Question

Use the following information to answer 31-35 Consider Jen, a consumer with preferences U left parenthesis H comma F right parenthesis equals 0.4 log F plus space 0.6 log H, where H is the quantity of housing and F is the quantity of food (per month). Suppose Jen has a stipend of $1000/month which she uses to purchase food at a price of $2/unit and housing at a price of $3/unit. Jen's utility-maximizing bundle of goods should be. A. (170F, 220H) B. (100F, 100H) C. (200F, 200H) D. (350F, 100H)

Suppose that Jen's employer subsidizes the food coupon by paying $1 of her each unit of food costs, thereby effectively lowering the price Jen pays for food to $1/unit. Jen's new optimal consumption bundle should be A. (340F, 220H) B. (150F, 100H) C. (310F, 230H) D. (400F, 200H)

Suppose that her employer simply gave Jen the dollar cost you found in Q32 as a lump sum (instead of subsidized food). Jen’s new optimal consumption bundle should be A. (150F, 100H) B. (280F, 280H) C. (115F, 115H) D. (340F, 240H) Jen gains A. same utility from both. B. a higher utility from the food subsidy. C. a higher utility from the lump-sum equivalent transfer. D. maybe higher or lower utility, the information is not enough.

Which following statements is TRUE? A. Food and housing are complement goods. B. Income elasticity of food is greater than zero. C. Housing is inferior good. D. Substitution effect is positive.

Answer 1