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# IME-A5-ANS - CHAPTER 4 | Utility TRUE-FALSE Difficulty 2...

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12. Fiery Demon is a rotgut whisky made in Kentucky. Smoothy is an unblended malt whisky imported from Scotland. Ed regards these brands as perfect substitutes. When he goes into a bar, he sometimes buys only Fiery Demon. Other times he buys only Smoothy. This shows that Ed has unstable preferences. Difficulty: 1 Correct Answer: False 13. Mark strictly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A . These preferences can be represented by a utility function. Difficulty: 3 Correct Answer: True 14. A consumer has preferences represented by the utility function U ( x 1 , x 2 ) = 10( x 2 1 + 2 x 1 x 2 + x 2 2 ) - 50. For this consumer, goods 1 and 2 are perfect substitutes. Difficulty: 1 Correct Answer: True 15. A person with utility function U ( x , y ) = 5 + y 2 + 2 x has nonconvex preferences. Difficulty: 2 Correct Answer: False 16. A person with the utility function U ( x , y ) = 10 + y 2 + x has convex preferences.
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IME-A5-ANS - CHAPTER 4 | Utility TRUE-FALSE Difficulty 2...

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