Question

11.he indifference curve that is tangent to the budget constraint on the Budget Constraint model shows the quantity of the two goods that the consumer would maximize utility from their consumption.

A.True.

B.False.

12.Susan, a student, budgets $20.00 for lunch for the week. Susan can buy 4 burger meals if she buys zero taco meals. What is the price of a burger meal for Susan?

A. $1.00

B. $2.00

C. $3.00

D. $4.00

E. $5.00

13. To determine the utility maximizing consumption of two products one uses the formula that is called the rule for maximizing utility:

A. P1/P2=MU1/MU2 which also is stated as MU1/PU1=MU2/P2..

B. Explains the Diamond-Water Paradox.

C. Calculates the utility maximizing consumption of the two goods.

D. All of the above are correct.

E. None of the above are correct.

14.If the Marginal Utility to Lee of working out in the gym one more day per week, from 5 to 6 days per week, becomes negative,

A. Lee is better off working out 5 days per week.

B. Lee is better off working out 6 days per week.

C. Lee is better off working out 7 days per week.

D. Lee is better off working out 0 days per week.

E. Lee should not work out at the gym.

15.A family on a trip budgets $1600.00 for restaurant meals and fast food meals. The family can buy 16 restaurant meals if they buy zero fast food meals. What is the price of a restaurant meal for the family?

A. $10.00

B. $16.00

C. $32.00

D. $100.00

E. $1600.00

16. Given that Kevin can consume a total of 8 tacos and 0 hamburgers, or 0 tacos and 4 hamburgers for her weekly lunch consumption possibilities; and, the price of a taco is $2.00, then Kim’s weekly lunch budget is

A. $32.00

B. $16.00

C, $8.00

D. $4.00

E. $2.00

Answer 1

11) True

Indifference curve shows various combination of two goods that give same level of satisfaction to the consumer. Higher the indifference curve, higher the utility. Also two indifference curves does not intersect each other. The utility maximising combination for the consumer is the point where the budget line is tanget to the highest possible indifference curve. Any indiffrence curve above this may give higher satisfaction, but is not attainable because of the budget constraint. Any indifference below the utility maximising point also lead to less utility.