pres08_ass4_sol

pres08_ass4_sol - W1105.002 Principles of Economics...

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W1105.002 Principles of Economics Assignment 4, due Febr. 21 st 2008 Before submitting your assignment, please make a copy for your own use. Your assignment will not be returned to you before the recitation sessions. Be sure you include: Name: Recitation Section # 1. Sam is at Barnes and Nobel where he wants to use his $20 to purchase notebooks and pens. The price of a notebook is $4, the price of a pen is $2. We measure number of pens along the horizontal axis. Sam’s budget constraint a. is upward sloping. b. has a slope equal to -2. c. intersects the horizontal axis at 2 pens. d. intersects the vertical axis at 5 notebooks. 2. Which of the following statements is (are) true of an indifference curve? (i) Indifference curves are bowed inward. (ii) Combinations of the two goods along lower indifference curves are preferred to combinations along higher indifference curves. . (iii) An indifference curve cannot cross another indifference curve of the same consumer. a. (i) only b. (ii) only c. (i) and (iii) d. (ii) and (iii) e. (i), (ii) and (iii) 3 . Your income increases and you purchase less of a good, then you consider the good to be a. a substitute good. b. a normal good. c. an inferior good. d. a complementary good. 4. Bill’s has worked 40 hours this week. If he works 40 hours this week, his marginal utility from one more hour of free time is 80, his marginal utility of consumption is 5, his hourly wage is $10. This week a. Bill should work 40 hours this week as well.
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pres08_ass4_sol - W1105.002 Principles of Economics...

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