Chapter 5 Homework 6

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlu… 1/21 Score: 100/100 Points 100 %

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlu… 2/21 1. Award: 5 out of 5.00 points The following figure shows a portion of a consumer’s indifference map and budget lines. The price of good Y is $7 and the consumer’s income is $700. Let the consumer begin in utility-maximizing equilibrium at point A on indifference curve I . Next the price of good X changes so that the consumer moves to a new utility-maximizing equilibrium at point B on indifference curve II . The total effect of the change in the price of X is +12 +10 -10 +32 +42 References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-07     ✓ 

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlu… 4/21 3. Award: 5 out of 5.00 points The price of X is $20 and the price of Y is $40. based on the graph, how many units of X will the consumer choose if point B is the utility-maximizing choice? 28 30 32 60 None of the choices are correct. References Multiple Choice Difficulty: 02 Medium Learning Objective: 05-04   ✓   

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlu… 5/21 4. Award: 5 out of 5.00 points A consumer has the indifference map shown below. The market prices of X and Y are $20 and $12, respectively. The consumer has $1,000 to spend on goods X and Y . For the utility-maximizing bundle, the marginal rate of substitution is _____ the slope of the budget line (in absolute value), and the ratio MU/P for good X is _____ the ratio MU/P for good Y. greater than; greater than greater than; less than less than; greater than less than; less than equal to; equal to References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-06    ✓  

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlu… 7/21 6. Award: 5 out of 5.00 points Alexandra consumes only caviar and champagne, but she does have a limited income of $400. Her current consumption choice is 5 ounces of caviar, at a price of $50 per ounce, and 6 bottles of champagne, at $25 each. The last ounce of caviar added 100 units to Alexandra's total utility, while the last bottle of champagne added 75 units. If Alexandra chooses 4 ounces of caviar and 8 bottles of champagne instead her total utility will increase by 150 units. decrease by 150 units. increase by 100 units. decrease by 100 units. increase by 50 units. References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-04     ✓ 

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlu… 8/21 7. Award: 5 out of 5.00 points Refer to the following indifference map for a consumer who has an income of $48 to spend on goods X and Y and the market prices of X and Y are both $4: After the price of good X increases to $12 while the price of good Y remains $4, how many units of good X would be purchased? 0 2 4 8 12 References Multiple Choice Difficulty: 02 Medium Learning Objective: 05-03 ✓     

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 10/21 9. Award: 5 out of 5.00 points In the figure below, a consumer faces a market price of X equal to $3, a market price of Y equal to $3, and the consumer’s budget is $90. In order for this consumer to choose the corner solution at point E , which of the following must occur? price of X must rise to $6. price of Y must rise to $6. price of X must rise to $9. price of Y must rise to $9. References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-06   ✓  

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 11/21 10. Award: 5 out of 5.00 points The figure below shows a consumer maximizing utility at two different prices (the left panel) and the consumer’s demand for good X at the same two prices of good X (the right panel). The price of good Y is $14. What is the consumer’s income? $12,000 $12,200 $12,250 $12,400 $12,600 References Multiple Choice Difficulty: 02 Medium Learning Objective: 05-07     ✓ 

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 13/21 12. Award: 5 out of 5.00 points The consumer's income is $800. According to the figure, why doesn't the consumer choose the combination at point B ? The consumer is willing to give up more X for additional units of Y than the rate in the market. The marginal utility of Y exceeds the marginal utility of X . The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X . Both "The consumer is willing to give up more X for additional units of Y than the rate in the market" and "The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X ". Both "The marginal utility of Y exceeds the marginal utility of X " and "The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X ". References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-04    ✓  

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 14/21 13. Award: 5 out of 5.00 points The figure below shows a consumer maximizing utility at two different prices (the left panel) and the consumer’s demand for good X at the same two prices of good X (the right panel). The price of good Y is $14. When the price of X increases from point M to point N along the demand curve, the total effect of the price increase is _____. − 335 − 425 +20 +40 References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-07 ✓    

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 16/21 15. Award: 5 out of 5.00 points Assume that an individual consumes two goods, X and Y . The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $5 and $10. Units of the Good Total Utility of X Total Utility of Y 1 50 400 2 95 750 3 135 950 4 170 1,100 5 200 1,220 6 225 1,320 7 245 1,400 8 260 1,450 Given the above, if the consumer has $65 to spend on X and Y , the utility-maximizing bundle is 3 X and 5 Y . 4 X and 4 Y. 5 X and 2 Y. 1 X and 6 Y. 2 X and 7 Y. References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-04    ✓  

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 17/21 16. Award: 5 out of 5.00 points In the following graph the consumer’s income is $1,200. What is Y 1 ? 30 80 110 120 None of the choices are correct. References Multiple Choice Difficulty: 02 Medium Learning Objective: 05-04    ✓  

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 19/21 18. Award: 5 out of 5.00 points The figure below shows a consumer maximizing utility at two different prices (the left panel) and the consumer’s demand for good X at the same two prices of good X (the right panel). The price of good Y is $4.50. When the price of X increases from point S to point R along the demand curve, the substitution effect of the price increase is _____. − 6 − 7.5 − 8 − 9 − 10 References Multiple Choice Difficulty: 03 Hard Learning Objective: 05-07 ✓     

1/14/24, 12:50 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcml… 20/21 19. Award: 5 out of 5.00 points Based on the following graph, one point on the consumer's demand curve for X is The consumer's income is $600. 60 units at a price of $10. 35 units at a price of $10. 35 units at a price of $6. 25 units at a price of $10. 25 units at a price of $7.50. References Multiple Choice Difficulty: 02 Medium Learning Objective: 05-05    ✓  