Mary consumes two goods, X and Y. Her indifference curves have the usual shape. Consider the baskets (1, 3), (2, 2) and (3, 1). Mary is indifferent between (1, 3) and (3, 1). Which of the following statements is true? A. Mary is indifferent between the baskets (1, 3), (2, 2) and (3, 1) B. Mary prefers the baskets (1, 3),and (3, 1) to the basket (2, 2) C. Mary prefers the basket (2,2) to the baskets (1, 3),and (3, 1) D. We cannot say anything about which of the 3 baskets Mary prefers without knowing the equation of her utility function. E. Mary considers X and Y to be perfect complements

Mary consumes two goods, X and Y. Her indifference curves have the usual shape. Consider the baskets (1, 3), (2, 2) and (3, 1). Mary is indifferent between (1, 3) and (3, 1). Which of the following statements is true? A. Mary is indifferent between the baskets (1, 3), (2, 2) and (3, 1) B. Mary prefers the baskets (1, 3),and (3, 1) to the basket (2, 2) C. Mary prefers the basket (2,2) to the baskets (1, 3),and (3, 1) D. We cannot say anything about which of the 3 baskets Mary prefers without knowing the equation of her utility function. E. Mary considers X and Y to be perfect complements

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.7P

See similar textbooks

Similar questions

Question 3 Lucy consumes only scoops of ice-cream (x) and cones (y). Moreover, she insists on consuming these two goods in the combination of 1 scoop of ice-cream and 1 cone. If there are more scoops of ice-cream than cones, she throws the extra ice-cream away. If there are more cones than scoops of ice-cream, she throws the extra cones away. Her utility function for ice-cream and cones is given by U(x, y) = min {x,y}. (The function min {x,y} returns the smaller number between x and y. In other words, if x y, min {x,y} = y; and if x = y, min {x,y} = x = y.) (a) Draw a couple of indifference curves for Lucy. Put ice-cream on the horizontal axis. (Hint: Draw the 45° line. Choose a point on the line. If you increase the amount of x but not y from that point, how would Lucy's utility change? If you increase the amount of y but not x from that point, how would Lucy's utility change?) (b) Suppose each scoop of ice-cream costs $2, and each cone costs $1. Lucy has an income of $6. Draw her…
2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current in come is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?
For Daniel, Pepsi and pizza are complementary products. He consumes a Pepsi with two slices of pizza. Daniel has $30,000 to spend between the two products. Each Pepsi costs $1,000 and a slice of pizza costs $2,000. Based on this information determine: a) Locate the indifference curves and the budget constraint on a graph. Place the Pepsi on the horizontal axis and the pizza slices on the vertical axis. b) What is the optimal consumption bundle? c) What is the consumption decision if Pepsi goes up to $2,000? d) How does the problem change if Daniel eats a slice of pizza for a Pepsi? Please solve all parts.
1. The price of a scoop of chocolate ice cream (x) is $2 and price of a scoop of vanilla ice cream (y) is $4. Sara views chocolate and vanilla ice cream as perfect substitutes. She likes both and is always willing to trade 3 scoops of chocolate for 2 scoops of vanilla ice cream. She has $20 to spend. a. Write down her utility function and draw a couple of her indifference curves. b. Write down her budget line and indicate the slope of the budget line. c. Using graph, find her optimal bundle to consumer. If her mom gives her a $10 gift certificate for only buying vanilla ice cream, draw her new budget line. e. Calculate her new optimal bundle and utility level this can bring to her. d. retere its: free
Suppose Tom has $60 in income and only buys cheese and tuna. Walmart charges $2 for a can of tuna and $4 for a block of cheese. Tom shops at Walmart and buys 20 cans of tuna and 5 blocks of cheese. a) Draw the budget constraint and indifference for Tom (put Tuna on X-axis). b) Suppose Tom’s income increases to $100, and his consumption of cheese increases to 6 blocks. Draw the new budget constraint and new optimal consumption bundle. c) Is tuna a normal or inferior good for Tom? Draw the Engel curve of tuna.
