Constrain t lop Correct Responses: o Disariminat ion Index 2.1 Perry lives on avocados and beans. The price of avocados is 10, the price of beans is 5, and his income is 40. Show Perry's budget line on a graph with avocados on the horizontal aris and beans on the vertical azis. Label the point w here the budget line hits the horizont al aris A and the oint w here the budget line hits the vertical aris B. Nezt to these labels, write down the number of avoc ados purch ased at A and the number of beans purch ased at B. Draw another budget li show ing what Perry's budget would be if his income doubled, the price of avoc ados doubled, and the price of beans st ayed the same. Label the point where this line hits the vertical azis C and the point w here it hits the horizontal aris D. Nezt to these labels write the number of avoc ados at c and the number of beans at D Answer: Ata there are 4 avocados. at b there are 8 units of beans at c there are 4 avoc ados at d there are 16 units of bean Topic: Budget Constraint Difficulty: 2 Correct Responses: 0 Disaiminat ion Index: o 2.2 Brend a li kes hot dogs and Coca-Col a. Hot dogs cost $l each and Co kes cost $.50 per bottle The otion for Coke that will last fo nth. If brend a sends in the bottle tops from the Co kes she drin ks during the ne for example, if she returns 25 bottle caps she will t month, she will get a refund of $ 20 for every bottlecap be yond the first 12 that she returns get back $2.60=$ 20(25-12 ). Brenda has $40 to spend on hot dogs and Coke during the next month. Draw her budget line with Co ke on the horizont al a zis and hot dogs on the vertical aris Find the points where the budget line hits the ares and the point where it has a kink. At each of these three points write down the quantities of each good consumed Answer: The budget line runs from (0, 40) on the vertical axis to a kink point(12, 34) and from (12,34) to about(1253
Essay Budget Constraint Topic: Budget Constraint Diculty: 1 % Correct Responses: 0 Discrimination Index: 0 2.1 Perry lives on avocados and beans. The price of avocados is 10, the price of beans is 5, and his income is 40. Show Perry's budget line on a graph with avocados on the horizontal axis and beans on the vertical axis. Label the point where the budget line hits the horizontal axis A and the point where the budget line hits the vertical axis B. Next to these labels, write down the number of avocados purchased at A and the number of beans purchased at B. Draw another budget line showing what Perry's budget would be if his income doubled, the price of avocados doubled, and the price of beans stayed the same. Label the point where this line hits the vertical axis C and the point where it hits the horizontal axis D. Next to these labels write the number of avocados at C and the number of beans at D. Answer: At A there are 4 avocados. At B there are 8 units of beans. At C there are 4 avocados. At D there are 16 units of beans. Topic: Budget Constraint Diculty: 2 % Correct Responses: 0 Discrimination Index: 0 2.2 Brenda likes hot dogs and Coca-Cola. Hot dogs cost $1 each and Cokes cost $.50 per bottle. There is a special promotion for Coke that will last for one month. If Brenda sends in the bottle tops from the Cokes she drinks during the next month, she will get a refund of $.20 for every bottlecap beyond the rst 12 that she returns. For example, if she returns 25 bottle caps she will get back $2:60 = $:20(25 12). Brenda has $40 to spend on hot dogs and Coke during the next month. Draw her budget line with Coke on the horizontal axis and hot dogs on the vertical axis. Find the points where the budget line hits the axes and the point where it has a kink. At each of these three points write down the quantities of each good consumed. Answer: The budget line runs from (0; 40) on the vertical axis to a kink point (12; 34) and from (12; 34) to about (125:3; 0)
ChaPter 2 Budget constraint Topic: Budget Constraint Difficulty: 2 Correct Responses: o Disaiminat ion Inde 2.3 Felic ity is study ing economics and polit ical sc ience. She can read 30 pages of polit ical science hour but 5 pages of economics per hour. T his week she has a 50 page assignm ent in conomics and a 150 page assignment in polit ical science. Because of sorority rush, she cannot devote more than 10 hours to st ud ying t hese su b jects t his week. She realizes s he cannot com plete ll of her assignm ents but is determ ined to com plete at least 30 pages of d in Draw a grap h w it h pages of econo m ics on t he horizont al ax is and pages of political science on t he Felic ity has im posed on he rself. (She is allo wed to read a he ad in e it her subject. Label key points on your graph wit h t heir num erical value Answer: Anyt hing in t he triangle bo unded by (0, 300 ), (30, 120 )and(30, 0)sat is fies t hese constraints Topic Budget Constraint Difficulty: 3 Correct Responses on Index: 2.4 Ed Moore and his family live in a city w it h many private schools and one public sc hool. T he Moores are t hinking of sending t he ir only child to private school because they would