INTERMEDIATE MICROECONOMICS

Difficulty: 1 Correct Answer: b 1. 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) = 5x2 + 2y2 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. Difficulty: 1 Correct Answer: c 2. George has $49 which he decides to spend on x and y. Commodity x costs $5 per unit and commodity y costs $11 per unit. He has the utility function U(x, y) = 3x2 + 6y2 and he can purchase fractional units of x and y. George will choose a. only y. b. some of each commodity but more x than y. c. only x. d. some of each commodity but more y than x. e. equal amounts of the two commodities. Difficulty: 2 Correct Answer: e 3. Wanda Littlemore’s utility function is U(x, y) = x + 46y 2y2. Her income is $135. If the price of x is $1 and the price of y is $18, how many units of good x will Wanda demand? a. 5 b. 12 c. 16 d. 0 e. 9 Difficulty: 2 Correct Answer: e 4. Wanda Littlemore’s utility function is U(x, y) = x + 47y 3y2. Her income is $107. If the price of x is $1 and the price of y is $23, how many units of good x will Wanda demand? a. 11 b. 19 c. 0 d. 18 e. 15 Difficulty: 3 Correct Answer: b 5. Henri’s utility function is min{x, 5y + 2z}. The price of x is $1, the price of y is $15, and the price of z is $7. Henri’s income is $44. How many units of x does Henri demand? a. 9.78 b. 11 c. 5 d. 3 e. None of the above. Difficulty: 3 Correct Answer: a 6. Leo’s utility function is min{x, 3y + 2z}. The price of x is $1, the price of y is $9, and the price of z is $8. Leo’s income is $8. How many units of x does Leo demand? a. 2 b. 1.60 c. 5 d. 7 e. None of the above. Difficulty: 2 Correct Answer: a 7. Peter consumes no commodities other than Miller Lite and Bud Light. His annual budget for these two commodities is described by the equation 5x + 30y = 300, where x is sixpacks of Miller Lite and y is cases of Bud Light. Peter considers 2 cases of Bud Light to be perfect substitutes for 6 sixpacks of Miller Lite. a. He will consume 60 sixpacks of Miller Lite per year. b. He will consume 10 cases of Bud Light per year. c. He will consume 14 cases of Bud Light per year. d. He will consume 12 sixpacks of Miller Lite per year. e. He is indifferent between any two bundles that use up his entire income. Difficulty: 2 Correct Answer: d 8. Roger consumes no commodities other than Miller Lite and Bud Light. His annual budget for these two commodities is described by the equation 5x + 25y = 300, where x is sixpacks of Miller Lite and y is cases of Bud Light. Roger considers 2 cases of Bud Light to be perfect substitutes for 6 sixpacks of Miller Lite. a. He will consume 12 cases of Bud Light per year. b. He will consume 12 sixpacks of Miller Lite per year. c. He will consume 16 cases of Bud Light per year. d. He will consume 60 sixpacks of Miller Lite per year. e. He is indifferent between any two bundles that use up his entire income. Choice | 25