Question 1

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.

Accepted Answer

The answer of Consider two activities: Attending economics class and...

Question 2

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.

Accepted Answer

The answer of Refer to carefully-labeled diagrams to explain each...

Question 3

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?

Accepted Answer

The Marginal Rate of Substitution (MRS) is calculated by taking the ratio of the marginal utilities of the two goods. In this case, the marginal utility of cooking (MU_C) is 6 and the marginal utility of baking (MU_B) is 3. Therefore, MRS = MU_C / MU_B = 6 / 3 = 2.

Question 4

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?

Accepted Answer

The answer of Harriet enjoys watching both American Idol and...

Question 5

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?

Accepted Answer

The marginal utility (MU) of cooking is the partial derivative of the utility function with respect to C, which is 6.

Question 6

Compare and contrast cardinal utility and ordinal utility.Which concept is sufficient for ranking consumers' preferences? Why?

Accepted Answer

The answer of Compare and contrast cardinal utility and ordinal...

Question 7

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.

Accepted Answer

The answer of Suppose that Frank is considering giving Mike...

Question 8

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?

Accepted Answer

CFor Owen, the utility change from giving away cars and receiving balls is calculated as the difference in utility from losing cars and gaining balls. For Simon, it's the opposite.- In option A, Owen gives 3 cars (-15 utility) for 2 balls (+20 utility), a net gain of +5 utility. Simon gives 2 balls (-12 utility) for 3 cars (+18 utility), a net gain of +6 utility. Both benefit.- In option C, Owen gives 3 balls (-30 utility) for 2 cars (+10 utility), a net loss. Simon gives 2 cars (-12 utility) for 3 balls (+18 utility), a net gain. Only Simon benefits, making my initial assessment incorrect.Upon reevaluation, the correct mutually beneficial trade is:- Option A, where both Owen and Simon gain utility from the trade.

Question 9

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?

Accepted Answer

The answer of Owen and Simon both like playing with...

Question 10

Using a carefully-labeled graph,explain the concept of declining marginal rate of substitution.Why would we expect indifference curves to exhibit this characteristic?

Accepted Answer

The answer of Using a carefully-labeled graph,explain the concept of...

Question 11

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?

Accepted Answer

The answer of Homer and Marge both enjoy lasagna and...

Quiz 4: Consumer Preferences

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.

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?

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?

Compare and contrast cardinal utility and ordinal utility.Which concept is sufficient for ranking consumers' preferences? Why?

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.

Using a carefully-labeled graph,explain the concept of declining marginal rate of substitution.Why would we expect indifference curves to exhibit this characteristic?