Michael and Kelly consume food and clothing. In particular, Michael currently consumes 19 units of food and 23 units of clothing and Kelly currently consumes 21 units of food and 17 units of clothing. At these levels of consumption, Michael's MRS of food for clothing is 1.50 and Kelly's MRS of food for clothing is 0.50. Illustrate with an Edgeworth box. 1.) Using the three-point curved line drawing tool, draw an indifference curve for Michael when consuming 19 units of food and 23 units of clothing. Label this curve UM. 2.) Using the three-point curved line drawing tool, draw an indifference curve for Kelly when consuming 21 units of food and 17 units of clothing. Label this curve Uk. Carefully follow the instructions above, and only draw the required objects. Clothing OK Kelly 19 21 Food Michael OM 23
1. Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time (D). His utility function is: U = √C.D a. Sketch Paul's indifference curves for U-5, U-10, and U=20. b. Suppose Paul has $200 to spend and that a cup of coffee costs $5 and a dozen donuts costs $20. Draw Paul's budget constraint on the same graph as his indifference curves. c. Suppose Paul spends all of his income on donuts. How many dozen can he buy and what is his utility? d. Show that Paul's income will not permit him to reach the =20 indifference curve. f. e. If Paul buys five dozen donuts, how many cups of coffee can he buy? What is his utility? Use a carefully drawn graph to show that the utility calculated in part e is the highest Paul can achieve with his $200.
Michael and Kelly consume food and clothing. In particular, Michael currently consumes 23 units of food and 19 units of clothing and Kelly currently consumes 17 units of food and 21 units of clothing. At these levels of consumption, Michael's MRS of food for clothing is 0.40 and Kelly's MRS of food for clothing is 2.50. Illustrate with an Edgeworth box. 1.) Using the three-point curved line drawing tool, draw an indifference curve for Michael when consuming 23 units of food and 19 units of clothing. Label this curve UM. 2.) Using the three-point curved line drawing tool, draw an indifference curve for Kelly when consuming 17 units of food and 21 units of clothing. Label this curve Uk. Carefully follow the instructions above, and only draw the required objects. Next, fill in the missing information in the following table. For simplicity, assume the consumers have the option of trading one unit of food (F) for one unit of clothing (C). Fill in the following table. (Enter your responses…
Suppose you have an income of $24 and the only two goods you consume are apples (x1) and peaches (x2). The price of apples is $4 and the price of peaches is $3. Suppose that your optimal consumption is 4 peaches and 3 apples. a. Illustrate this in a graph using indifference curves and budget lines. b. Now suppose that the price of apples falls to $2 and I take enough money away from you to make you as happy as you were originally. Will you buy more or fewer peaches? Provide a graphical representation.
John only values food until he has consumed 10 units of it, and after that, he values only shelter. 1) Sketch John’s indifference curves between food and shelter.
8. Normal and inferior goods Antonio likes going to the ballpark to watch baseball, and he also is fond of going to the theater to listen to the symphony orchestra. The following diagram shows two of Antonio's indifference curves for going to ballgames and symphonies. With Antonio's initial budget constraint (BC1), he chose to go to four symphonies and six baseball games per month (point X). Then his budget constraint shifted to BC2, and he chose to go to five symphonies and three ballgames per month (point Y). BALLGAMES 3 8 10 0 4 5 SYMPHONIES BC 8 BC 10 ? Of the following choices, which could have shifted Antonio's budget constraint from BC₁ to BC2? Check all that apply. His income increased while the prices of baseball and symphony tickets stayed the same. The prices of both baseball and symphony tickets increased while his income stayed the same. His income decreased while the prices of baseball and symphony tickets stayed the same. normal The price of symphony tickets increased…
Assume Pat spends all of her allowance to purchase 4 apples and 4 candy bars. Pat's marginal utility of the fourth apple is 20 utils, and her marginal utility of the fourth candy bar is 40 utils. If an apple costs $1.00 and a candy bar $0.50, to maximize utility Pat should(A) purchase more apples and more candy bars(B) maintain the current purchase of 4 apples and 4 candy bars(C) purchase more apples and fewer candy bars(D) purchase fewer apples and more candy bars(E) purchase fewer apples and fewer candy bars