25. Consider the following three market baskets in Figure 2. If preferences satisfy the basicassumptions of completeness and transitivity and more-is-better then:ABсFood685Figure 2(a) A is on the same indifference curve as B.(b) B is on the same indifference curve as C.(c) A is preferred to C.(d) B is preferred to A.(e) Both A and B answer choices are correct.Clothing358

An indifference map provides the set of indifference curves that informs on a consumer's…

25. Consider the following three market baskets in Figure 2. If preferences satisfy the basic assumptions of completeness and transitivity and more-is-better then: A B C Food 6 8 5 Figure 2 (a) A is on the same indifference curve as B. (b) B is on the same indifference curve as C. (c) A is preferred to C. (d) B is preferred to A. Clothing 3 5 8

25. Consider the following three market baskets in Figure 2. If preferences satisfy the basic assumptions of completeness and transitivity and more-is-better then: A B C Food 6 8 5 Figure 2 (a) A is on the same indifference curve as B. (b) B is on the same indifference curve as C. (c) A is preferred to C. (d) B is preferred to A. Clothing 3 5 8

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.2P

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Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
4 Emily goes camping on the weekend and eats marshmallows (M) and crackers (C) there. She wants to match 1 marshmallow with 2 crackers, but does not eat in different proportion (i.e., perfect com- plement). The price of a marshmallow is 10 cents and the price of a cracker is 5 cents, and she spend up to $3 in total. a) Write down a utility function which represents Emily's preferences over marshmallows and crackers. b) How many marshmallows and crackers is she going to consume? (Hint: the first-order conditions will not help; draw the budget constraint and the indifference curves and look at the highest one that intersect the budget constraint). c) What is the exact value of Emily's indirect utility?
1. Suppose that there are two breakfast options, pancakes and waffles. Kwame only cares about the calories he gets from his breakfast he wants to consume as much as possible, no matter the food. Suppose that a waffle has thrice as many calories as a pancake. What do Kwame's indifference curves look like, illustrated with waffles on the y axis and pancakes on the x - axis?
2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current in come is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?
9. Income and substitution effects Sean and Yvette Durand live in Edmonton and enjoy going out to fancy restaurants for dinner and to diners for breakfast. On the following diagram, the purple curves I1 and 12 represent two of their indifference curves for fancy dinners and diner breakfasts. They have $800 per month available to spend on eating out. The price of a diner breakfast is always $10. Each labelled point represents the tangency between a budget constraint and the corresponding indifference curve. DINER BREAKFASTS 48 40 26 BC 0 2 5 10 Z H BC FANCY DINNERS (?) The initial budget constraint (BC₁) shows the Durands' budget constraint when the price of a fancy dinner is $160. At this price, Sean and Yvette would choose to consume two fancy dinners. Suppose that the price of a fancy dinner decreases to $40, shifting their budget constraint to BC2, which represents a new relative price of four diner breakfasts per fancy dinner. (Hint: The blue line labelled H is parallel to BC2 and…
8. Show that if strict preferences > over three outcomes x, y and z, do not satisfy transitivity, so that x > y > z > x, then these preferences cannot be represented by a utility function.
Give examples by drawing a graph of each of the following. Please draw your graphs neatly using a ruler to draw the axes and label your graphs completely. In each case draw ar least three indiffer- ence curves and indicate clearly the direction of increasing prefer- ence. (i) the preferences being convex but not strictly convex. (ii) the preferences being strictly increasing but not convex.
Matt has $14 to spend on fruit today at the grocery store. The only fruits he likes are apples and oranges. Both cost $2 per pound. Matt's preferences between these fruits are presented in the table below. How many apples and oranges will he buy if he were a utility maximizer? a b с Pounds of Apples 1 2 3 4 5 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. d Pounds of Oranges 1 2 3 4 5 Apples = 1 pound, Oranges = 2 pounds Apples = 2 pound, Oranges = 5 pounds Apples = 1 pound, Oranges = 1 pound Marginal Utility from Apples Apples = 3 pounds, Oranges = 3 pounds. 200 300 380 440 480 Marginal Utility from Oranges 100 200 250 280 300