Harvard Practice Problems - Practice final 2009 Multiple...

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Practice final 2009 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. In Problem 2, Ambrose has indifference curves with the equation , where larger constants correspond to higher indifference curves. If good 1 is drawn on the horizontal axis and good 2 on the vertical axis, what is the slope of Ambrose’s indifference curve when his consumption bundle is (1, 11)? a. b. c. –12 d. –2 e. –1 ____ 2. In Problem 9, if we graph Mary Granola’s indifference curves with avocados on the horizontal axis and grapefruits on the vertical axis, then whenever she has more grapefruits than avocados, the slope of her indifference curve is –2. Whenever she has more avocados than grapefruits, the slope is . Mary would be indifferent between a bundle with 9 avocados and 15 grapefruits and another bundle with 15 avocados and a. 13 grapefruits. b. 11 grapefruits. c. 7 grapefruits. d. 9 grapefruits. e. 10 grapefruits. ____ 3. In Problem 1, Charlie’s utility function is U ( A , B ) = AB , where A and B are the numbers of apples and bananas, respectively, that he consumes. If Charlie is consuming 35 apples and 175 bananas, then if we put apples on the horizontal axis and bananas on the vertical axis, the slope of his indifference curve at his current consumption is a. –36. b. –10. c. . d. –5. e. . ____ 4. In Problem 2, Ambrose has the utility function U ( x 1 , x 2 ) = . If Ambrose were initially consuming 4 units of nuts (good 1) and 23 units of berries (good 2), then what is the largest number of berries that he would be willing to give up in return for an additional 45 units of nuts? a. 30 b. 7 c. 10 d. 20 e. 5 ____ 5. Joe Bob’s cousin Peter consumes goods 1 and 2. Peter thinks that 4 units of good 1 is always a perfect substitute for 2 units of good 2. Which of the following utility functions is the only one that would NOT represent Peter’s preferences? a. U ( x 1 , x 2 ) = min{ 2 x 1 , 4 x 2 }. b. U ( x 1 , x 2 ) = 20 x 1 + 40 x 2 – 10,000. c. U ( x 1 , x 2 ) = 2 x 1 + 4 x 2 + 1,000. d. U ( x 1 , x 2 ) = 4 x 2 1 + 16 x 1 x 2 + 16 x 2 2 . e. More than one of the above does not represent Peter’s preferences.
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____ 6. In Problem 1, Charlie has a utility function U ( x A , x B ) = x A x B , the price of apples is $1, and the price of bananas is $2. If Charlie’s income were $400, how many units of bananas would he consume if he chose the bundle that maximized his utility subject to his budget constraint? a. 100 b. 20 c. 200 d. 50 e. 300 ____ 7. In Problem 3, Ambrose’s utility is U ( x 1 , x 2 ) = . If the price of nuts (good 1) is $1, the price of berries (good 2) is $4, and his income is $132, how many units of nuts will Ambrose choose? a.
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This note was uploaded on 05/05/2010 for the course ECONMOICS ECON 203 taught by Professor Josephpetry during the Spring '10 term at University of Illinois, Urbana Champaign.

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Harvard Practice Problems - Practice final 2009 Multiple...

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