2.1 If she spends all of her income on lemons and tangerines, Isabella can just afford 30
lemons and 8 tangerines per day. She could also use her entire budget to buy 6 lemons
and 14 tangerines per day. The price of lemons is 6 guineas each. How
4.1 Ike's utility function is U(x; y) = 25xy. He has 12 units of good x and 8 units of y.
Ben's utility function for the same two goods is U(x; y) = 4x+ 4y. Ben has 9 units of x
and 13 units of y.
(a) Ike prefers Ben's bundle to his own bundle, b
5.1 Hans has 27 dollars, 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) = 5x2 +
2y^2 and he can purchase fractional units of x and y.
(a) Hans will choo
3.1 Fanny consumes goods x and y. Her indifference curves are described by the formula
y = k=(x + 7). Higher values of k correspond to better indifference curves. Which of the
following is true?
(a) Fanny likes good y and hates good x.
6.1 Daisy received a tape recorder as a birthday gift and is not able to return it. Her utility
function is U(x; y; z) = x+z^(1/2f) (y) where z is the number of tapes she buys, y is the
number of tape recorders she has and x is the amount of mone
10.1 If current and future consumption are both normal goods, an increase in
the interest rate will necessarily:
(a) cause savers to save more.
(b) cause borrowers to borrow less.
(c) reduce everyone's current consumption.
(d) make everyone worse off
2) List and describe four different types of freight rate
systems. Based on the structure of transport costs, explain
why most short distance shipments are by truck,
intermediate distance shipments are by rail, and long