wiley quiz

8/10/2019 Wiley Quiz

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4. Een consument haalt nut uit het consumeren van goed x en y volgens nutsfunctie U(x,y)=6x+3y.Hij heeft een budget van $30 te besteden. Wat is de optimale goederenbundel wanneer de prijzengelijk zijn aan Px = 2 en Py = 3?

(x=0, y=10)

(x=6, y=6)

(x=15, y=0)

none of the above

5. Justin has the utility function U =xy, with the marginal utilities MUx = y and MUy =x. The price

ofx is 2, the price of y ispy, and his income is 40. When he maximizes utility subject to his budgetconstraint, he purchases 5 units ofy. What must be the price of y and the amount ofx consumed?

py= $6, x = 5

py= $3, x = 12.5

py= $2, x = 20

py= $4, x = 10

6. Paul consumes only two goods, pizza (P) and hamburgers (H) and considers them to be perfect

substitutes, as shown by his utility function: U(P,H) = P + 4H. The price of pizza is $3 and the price ofhamburgers is $6, and Pauls monthly income is $300. Knowing that he likes pizza, Paulsgrandmother gives him a birthday gift certificate of $60 redeemable only at Pizza Hut. Though Paul ishappy to get this gift, his grandmother did not realize that she could have made him exactly as happyby spending far less than she did. How much would she have needed to give him in cash to make him

just as well off as with the gift certificate?

$30

$60

$45

$50


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7. Raymond consumes leisure (L hours per day) and other goods (Y units per day), withpreferences described by U(L, Y) = Y+ 2L. The associated marginal utilities areMUY= 1and MUL= 1/L. The price of other goods is 1 euro per unit. The wage rate is w euros per hour.

Show how the number of units of leisure Raymond chooses depends on the wage rate?

L = 2w2

L = 1/w2

L = 1/w0.5

L = w2

How does Raymonds daily income depend on the wage rate?

Y = 24w (1/w2)

Y = 24w (w2)

Y = 24w (1/w)

Y = 16w (1/w)

Does Raymond work more when the wage rate rises?

No, Raymond does not work more as the wage rate rises.

Yes, Raymond works more as the wage rate rises.

Not enough information to answer the question.


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Rick purchases two goods, food and clothing. He has a diminishing marginal rate of substitutionof food for clothing. Letx denote the amount of food consumed and y the amount of clothing.Suppose the price of food increases from Px1 to Px2. On a clearly labeled graph, illustrate theincome and substitution effects of the price change on the consumption of food. Do so for each ofthe following cases:

Case 1: Food is a normal good.


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Case 2: The income elasticity of demand for food is zero.


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Case 3: Food is an inferior good, but not a Giffen good.


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Case 4: Food is a Giffen good.


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9. Let with and . Let , and be the initial set of prices and income.

Now, let rise to $25. What are the (approximate) substitution and income effects of this changein prices?

Income effect = -1.2; Substitution Effect = -1.8




10. Under what circumstances is the demand curve downward-sloping?

When the good is a Giffen good.

When the good is an inferior good and the income effect outweighs the substitutioneffect.

The demand curve is always downward-sloping.

When the good is not a Giffen good.


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11. Suppose the market for rental cars has two segments, business travelers and vacationtravelers. The demand curve for rental cars by business travelers is Qb = 35 0.25P, where Qb isthe quantity demanded by business travelers (in thousands of cars) when the rental priceis P dollars per day. No business customers will rent cars if the price exceeds $140 per day. Thedemand curve for rental cars by vacation travelers is Qv = 120 1.5P, whereQv is the quantitydemanded by vacation travelers (in thousands of cars) when the rental price is P dollars per day.No vacation customers will rent cars if the price exceeds $80 per day.

Fill in the table to find the quantities demanded in the market at each price.(Round your answers to 1 decimal place and use dot as decimal. For example, 0.1.)

Price($/day)

Business (thousandsof cars/day)

Vacation (thousandsof cars/day)

Market Demand(thousands of

cars/day)

100

90

80

70

60

50


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Select a graph that best reflects the demand curve for each segment, and the marketdemand curve for rental cars.


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Describe the market demand curve algebraically. In other words, show how the quantitydemanded in the marketQm depends on P. Make sure that your algebraic equation for themarket demand is consistent with your answers to parts (a) and (b).

Qm= 155 - 1.75P

Qm= 155 - 1.75P, when P < 80; Qm = 35 - 0.25P when P > 80

Qm= 35 - 0.25P

If the price of a rental car is $60, what is the consumer surplus in each market segment?

Consumer surplus for the business travelers is $65. Consumer surplus for the vacationtravelers is $5.




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