like a sc hool t hat has more teac hers and ot her resources per st udent t han t he lo cal public school. T he Moore must pay taxes to sup port local public sc hoo ls w het her or not t heir child goes to private sc ho here is such a Variety of private sc hoo ls t hat t he Moores can get just a bo ut any le vel of inputs per student by choosing t he appropriate private sc hool. Tuition in t he private schools equals ex penditure per st udent. Draw a diagram to show t he Moores bud get constraint. Put ex penditures per student in t he childs sc hool on t he horizont al axis and ot her go o ds on t he vertical Answer: One point is (a, d)w here is expenditures per pupil in public sc hool and d is disposa ble income. T he rest of t he bud get is a line with slope -1 from(2s, d-2)to the r axis
CHAPTER 2 Budget Constraint 22 Topic: Budget Constraint Diculty: 2 % Correct Responses: 0 Discrimination Index: 0 2.3 Felicity is studying economics and political science. She can read 30 pages of political science per hour but only 5 pages of economics per hour. This week she has a 50 page assignment in economics and a 150 page assignment in political science. Because of sorority rush, she cannot devote more than 10 hours to studying these sub jects this week. She realizes she cannot complete all of her assignments but is determined to complete at least 30 pages of her economics reading. Draw a graph with pages of economics on the horizontal axis and pages of political science on the vertical axis. On this graph, show the possibilities that are consistent with the constraints that Felicity has imposed on herself. (She is allowed to read ahead in either sub ject.) Label key points on your graph with their numerical values. Answer: Anything in the triangle bounded by (0; 300); (30; 120) and (30; 0) satis es these constraints. Topic: Budget Constraint Diculty: 3 % Correct Responses: 0 Discrimination Index: 0 2.4 Ed Moore and his family live in a city with many private schools and one public school. The Moores are thinking of sending their only child to private school because they would like a school that has more teachers and other resources per student than the local public school. The Moores must pay taxes to support local public schools whether or not their child goes to private school. There is suchavariety of private schools that the Moores can get just about any level of inputs per student by choosing the appropriate private school. Tuition in the private schools equals expenditure per student. Draw a diagram to show the Moores' budget constraint. Put expenditures per student in the child's school on the horizontal axis and other goods on the vertical. Answer: One point is (x; d) where x is expenditures per pupil in public school and d is disposable income. The rest of the budget is a line with slope 1 from (2s; d x) to the x axis
c h t e r 3 T r u e references Topic: Pre ferenc Difficulty: 1 Res Discriminat ion Index: 31 Correct Answer: Fal 3.1 If preferences are transitive. m ore is alw ays p referred to less pic: Preferences Difficulty: I Discriminat ion Index: 21 3.2 A person with reflex ive preferences is som eone w ho does not shop carefully. Topic: Pre ferences Difficulty: 2 Index: 6 Correct Answer: True 3.3 If som eone has the utility function U=1///+2min a, y) then x and y are perfect com plem en ts or that person Correct Responses: 68 Discrimina 3.44 ith convex preferences who is in different between the bundles(1, 2)and(9, 6) ill like the bundle (5, 4) at least as w ell as either of the first two bundles Topic: Preferences Difficulty: 1 % o Correct Responses: 68 at ion Index: Correct Ans 3.5A different between the bundles(2 w ill like the bundle(6, 6)at least as w ell as either of the first two bundles Topic: Preferences Difficulty: 2 %o Correct Res 3.6 If there are tw o goods, if a consum er prefers m ore of each good to less, and if she has dim in shing m arginal rate of subs titution, then her p references are convex
Chapter 3 True-False Preferences Topic: Preferences Diculty: 1 % Correct Responses: 70 Discrimination Index: 31 Correct Answer: False 3.1 If preferences are transitive, more is always preferred to less. Topic: Preferences Diculty: 1 % Correct Responses: 89 Discrimination Index: 21 Correct Answer: False 3.2 A person with re exive preferences is someone who does not shop carefully. Topic: Preferences Diculty: 2 % Correct Responses: 94 Discrimination Index: 6 Correct Answer: True 3.3 If someone has the utility function U = 1000+2minfx; yg then x and y are perfect complements for that person. Topic: Preferences Diculty: 1 % Correct Responses: 68 Discrimination Index: 40 Correct Answer: True 3.4 A consumer with convex preferences who is indi erent between the bundles (1; 2) and (9; 6) will like the bundle (5; 4) at least as well as either of the rst two bundles. Topic: Preferences Diculty: 1 % Correct Responses: 68 Discrimination Index: 40 Correct Answer: True 3.5 A consumer with convex preferences who is indi erent between the bundles (2; 3) and (10; 9) will like the bundle (6; 6) at least as well as either of the rst two bundles. Topic: Preferences Diculty: 2 % Correct Responses: 81 Discrimination Index: 0 Correct Answer: True 3.6 If there are two goods, if a consumer prefers more of each good to less, and if she has diminishing marginal rate of substitution, then her preferences are convex
