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BUAD 351  Economic Analysis for Business Decisions
Homework 2
due: Thu 02/12/2009
PART (i): multiple choice
please provide the answers in the following box:
question
answer
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1. A marginal rate of substitution formula tells us
a. The rate at which the consumer is willing to exchange one good for another, given the level
of utility
b. The rate at which the consumer is willing to exchange one good for another, given the amounts
consumed
c. The rate at which the consumer is willing to exchange one good for another, given the
d. The rate at which the consumer is willing to exchange one good for another, given the prices
of the goods
U
(
C;M
) =
C
+ 3
p
M
, where
C
is liters of Coke and
M
is liters
Dew.
a. 72
b. 17
c. 35
d. none of the above
3. Teresa consumes both steak and lobster. Suppose the formula for her indi±erence curves is
S
=
U
1
:
5
L
, where S stands for the number of steaks, L stands for the number of lobsters and U
represents utility. Which of the following bundles would Teresa prefer?
a. 10 steaks and 4 lobsters
b. 9 steaks and 5 lobsters
c. 12 steaks and 2 lobsters
d. There is not enough information to answer the question
1
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View Full Document4. If everyone in an economy buys and sells goods at marketwide prices (and everybody consumes
positive quantities of everything)
will be the same
b. People who choose to buy will pay the same prices, but will have di/erent marginal rates of
substitution
c. People who choose to buy will pay di/erent prices, but will have the same marginal rates of
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 Spring '07
 Eastin
 Business, Microeconomics

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