practiceexam2B

# practiceexam2B - 1 Lisas income is \$15 The price of...

This preview shows pages 1–3. Sign up to view the full content.

1. Lisa’s income is \$15. The price of milk (per gallon) is \$3 and the price for chocolate is \$6 per pound. What is the equation of Lisa’s budget line? (M = quantity of milk and C = quantity of chocolate) a. 3C + 6M = 15 b. 45-18C = 6M c. 3M + 6C = 15 d. 2C + M = 15 2. Lisa’s income is \$15. The price of milk (per gallon) is \$3 and the price for chocolate is \$6 per pound. If the quantity of chocolate is measured on the x axis, what is Lisa’s marginal rate of substitution when she maximizes her utility given this budget? 3. Lisa’s income is \$15. The price of milk (per gallon) is \$3 and the price for chocolate is \$6 per pound. If the price of milk rises to \$6 per gallon, and the price of chocolate rises to \$9 per pound, the slope of the budget line changes from ___________ to ___________. (Assume the quantity of chocolate is still measured on the x axis.) 4. Tim buys only soda and pizza, and he only buys amounts that maximize his total utility. The marginal utility from a soda is 10, and the price of a soda is \$1. The marginal utility from a pizza is 80. Thus the price of a pizza must be 5. A consumer maximizes utility where which of the following is true? a. The budget line is twice as steep as the indifference curve. b. The consumer’s marginal rate of substitution is maximized. c. Marginal utility per dollar is equal across all goods d. The consumer spends all income on the cheapest good possible. 6. The table below shows the utility Tom receives from consuming bottled water and soda. The price of water is \$1, the price of soda is \$2, and Tom has \$7 of income. What is Tom’s marginal utility per dollar spent on the 3 rd bottle of water? Soda Water Bottle Quantity Total utility Quantity Total utility 0 0 0 0 1 30 1 25 2 50 2 40 3 65 3 50 4 73 4 58 5 80 5 65

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
7. Based on the table for Tom above, if Tom maximizes his utility, he will buy _______ bottles of water and _____________ sodas.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern