Intermediate microeconomic theory. Assignment 1 (make-up).
This assignment consists of five multiple-choice questions, that are overall worth 5 points
(i.e., each question is worth 1 point). There is one and only one co
ect answer per question.
QUESTION 1. Joel’s utility function is U(xA, xB) = xA xB. If his income were $40, the price of apples (A)
were $4, and the price of bananas (B) were $6, how many apples would there be in the best bundle
that Joel could afford?
a. 8
b. 10
c. 12
d. 9
e. 5
Question 2. Ross has nice convex preferences represented by utility function U(x, y) = (x + 2)(y + 3).
The price of x is $1 and the price of y is $1. When he maximizes his utility subject to his budget
constraint, he consumes positive amounts of both goods. Ross consumes
a. exactly as many units of x as of y.
b. 1 more unit of x than he consumes of y.
c. 1 more unit of y than he consumes of x.
d. 2 more units of x than he consumes of y.
e. None of the above.
QUESTION 3. Linda has nice convex preferences represented by U(x, y) = x + 46y - 2y 2. Her income
is $135. If the price of x is $1 and the price of y is $18, how many units of good x will Linda demand?
a. 5
b. 12
c. 16
d. 0
e. 9
QUESTION 4. Clara consumes 2 units of whey per 1 unit of curds (i.e., whey and curds are
complements). If the price of curds is $5 and the price of whey is $6, then (if Clara’s income is m) her
demand for curds will be
a. 5c + 6w = m.
b. 6m/5.
c. 5m.
d. m/5.
e. m/17.
QUESTION 5. Giselle consumes grapefruits and pineapples. Her utility function is U(x, y) = x 2y 8,
where x is the number of grapefruits consumed and y is the number of pineapples consumed.
Giselle’s income is $105, and the prices of grapefruits and pineapples are $1 and $3, respectively.
How many grapefruits will she consume?
a. 10.5
b. 7
c. 63
d. 21
e. None of the above.