QUESTION 11 1. If a round of golf costs me $80, and I must take off six hours fr
ID: 1223021 • Letter: Q
Question
QUESTION 11
1. If a round of golf costs me $80, and I must take off six hours from work to play it, what is the total economic cost of the round of golf. Assume that I make $40 per hour and I do not get paid for time away from the job? (Enter just the whole number -- no dollar signs, no decimal points, no words.)
1 point
QUESTION 12
1.
Table B
Budget = 10
Price
=1
Price
=1
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
2.
3. Consider, Table A, above. If the budget is $10 and the price of both widgets and zercs is $1, determine the utility maximizing combination of widgets and zercs for this consumer to purchase. The utility maximizing combination of widgets and zercs is widgets and zercs. (Enter a whole number, 0 - 10, no decimals, no words – just the number of widgets and zercs, respectively.)
1 point
QUESTION 13
1. Table B
Budget = 10
Price
=2
Price
=1
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
2.
If the price of widgets rises to $2 and the price of zercs remains at $1, the utility maximizing combination of widgets and zercs is widgets and zercs. (Enter a whole number, 0 - 10, no decimals, no words – just the number of widgets and zercs, respectively.)
1 point
QUESTION 14
1. TABLE B
Budget = 10
Price
=1
Price
=2
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
2.
3. Now suppose the price of widgets goes back to $1 and the price of zercs rises to $2. The utility maiximizing combination of widgets and zercs is now widgets and zercs. (Enter a whole number, 0 - 10, no decimals, no words – just the number of widgets and zercs, respectively.)
1 point
QUESTION 15
1. The law of (three words) ______ ________ ________explains why an indifference curve is convex to the origin.
1 point
QUESTION 16
1. The budget constraint is negatively sloped because:
A.
Assuming that your tastes are constant, when you buy more of one good, you want less of another good.
B.
Assuming that your income is a given, when you buy more units of one product you can afford fewer units of the other.
C.
Neither of the above, the budget constraint is positively sloped.
D.
Neither of the above, the budget constraint is horizontal.
2 points
QUESTION 17
1. Refer to Graph. This consumer prefers combination D to combination C.
True
False
2 points
QUESTION 18
1. Refer to Graph If the price of good Y went up, the budget constraint would become flatter (i.e., less steep).
True
False
2 points
QUESTION 19
1. Refer to Graph This consumer is indifferent between combinations A, B & C.
True
False
2 points
QUESTION 20
1. Refer to Graph. Given his budget, relative prices of X & Y, and his preferences between X & Y, as indicated by this graph, the utility maximizing combination is C.
True
False
Budget = 10
Price
=1
Price
=1
Total
Marginal
Total
Marginal
Widgets
Utility
Utility
MU/P
Zercs
Utility
Utility
MU/P
0
0
0
0
1
500
1
100
2
900
2
190
3
1200
3
260
4
1380
4
300
5
1500
5
320
6
1580
6
330
7
1650
7
335
8
1700
8
338
9
1720
9
339
10
1730
10
340
Explanation / Answer
(11) Total economic cost = $80 + 6 x $40 = $(80 + 240) = $320
(12) Utility is maximized when
(MU of Widgets / Price of widgets) = (MU of Zerc / Price of Zerc), where
MU = Change in Total utility (TU) / Change in Quantity
From following table, we see that above condition is fulfilled for following (Widget, Zerc) bundles:
(a) (7, 3) [When MU / P = 70 for both]
(b) (9, 5) [When MU / P = 20 for both]
(c) (10, 6) [When MU / P = 10 for both]
For bundle (a), Cost = 7 x $1 + 3 x $1 = $(7 + 3) = $10 (Budget is exhausted)
For bundle (b), Cost = 9 x $1 + 5 x $1 = $(9 + 5) = $14 (Budget is exceeded)
For bundle (c), Cost = 10 x $1 + 6 x $1 = $(10 + 6) = $16 (Budget is underutilized)
So, optimal consumption bundle is: 7 Widgets, 3 Zercs.
NOTE: First 2 questions are answered.
Widget TU MU MU/P Zerc TU MU MU/P 0 0 - 0 0 0 - 0 1 500 500 500 1 100 100 100 2 900 400 400 2 190 90 90 3 1,200 300 300 3 260 70 70 4 1,380 180 180 4 300 40 40 5 1,500 120 120 5 320 20 20 6 1,580 80 80 6 330 10 10 7 1,650 70 70 7 335 5 5 8 1,700 50 50 8 338 3 3 9 1,720 20 20 9 339 1 1 10 1,730 10 10 10 340 1 1Related Questions
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