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ch5
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
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 $320, how many units of bananas would he consume if he chose the bundle that
maximized his utility subject to his budget constraint?
a.
80
b.
40
c.
160
d.
16
e.
240
____
2.
Clara’s utility function is
U
(
X
,
Y
) = (
X
+ 2)(
Y
+ 1). If Clara’s marginal rate of substitution is –2 and she is
consuming 10 units of good
X
, how many units of good
Y
is she consuming?
a.
2
b.
24
c.
12
d.
23
e.
5
____
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 $7, and his income is $238, how many units of
nuts
will Ambrose choose?
a.
6
b.
196
c.
392
d.
199
e.
98
____
4.
Hans has $27 which he decides to spend on
x
and
y
. Commodity x costs $16 per unit and commodity
y
costs
$10 per unit. He has the utility function
U
(
x
,
y
) = 5
x
2
+ 2
y
2
and he can purchase fractional units of
x
and
y
.
Hans will choose
a.
only x.
b.
only y.
c.
some of each commodity but more y than x.
d.
some of each commodity but more x than y.
e.
equal amounts of the two commodities.
____
5.
Peter consumes no commodities other than Miller Lite and Bud Light. His annual budget for these two
commodities is described by the equation 5
x
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This note was uploaded on 05/08/2011 for the course ECON 302 taught by Professor Avrinrad during the Spring '09 term at University of Illinois, Urbana Champaign.
 Spring '09
 AVRINRAD
 Utility

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