 5
When faced with all available alternatives,the consumer will select the one that is ranked the highest.This principle is called:
A) the choice principle.
B) the ranking principle.
C) the consumption principle.
D) the more-is-better principle.
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Multiple Choice
Q 6Q 6
According to the more-is-better principle:
A) a consumer will always select the bundle that is ranked highest among all alternative bundles.
B) a consumer will prefer a bundle that has the largest amount of the good they prefer most.
C) consumers always try to achieve the highest possible level of well-being.
D) when comparing consumption bundles, a consumer prefers a bundle that has more of every good.
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Multiple Choice
Q 7Q 7
Netflix.com asks its customers to rate the videos they have watched.This information is then used to rank videos for other Netflix.com subscribers.These subscribers can then use the video rankings to help them decide on a video to rent.Through this process,Netflix.com is helping its customers apply the:
A) ranking principle.
B) choice principle.
C) more-is-better principle.
D) the indifference principle.
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Multiple Choice
Q 8Q 8
The decisions consumers make about which goods to consume are interrelated because:
A) the enjoyment of one good often depends on the consumption of other goods.
B) consumers have perfect information regarding all possible consumption bundles.
C) consumers can't always distinguish between goods.
D) consumers are often indifferent between different goods.
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Multiple Choice
Q 9Q 9
Refer to Table 4.1.If Mike starts with 3 CDs and 2 economics books,would he be willing to trade one CD for an economics book?
A) Yes, because the bundle with 2 CDs and 3 economics books is ranked higher than the bundle with 3 CDs and 2 economics books
B) No, because the bundle with 2 CDs and 3 economics books is ranked higher than the bundle with 3 CDs and 2 economics books
C) Yes, because the bundle with 3 CDs and 2 economics books is ranked higher than the bundle with 2 CDs and 3 economics books
D) No, because the bundle with 3 CDs and 2 economics books is ranked higher than the bundle with 2 CDs and 3 economics books
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Multiple Choice
Q 10Q 10
Refer to Table 4.1.If Mike starts with 4 CDs and 1 economics book,would he be willing to trade one CD for two economics books?
A) Yes, because the bundle with 3 CDs and 3 economics books is ranked higher than the bundle with 4 CDs and 1 economics book
B) No, because the bundle with 3 CDs and 3 economics books is ranked higher than the bundle with 4 CDs and 1 economics book
C) Yes, because the bundle with 4 CDs and 1 economics book is ranked higher than the bundle with 3 CDs and 3 economics books
D) No, because the bundle with 4 CDs and 1 economics book is ranked higher than the bundle with 3 CDs and 3 economics books
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Multiple Choice
Q 11Q 11
Refer to Table 4.1.Mike's preferences are consistent with the More-Is-Better Principle because:
A) the two goods are perfect substitutes.
B) there are no empty cells.
C) in each column, the choices at the top are ranked lower than the choices at the bottom.
D) in each column, the choices at the top are ranked higher than the choices at the bottom.
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Multiple Choice
Q 12Q 12
Refer to Table 4.1.Mike's preferences are consistent with the Ranking Principle because:
A) the two goods are perfect complements.
B) there are no empty cells.
C) in each column, the choices at the top are ranked lower than the choices at the bottom.
D) in each column, the choices at the top are ranked higher than the choices at the bottom.
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Multiple Choice
Q 13Q 13
A curve that shows all of the alternative consumption bundles that the consumer likes equally well is called:
A) a budget constraint.
B) an indifference curve.
C) an individual demand curve.
D) a consumption bundle curve.
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Multiple Choice
Q 14Q 14
If the more-is-better principle holds,two different consumption bundles can't be equally attractive unless:
A) they contain the same amounts of each good.
B) the consumer is unable to rank both bundles.
C) as the consumer gives up some of one good, the consumer is given more of the other good.
D) they each cost the same amount to purchase.
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Multiple Choice
Q 15Q 15
Which of the following is NOT a property of indifference curves?
A) Indifference curves are thin.
B) Indifference curves may slope upward or downward.
C) Indifference curves from the same family never cross.
D) A consumer prefers to be on the indifference curve that is farthest from the origin.
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Multiple Choice
Q 16Q 16
According to Figure 4.1,which of the following statements is true?
A)Bundle A would be preferred to bundle C.
B)Bundle A would be preferred to bundle B.
C)Bundle C would be preferred to bundle D.
D)Bundle B would be preferred to bundle A.
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Multiple Choice
Q 17Q 17
If the more-is-better principle holds,then indifference curves must:
A) be positively-sloped.
