EIA2001

If a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefers A to C. This assumption is called:

• completeness

• transitivity

• nonsatiation.

• rationality.

The shape of an indifference curve like the one in this figure:

• represents more realistically the preferences of a rational consumer.

• implies that consumer preferences are not complete.

• violates the assumption that more is preferred to less.

• has market baskets that represent different levels of utility.

The value of the marginal rate of substitution between points B and D is:

• -4

• -0.25

• 10

• 6

Michele is trying to decide which courses to take next semester. She has narrowed down her choice to two courses, Econ 1 and Econ 2. Now she is having trouble and cannot decide which of the two courses to take. It's not that she is indifferent between the two courses, she just cannot decide. An economist would say that this is an example of preferences that:

• A. are not transitive.

• B. are incomplete.

• C. violate the assumption that more is preferred to less.

• all A, B and C

Pencils sell for 10 cents and pens sell for 50 cents. Suppose Jack, whose preferences satisfy all of the basic assumptions, buys 5 pens and one pencil each semester. With this consumption bundle, his MRS of pencils for pens is 3. Which of the following is true?

• Jack could increase his utility by buying more pens and fewer pencils.

• Jack could increase his utility by buying more pencils and fewer pens.

• Jack could increase his utility by buying more pencils and more pens.

• Jack could increase his utility by buying fewer pencils and fewer pens.

Bob views apples and oranges as perfect substitutes in his consumption, and MRS = 1 for all combinations of the two goods in his indifference map. Suppose the price of apples is $2 per pound, the price of oranges is $3 per pound, and Bob's budget is $30 per week. What is Bob's utility maximizing choice between these two goods?

• 4 pounds of apples and 6 pounds of oranges

• 5 pounds of apples and 5 pounds of oranges

• 10 pounds of oranges and no apples

• 15 pounds of apples and no oranges

You may consume ice cream or frozen yogurt, and ice cream consumption is plotted along the horizontal axis of your indifference map. The prices are denoted PY for frozen yogurt and PIC for ice cream. Under what condition will you only consume frozen yogurt?

• MRS is greater than P_IC/P_Y.

• MRS is less than P_IC/P_Y.

• MRS is less than P_Y/P_IC.

• MRS is infinite.

From an initial position at point A, the positions the consumer chooses as her budget line changes let us conclude that:

• A is preferred to E and G.

• B is preferred to A.

• A is preferred to all market baskets in the top shaded area and all market baskets in the bottom shaded area are preferred to A.

• A is preferred to all market baskets in the bottom shaded area and all market baskets in the top shaded area are preferred to A.

Monica consumes only goods A and B. Suppose that her marginal utility from consuming good A is equal to 1/Qa, and her marginal utility from consuming good B is 1/Qb. If the price of A is $0.50, the price of B is $4.00, and the Monica's income is $120.00, how much of good A will she purchase?

• 12

• 24

• 60

• 120

Bill uses his entire budget to purchase Pepsi and hamburgers, and he currently purchases no Pepsi and 6 hamburgers per week. The price of Pepsi is $1 per can, the price of a hamburger is $2, Bill's marginal utility from Pepsi is 2, and his marginal utility from hamburgers is 6. Is Bill's current consumption decision optimal?

• No, he should increase Pepsi consumption and reduce hamburger consumption.

• No, he should purchase more of both goods.

• Yes, the corner solution is best because his MRS is less than the price ratio.

• We do not have enough information to answer this question.