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BUAD 351 - Economic Analysis for Business Decisions Homework 2 due: Wed 02/13/2008 PART (i): multiple choice please provide the answers in the following box: question answer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1. According to the more-is-better principle, a. A consumer will always select the bundle that is ranked highest among all alternative bundles b. A consumer will prefer a bundle that has the largest amount of the good they prefer most c. Consumers always try to achieve the highest possible level of well-being d. When comparing two consumption bundles, a consumer prefers the bundle that has more of every good 2. A marginal rate of substitution formula tells us of utility consumed consumer°s income of the goods 3. Suppose a consumer°s MRS is given by the formula MRS P T = T=P , where P stands for the number of pieces of pizza and T stands for the number of tacos. Starting at 12 tacos and 4 pizzas, the consumer must receive 4. Let Tom°s utility function be U ( C; M ) = C + 3 p M , where C is liters of Coke and M is liters of Mountain Dew. Compute Tom°s utility if he consumes 8 liters of Coke and 9 liters of Mountain Dew. 1

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