CHAPTER 3 Preferences Topic: Preferences Difficulty: 2 9 Correct Respo Discrimination Index: 11 Correct Answer 3.7 If preferences are convex, t hen for any commodity bundle x, the set of commodity bundles that are worse t han x is a convex set Topic: Preferences Difficulty: 2 9 Correct Respo As Disariminat ion Index: o 3.8 Bill Katz prefers more of good 1 to less and he prefers less of good 2 to more. Bill has convex preferences. If we draw his indi fference curves wit h good 1 on the horizont al axis and good 2 on the vertical axis, t hen his indifference curves have positive slope but get steeper as they rise Topic Preferences 9 Correct Respe As Disariminat ion Index 3. 9 The marginal rate of substit ution measures t he dist ance between one indifference curve and th Topic: Preferences Difficulty: 1 9 Correct Respe As Disaiminat ion Index: 11 3.10 Ambrose has an indifference curve with equation x 2= 20-4xi. When Ambrose is con- suming the bundle (4, 16), his marginal rate of substitution is -5/4 Topic: Preferences Difficulty: 1 will give her grade that is the maximum of he dterm examina midterm scores
CHAPTER 3 Preferences 24 Topic: Preferences Diculty: 2 % Correct Responses: 75 Discrimination Index: 11 Correct Answer: False 3.7 If preferences are convex, then for any commodity bundle x; the set of commodity bundles that are worse than x is a convex set. Topic: Preferences Diculty: 2 % Correct Responses: 58 Discrimination Index: 0 Correct Answer: False 3.8 Bill Katz prefers more of good 1 to less and he prefers less of good 2 to more. Bill has convex preferences. If we draw his indi erence curves with good 1 on the horizontal axis and good 2 on the vertical axis, then his indi erence curves have positive slope but get steeper as they rise. Topic: Preferences Diculty: 1 % Correct Responses: 99 Discrimination Index: 0 Correct Answer: False 3.9 The marginal rate of substitution measures the distance between one indi erence curve and the next one. Topic: Preferences Diculty: 1 % Correct Responses: 79 Discrimination Index: 11 Correct Answer: False 3.10 Ambrose has an indi erence curve with equation x2 = 20 4x 1=2 1 . When Ambrose is consuming the bundle (4; 16); his marginal rate of substitution is 5=4. Topic: Preferences Diculty: 1 % Correct Responses: 77 Discrimination Index: 34 Correct Answer: False 3.11 Nancy's psychology teacher will give her a course grade that is the maximum of her scores on three midterm examinations. Nancy has convex preferences over the possible combinations of midterm scores
TRUE-RALSE 25 Topic: Preferences Difficulty: 3 Correct Responses: 39 Discrimination Index: 26 Correct Answer: False 3.12 If Melody has m ore classical records t han rock and roll records, s he is willing to exchange exactly 1 classical record for 2 rock and roll records, but if she has m ore rock and roll records t han classical records, t he n s he is willing to exchange exactly I rock and roll record for 2 classical records. Melody has conVex preferences. Topic: Preferences Difficulty: 1 9 Correct Responses: 71 Discrimination index: 17 Correct Answer: False 3.13 Josep hine buys 3 quarts of milk and 2 pounds of but ter w hen milk sells for $2 a quart and butter sells for $I a pound. Wilma buys 2 quarts of m il k and 3 pounds of butter at t he same prices Josep hine s m arginal rate of su bstit ut io n between mil k and butter is greater t han wilm as Topic: Preferenc Correct Responses: 29 Discrimination Index: 29 Correct answer: true a consumer who is una ble to detect sm all differences in the am ount of w could have a transitive strict pre ference relat ion but is unli kely to have a transitive ind ifference relatio
TRUE-FALSE 25 Topic: Preferences Diculty: 3 % Correct Responses: 39 Discrimination Index: 26 Correct Answer: False 3.12 If Melody has more classical records than rock and roll records, she is willing to exchange exactly 1 classical record for 2 rock and roll records, but if she has more rock and roll records than classical records, then she is willing to exchange exactly 1 rock and roll record for 2 classical records. Melody has convex preferences. Topic: Preferences Diculty: 1 % Correct Responses: 71 Discrimination Index: 17 Correct Answer: False 3.13 Josephine buys 3 quarts of milk and 2 pounds of butter when milk sells for $2 a quart and butter sells for $1 a pound. Wilma buys 2 quarts of milk and 3 pounds of butter at the same prices. Josephine's marginal rate of substitution between milk and butter is greater than Wilma's. Topic: Preferences Diculty: 2 % Correct Responses: 29 Discrimination Index: 29 Correct Answer: True 3.14 A consumer who is unable to detect small di erences in the amount of water in her beer could have a transitive strict preference relation but is unlikely to have a transitive indi erence relation