B) be negatively-sloped.
C) be thin.
D) be concave.
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Multiple Choice
Q 18Q 18
If two consumption bundles lie on the same indifference curve,then:
A) the consumer prefers the bundle that is farthest from the origin.
B) the consumer does not prefer one bundle over the other.
C) the consumer prefers the bundle that is farthest to the right on the indifference curve.
D) the consumer prefers the bundle that is farthest to the left on the indifference curve.
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Multiple Choice
Q 19Q 19
Teresa consumes both steak and lobster.Suppose the formula for her indifference curves is S = U - 1.5L,where S stands for the number of steaks,L stands for the number of lobsters,and U represents utility.Which of the following bundles would Teresa prefer?
A) 10 steaks and 4 lobsters
B) 9 steaks and 5 lobsters
C) 12 steaks and 2 lobsters
D) There is not enough information to answer the question.
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Multiple Choice
Q 20Q 20
Dane consumes both hamburgers and pizza.Suppose the formula for his indifference curves is H = U - 2 P,where H stands for the number of hamburgers,P stands for the number of pizzas,and U represents utility.Which of the following statements is true?
A) Dane prefers a consumption bundle with 5 hamburgers and 4 pizzas to a consumption bundle with 10 hamburgers and 2 pizzas.
B) Dane prefers a consumption bundle with 8 hamburgers and 3 pizza to a consumption bundle with 14 hamburgers and 1 pizzas.
C) Dane is indifferent between a consumption bundle with 10 hamburgers and 2 pizzas and a consumption bundle with 8 hamburgers and 3 pizzas.
D) Dane is indifferent between a consumption bundle with 5 hamburgers and 4 pizzas and a consumption bundle with 8 hamburgers and 3 pizzas.
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Multiple Choice
Q 21Q 21
A "bad" would be associated with:
A) zero marginal utility.
B) a very small amount of marginal utility.
C) negative marginal utility.
D) positive marginal utility.
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Multiple Choice
Q 22Q 22
Suppose Addison is a big fan of jazz music,and that he likes opera music very little.What would his family of indifference curves look like?
A) Negatively sloped, with higher levels of utility represented by indifference curves that are closer to the origin
B) Positively sloped, with higher levels of utility represented by indifference curves that are closer to the origin
C) Negatively sloped, with higher levels of utility represented by indifference curves that are farther from the origin
D) Positively sloped, with higher levels of utility represented by indifference curves that are farther from the origin
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Multiple Choice
Q 23Q 23
For any given family of indifference curves,a consumer would prefer to be at a point:
A) on the indifference curve that is closest to the origin.
B) that is far to the right on an indifference curve.
C) that is far to the left on an indifference curve.
D) on the indifference curve that is farthest from the origin.
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Multiple Choice
Q 24Q 24
Which of the following would be inconsistent with the More-Is-Better Principle?
A) Indifference curves with negative slopes
B) Indifference curves that cross
C) Indifference curves that are L-shaped
D) Indifference curves that are parallel to one another
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Multiple Choice
Q 25Q 25
The slope of an indifference curve tells us:
A) the marginal utility the consumer receives from consuming an additional unit of a good.
B) how much of one good is required to compensate the consumer for giving up some of another good.
C) the amount of utility a consumer receives from consuming a bundle of goods.
D) the rate at which utility changes as more of one good is consumed.
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Multiple Choice
Q 26Q 26
The rate at which a consumer will exchange one good for another is called:
A) marginal utility.
B) the marginal rate of transformation.
C) the rate of substitutability.
D) the marginal rate of substitution.
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Multiple Choice
Q 27Q 27
Higher rates of substitution are indicated by _______ values of the marginal rate of substitution.
A) small negative
B) large negative
C) small positive
D) large positive
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Multiple Choice
Q 28Q 28
Intuitively,the marginal rate of substitution for X with Y tells us:
A) how much Y a consumer needs to compensate them for a one-unit decrease in X.
B) how much X must be taken away from a consumer to compensate them for a one-unit increase in Y.
C) how much X a consumer needs to compensate them for a one-unit decrease in Y.
D) how much more Y the consumer will buy if the price of Y increases by $1.
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Multiple Choice
Q 29Q 29
The marginal rate of substitution between two goods is given by:
A) the inverse of the slope of an indifference curve.
B) the slope of a line tangent to an indifference curve.
C) negative one times the inverse of the slope of an indifference curve.
D) negative one times the slope of a line tangent to an indifference curve.
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Multiple Choice
Q 30Q 30
Rates of substitution are determined by:
A) the consumer's income.
