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

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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
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7. Based on the table for Tom above, if Tom maximizes his utility, he will buy _______ bottles of water and _____________ sodas.
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