Question

1. Suppose that the utility function is equal to U(XY)=   2YX² . What is the slope of the indifference curve when Y = 2 and X = 7? Assume that good X is on the horizontal axis and good Y is on the vertical axis.

A. 7

B.3

C. 1

D. 4/7

2.Kyle's utility function is U = 2X + 3Y, where X is units of good X, and Y is units of good Y. What is the marginal utility of good X?

A.2+4Y

B.3

C.2

D.U/4

3. Sarinda consumes crab cakes and tuna. Sarinda's utility increases with the consumption of crab cakes, but her utility neither increases nor decreases with the consumption of tuna. Assuming tuna is on the x-axis and crab cake is on the y-axis, what do Sarinda's indifference curves look like?

A.horizontal lines

B.vertical lines

C.downward-sloping lines

D.upward-sloping lines from the origin

4. Suppose a consumer spends all her income on goods X and Y. Suppose the price of good X increases, and the consumer's income decreases. Which of the following must be true?

A.The amounts of both good X and good Y that the consumer can purchase decrease.

B.The amount of good Y that the consumer can purchase decreases.

C.The amount of good X that the consumer can purchase decreases.

D.The amount of good X that the consumer can purchase decreases, and the amount of good Y that the consumer can purchase increases.

Answer 1

1. Ans - D) 4/7

Explanation:

Slope of IC curve = MUx/ Muy = 4XY/ 2X² = 2Y /X

the slope of the indifference curve when Y = 2 and X = 7 : 2*2/7 = 4/7

2. Ans - C) 2

Explanation:

the marginal utility of good X = d(U)/dx = 2

3. Ans - Horizontal lines

Explanation:

As tuna is a neutral commodity and crab cakes are good commodity for Sarinda.

She prefers to have more crab cake, but amount of tuna does not affect her utility so her utility increases as crab cakes increases, means IC curve move upward when crab cakes increases irrespective of the consumption of tuna. And if we place tuna along X-axis and crab cake along Y-axis, the indifference curves (ICs) will be horizontal straight lines.

4. Ans - C) The amount of good X that the consumer can purchase decreases.

Explanation:

As for good X both substitution effect and income effect are negative causes the amount of good X that the consumer can purchase decreases.

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