B) the consumer's preferences.
C) the number of available consumption bundles.
D) the prices of different goods.
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Multiple Choice
Q 31Q 31
As we move down and to the right along an indifference curve,the marginal rate of substitution:
A) increases.
B) decreases.
C) remains constant.
D) increases, then decreases.
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Multiple Choice
Q 32Q 32
Refer to Figure 4.2.The marginal rate of substitution for economics books with CDs is highest at point:
A)A.
B)B.
C)C.
D)D.
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Multiple Choice
Q 33Q 33
A marginal rate of substitution formula tells us:
A) the rate at which the consumer is willing to exchange one good for another, given the level of utility.
B) the rate at which the consumer is willing to exchange one good for another, given the amounts consumed.
C) the rate at which the consumer is willing to exchange one good for another, given the consumer's income.
D) the rate at which the consumer is willing to exchange one good for another, given the prices of the goods.
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Multiple Choice
Q 34Q 34
Suppose a consumer's MRS is given by the formula MRSPT = T/P,where P stands for the number of pieces of pizza and T stands for the number of tacos.Starting at 12 tacos and 4 pizzas,the consumer must receive:
A) 3 tacos to compensate them for the loss of one piece of pizza.
B) 3 pieces of pizza to compensate them for the loss of one taco.
C) 1/3 taco to compensate them for the loss of one piece of pizza.
D) 1/3 piece of pizza to compensate them for the loss of one taco.
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Multiple Choice
Q 35Q 35
Suppose Joe's MRS for cookies with crackers is 6 crackers per cookie.Also assume that Mary's MRS for cookies with crackers is 3 crackers per cookie.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make both Joe and Mary better off?
A) Joe gives Mary 5 crackers in exchange for a cookie.
B) Joe gives Mary 2 crackers in exchange for a cookie.
C) Joe gives Mary 6 crackers in exchange for a cookie.
D) There is not enough information to answer the question.
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Multiple Choice
Q 36Q 36
Suppose Bart's MRS for sodas with chips is 6 bags of chips per soda.Also assume that Lisa's MRS for sodas with chips is 8 bags of chips per soda.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make Bart and Lisa better off?
A) Bart gives Lisa 9 bags of chips in exchange for a soda.
B) Bart gives Lisa 7 bags of chips in exchange for a soda.
C) Bart gives Lisa 6 bags of chips in exchange for a soda.
D) None of these trades is mutually beneficial.
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Multiple Choice
Q 37Q 37
Refer to Figure 4.3.Which diagram most likely represents the indifference map for Sony PlayStations and Nintendo GameCubes?
A) A
B) B
C) C
D) D
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Multiple Choice
Q 38Q 38
Refer to Figure 4.3.Which diagram most likely represents the indifference map for left shoes and right shoes?
A) A
B) B
C) C
D) D
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Multiple Choice
Q 39Q 39
Refer to Figure 4.3.Which diagram most likely represents the indifference map for a good and a "bad"?
A) A
B) B
C) C
D) D
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Multiple Choice
Q 40Q 40
Two products are perfect substitutes if:
A) a consumer is willing to swap one for another at a fixed rate.
B) they are valuable only when used together in fixed proportions.
C) their indifference curves are L-shaped.
D) an increase in the price of one good causes a decrease in the demand for the other good.
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Multiple Choice
Q 41Q 41
Two products are perfect complements if:
A) a consumer is willing to swap one for another at a fixed rate.
B) they are valuable only when used together in fixed proportions.
C) their indifference curves are straight lines.
D) they lie on the same indifference curve.
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Multiple Choice
Q 42Q 42
Suppose Frank is completely indifferent between drinking Coke and drinking Pepsi.Then Frank's indifference curves for Coke and Pepsi would be:
A) linear.
B) L-shaped.
C) convex.
D) positively-sloped.
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Multiple Choice
Q 43Q 43
Felix always consumes exactly four cookies with a glass of milk.Felix's indifference curves for cookies and milk would be:
A) linear.
B) L-shaped.
C) convex.
D) positively-sloped.
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Multiple Choice
Q 44Q 44
When there is a high degree of complementarity between two products,then the indifference curves will:
A) be reasonably close to straight lines.
B) be perfectly straight lines.
C) bend sharply.
D) be positively sloped.
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Multiple Choice
Q 45Q 45
When there is a low degree of complementarity between two products,then their indifference curves will:
A) be relatively straight.
B) be perfectly straight lines.
C) bend sharply.
D) be positively sloped.
