econ 212 Practice Problems
1. True/False
Indicate whether the statement is true or false AND EXPLAIN WHY BRIEFLY.
____
1.
At the optimum, a consumer’s indifference curve must be tangent to her budget line.
____
2.
Max Gross has the utility function
U
(
x
,
y
) = max{
x
,
y
} . If the price of
x
is the same as the price of
y
, Max will buy equal
amounts of
x
and
y
.
____
3.
Clara’s utility function is
U
(
x
,
y
) = (
x
+ 2)(
y
+ 1). If her consumption of both
x
and
y
are doubled, then her marginal rate
of substitution between
x
and
y
remains constant.
____
4.
Charlie’s utility function is
U
(
x
,
y
) =
xy
2
. His marginal rate of substitution between
x
and
y
does not change if the amount
of both goods doubles.
____
5.
Ambrose’s utility function is
U
(
x
,
y
) =
x
+ 4
y
1/2
. The price of
x
is $1 and the price of
y
is $2. If his income rises from
$100 to $150, his consumption of
y
increases by more than 10% but less than 50%.
____
6.
Linus has utility function
U
(
x
,
y
) =
x
+ 2
y
. If the price of
x
is $1 and the price of
y
is .50 cents then Linus must consume
equal amounts of both goods in order to maximize his utility.
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 Spring '08
 Yu
 Utility, les, Max Gross

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