Econ 207: Unit 2C. Practice Problems
Multiple Choice:
1.
With typically shaped indifference curves, utility
maximization requires a consumer do what two things?
a.
set MUx = MUy; spend all their income
b.
spend all their income; set MRS = Px/Py
c.
spend as little as possible; maximize the MRS
d.
set MRS = Px/Py and spend as little as possible
2.
The figure above shows Sarah’s budget constraint and
three of her indifference curves.
Which of the following
statements is FALSE?
a.
at bundle D, Sarah’s marginal rate of substitution of
X for Y is equal to P
X
/ P
Y
b.
Sarah would be spending less than her full income
on bundle B, exactly her full income on bundles A,
D, and C, while bundle E is not affordable for her.
c.
Sarah’s optimal consumption bundle is bundle D
d.
Sarah prefers bundle D to either bundle A or bundle
C, and she prefers either bundle A or bundle C to
bundle B
3.
Jenny has the “usual-shaped” downward sloping, convex
indifference curves for pizza slices and sodas.
The price
of a pizza slice is $2 and the price of a soda is $1.
In
general, Jenny’s optimal consumption bundle will be one
for which her marginal rate of substitution of pizza slices
for sodas (the quantity of soda he is willing to trade for
one more pizza slice) is equal to:
a.
½
b.
1
c.
2
d.
3
4.
Jimmy spends his entire income on carrots and cookies.
At his optimal consumption bundle, he would consume
positive amounts of both goods.
At his CURRENT
consumption bundle, Jimmy’s MRS of cookies for carrots
(the amount of carrots he’s willing to give up to obtain an
additional cookie) is 3.
The price of a cookie is $0.25
and the price of a carrot is $0.10.
Which of the following
statements is correct?
a.
Jimmy can improve his utility by consuming more
cookies and fewer carrots
b.
Jimmy can improve his utility by consuming fewer
cookies and more carrots
c.
Jimmy is maximizing his utility
d.
whether or not Jimmy is maximizing his utility
cannot be determined from the information given
5.
Frank's utility function is
U
= 10
X
+ 6
Y
. Frank has a
budget of $60 to spend on goods
X
and
Y
. The price of
good
X
is $3 and the price of good
Y
is $2. To maximize
utility, Frank should purchase _____ units of good X and
_____ units of good Y.
a.
20; 0
b.
6; 10
c.
10; 15
d.
0; 30
6.
Annie is currently spending all of her income on movies
and shows.
The MU of the last movie seen was 15, the
MU of the last show seen was 25, the price of a movie is
$10 and the price of a show is $50.
To maximize utility,
Annie should:
a.
Watch more shows and fewer movies
b.
Watch more movies and fewer shows
c.
Keep their consumption of movies and shows the
same
d.
Watch fewer movies and fewer shows
7.
To maximize utility, this
consumer will buy _____
hockey tickets and _____
soccer tickets.
a.
8; 0
b.
5; 3
c.
3; 5
d.
0; 8
8.
Suppose that a consumer’s
utility function is given by: U = XY. The price of good
X
is $5 and the price of good
Y
is $4. How many units of
good
X
does the consumer buy if she has $360 of income
(you can assume typically shaped indifference curves)?
a.
9
b.
36
c.
45
d.
72
9.
Kangbo is maximizing utility by
consuming movies and concerts.
If the price of movie tickets
doubles and Kangbo continues to
maximize utility, what will the
marginal rate of substitution of
movie tickets for concert tickets
be after the price change?
a.
-1
b.
1
c.
-2
d.
2
e.
none of the above
10. David gets
$90 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 $1 per ounce) and jelly (at $2 per ounce).
Bread is provided free of charge by a concerned
neighbor.
David is a picky eater and makes his
sandwiches only one way-- with exactly one ounce of
peanut butter and two ounces of jelly.
He is set in his
ways and will never change his preferences. To maximize
utility, David should consume _____ ounces of peanut
butter and _____ ounces of jelly each month.
a.
18; 36
b.
0; 45
c.
90; 0
d.
15; 30