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Multiple Choice
Q 46Q 46
A utility function is a mathematical formula that assigns to each consumption bundle a numeric value that represents the:
A) opportunity cost of consuming the bundle.
B) consumer's relative well-being from consuming the bundle.
C) price the consumer would pay for the bundle.
D) rates of substitution of the goods in the bundle.
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Multiple Choice
Q 47Q 47
Stewie enjoys watching DVDs and listening to his iPod.Suppose his utility function is given by U(D,I)= 3D + 4(D × I),where D is the number of hours he spends watching DVDs and I is the number of hours he spends listening to his iPod.Which of the following combinations will provide Stewie with the greatest amount of satisfaction?
A) 4 hours of watching DVDs and 8 hours of listening to his iPod
B) 6 hours of watching DVDs and 6 hours of listening to his iPod
C) 2 hours of watching DVDs and 10 hours of listening to his iPod
D) 8 hours of watching DVDs and 6 hours of listening to his iPod
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Multiple Choice
Q 48Q 48
When the more-is-better principle holds,we assign higher utility values to indifference curves:
A) that are closer to the origin.
B) that are farther from the origin.
C) that are concave.
D) that are L-shaped.
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Multiple Choice
Q 49Q 49
Which of the following statements regarding preferences and indifference curves is true?
A) When choosing between two consumption bundles, a consumer will always prefer the consumption bundle on the lower indifference curve.
B) A consumer is indifferent between two consumption bundles that are on the same indifference curve.
C) When choosing between two consumption bundles, a consumer will always prefer the consumption bundle that is farthest to the right on an indifference curve.
D) When choosing between two consumption bundles, a consumer will always prefer the consumption bundle that is farthest to the left on an indifference curve.
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Multiple Choice
Q 50Q 50
Information about preferences is ordinal if:
A) the information tells us something about the intensity of the consumer's preferences.
B) the information allows us to make comparisons between the preferences of different consumers.
C) the information allows us to determine only whether one alternative is better or worse than another.
D) the information allows us to make comparisons between the preference of the same consumer at different points in time.
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Multiple Choice
Q 51Q 51
In modern microeconomic theory,utility functions summarize:
A) cardinal information about preferences.
B) ordinal information about preferences.
C) absolute information about preferences.
D) both cardinal and ordinal information about preferences.
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Multiple Choice
Q 52Q 52
According to influential moral philosopher Jeremy Bentham:
A) utility functions should provide cardinal information about preferences.
B) the aim of public policy should maximize an individual's utility.
C) utility functions should provide ordinal information about preferences.
D) public policy decisions should be based on ordinal utility.
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Multiple Choice
Q 53Q 53
From the modern "ordinalist" perspective,the scale used to measure utility:
A) provides an absolute measure of human well-being.
B) is completely arbitrary.
C) summarizes information about the intensity of preferences.
D) is the same for each consumer.
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Multiple Choice
Q 54Q 54
From the modern "ordinalist" perspective,when we change the scale used to measure utility:
A) the consumers indifference curves remain unchanged.
B) the consumers indifference curves will shift in the same direction as the change in the scale used to measure utility.
C) the consumers indifference curves will shift in the opposite direction as the change in the scale used to measure utility.
D) consumers will "move along" their indifference curves.
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Multiple Choice
Q 55Q 55
Marginal utility:
A) is the change in a consumer's utility resulting from the addition of a very small amount of some good.
B) is the total utility a resulting from consuming some good, divided by the amount consumed.
C) is the change in a consumer's utility resulting from the addition of a very small amount of some good, divided by the amount added.
D) is the change in a consumer's utility resulting from the addition of a very small amount of some good, divided by the total amount being consumed.
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Multiple Choice
Q 56Q 56
If Anne receives more satisfaction as she consumes more shoes,then:
A) the marginal utility of shoes is positive.
B) the marginal utility of shoes is negative.
C) the marginal utility of shoes is constant.
D) the marginal utility of shoes is zero.
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Multiple Choice
Q 57Q 57
If consuming more of a good doesn't affect a consumer's well-being,then:
A) the marginal utility of the good is positive.
B) the marginal utility the good is negative.
C) the marginal utility the good is constant.
D) the marginal utility the good is zero.
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Multiple Choice
Q 58Q 58
Which of the following correctly expresses the relationship between the marginal utilities of two goods and marginal rate of substitution between the goods?
A) MRSXY = (MUY/MUX)
B) MRSXY = (MUX/MUY)
C) MRSXY = (U/∆X)
D) MRSXY = (U/∆Y)
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Multiple Choice
Q 59Q 59
Ultimately,the opportunity for mutually beneficial trade between two individuals is based on:
A) the marginal utilities each consumer derives from each good.
