1. Suppose the price of x1 is $20 and the price of x2 is $4. If good x1 is on the horizontal axis, what is the slope of the consumer's budget constraint?
a. -0.20
b. -0.25
c. -5.0
d. -0.2
e. -4.0
f. -20.0
2. Suppose the price of x1 is $5 and the price of x2 is $1 and Toni's income is $20. Suppose Toni gets a $5 gift card that can only be used for the purchase of x1 and there is no resale value of the gift card. With the gift card, the commodity bundle (1,20) is on Toni's budget constraint.
True
False
3. Tiffany's utility function is given by the formula U(x1, x2) = min{20x1, 10x2}. If x1 = x2, which commodity will have a greater marginal utility?
A. Both x1 and x2 have the same marginal utility
B. It is not possible to determine which commodity has higher marginal utility
C. x2
D. x1
4. For U(x1,x2) = 6x11/3 + x2, preferences are
a. consistent with diminishing marginal rate of substitution.
b. consistent with constant marginal rate of substitution.
c. consistent with increasing marginal rate of substitution.
d. not consistent with a utility function.
5. For a utility function of the form U(x1,x2)=min{5x1,10x2}, the individual will have excess x2 for commodity bundles where
a. x2>2x1 b. x2>5x1
c. x2>0.5x1 d. x2>10x1
6. Matt enjoys Fuji and Gala apples and finds 1 Fuji apple to be just as good as 4 Gala apples.
a. Matt's preferences over Fuji (F) and Gala (G) apples can be represented by the utility function U(F,G)=0.25F+G
b. Matt's preferences over Fuji (F) and Gala (G) apples can be represented by the utility function U(F,G)=F+4G
c. Matt's preferences over Fuji (F) and Gala (G) apples can be represented by the utility function U(F,G)=4F+.25G
d. Matt's preferences over Fuji (F) and Gala (G) apples can be represented by the utility function U(F,G)=4F+G
e. Both A and B
f. Both C and D