B) the price each consumer is will to pay for each good.
C) the degree of substitutability of each good.
D) a comparison of the individuals' utility function.
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Multiple Choice
Q 60Q 60
By itself,the marginal utility of a particular good:
A) provides important information about a consumer's preferences.
B) tells us how much a consumer would pay for the good.
C) tells us how much the consumer values the good.
D) is completely meaningless.
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Multiple Choice
Q 61Q 61
Frieda enjoys cooking and baking.Her utility function is U(C,B)= 6C + 3B,where C is the number of hours she spends cooking and B is the hours she spends baking.What is Frieda's MU of cooking?
A) 1/6
B) 2
C) 6
D) It cannot be determined from the given information.
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Multiple Choice
Q 62Q 62
Frieda enjoys cooking and baking.Her utility function is U(C,B)= 6C + 3B,where C is the number of hours she spends cooking and B is the hours she spends baking.What is Frieda's MRS of cooking with baking?
A) 1/6
B) 2
C) 6
D) It cannot be determined from the given information.
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Multiple Choice
Q 63Q 63
Owen and Simon both like playing with balls and cars.Suppose B represents the number of balls,and C represents the number of cars.If Owen's utility function can be given by U(B,C)= 10B + 5C,and Simon's utility function can be given by U(B,C)= 6B + 6C,which of the following trades would be mutually beneficial?
A) Owen gives Simon 3 cars in exchange for 2 balls
B) Owen gives Simon 2 cars in exchange for 3 balls
C) Owen gives Simon 3 balls in exchange for 2 cars
D) Owen gives Simon 2 balls in exchange for 3 cars
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Multiple Choice
Q 64Q 64
Owen and Simon both like playing with balls and cars.Suppose B represents the number of balls,and C represents the number of cars.If Owen's utility function can be given by U(B,C)= 10B + 5C,and Simon's utility function can be given by U(B,C)= 6B + 6C,which of the following trades would benefit Simon but not Owen?
A) Owen gives Simon 3 cars in exchange for 2 balls
B) Owen gives Simon 2 cars in exchange for 3 balls
C) Owen gives Simon 3 balls in exchange for 2 cars
D) Owen gives Simon 2 balls in exchange for 3 cars
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Multiple Choice
Q 65Q 65
Refer to carefully-labeled diagrams to explain each of the following:
a.Indifference curves are thin.
b.Indifference curves do not slope upward.
c.Indifference curves from the same family do not cross.
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Essay
Q 66Q 66
Using a carefully-labeled graph,explain the concept of declining marginal rate of substitution.Why would we expect indifference curves to exhibit this characteristic?
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Essay
Q 67Q 67
Suppose that Frank is considering giving Mike eight paperback books in exchange for 2 CDs.Explain the conditions under which this trade would be mutually beneficial.Also explain the conditions under which Frank and Mike won't make the trade.
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Essay
Q 68Q 68
Consider two activities: Attending economics class and reading an economics textbook.Zack thinks he can learn economics by either attending class or reading the textbook.Zoe knows she learns best by both attending class and reading the textbook.Use indifference curves to illustrate each person's preferences for attending class and reading the text.
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Essay
Q 69Q 69
Compare and contrast cardinal utility and ordinal utility.Which concept is sufficient for ranking consumers' preferences? Why?
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Essay
Q 70Q 70
Homer and Marge both enjoy lasagna and wine.Homer's utility function is given by U(L,W)= 12L + 4W.Marge's utility function is given by U(L,W)= 2L + 2W.In each function,L stands for plates of lasagna and W stands for glasses of wine.Would Homer and Marge agree to a trade in which Homer gives Marge a plate of lasagna in exchange for two glasses of wine?
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Essay
Q 71Q 71
Harriet enjoys watching both American Idol and Desperate Housewives on television.Her preferences correspond to the utility function U(A,D)= 2A + 4√D,where A stands for the number of hours she watches American Idol and D is the number of hours she watches Desperate Housewives.
a.How would Harriet rank the following alternatives: 4 hours of American Idol and 2 hours of Desperate Housewives,2 hours of American Idol and 4 hours of Desperate Housewives and 3 hours of American Idol and 3 hours of Desperate Housewives?
b.Suppose that one week,Desperate Housewives is not shown,but there is a two-hour American Idol special (instead of the usual one-hour program).Is Harriet better off or worse off? Explain.
c.Would Harriet's preferences change if her utility function was expressed as U(A,D)= 2A + 4√D+6? Why or why not?
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Essay