Homework Answers
a> False
Completeness and transitivity are two different properties and one does not guarantee the other.
b> True
It is so because if he has to take more of the bad good, he has to take more of the good good to remain indifferent.
c> False
They never intersect, it can be proved.
d> True
MRS does not depend on the exact form of the utility function but rather on the preference only.
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)For each of the following statements, determine whether it is true or false? Briefly explain. (24...
1. True or False, and explain briefly. 1) The assumption that more is better implies that...
1. True or False, and explain briefly. 1) The assumption that more is better implies that the indifference curves are upward sloping 2) Convexity of indifference curves implies that consumers are willing to give up more to get an extra the more they have 3) Consider the following three bundles. Bundle Good Goody If Bundles A and B are on the same indifference curve, preferences satisfy all the usual assumptions introduced in the lecture, Bundle Cis preferred to Bundle A...
9. Explain why two indifference curves that represent distinct levels of preference (or utility) can not...
9. Explain why two indifference curves that represent distinct levels of preference (or utility) can not cross and how this would violate the assumption that preferences are transitive. Provide a sketch to support your answer. homo economicus agent's preferences can be represented using a Cobb-Douglas utility functionn The agent's "taste for good 1 relative to good 2 depends on a single parameter, a. The larger the value of a, the more good 2 she is willing to give up to...
Which statement is true or false: a. The principle that "More is better" results in indifference...
Which statement is true or false:
a. The principle that "More is better" results in indifference curves reflecting greater preferences the further they are from the origin. b. If two goods are perfect substitutes, then the indifference curves for those two goods would be upward sloping and straight.
d See Hint Let x1 represent a typical good (i.e., consumers prefer more of good x1...
d
See Hint Let x1 represent a typical good (i.e., consumers prefer more of good x1 to less). Let x2 represent a second good in a two-good world. Both goods have continuous indifference curves and income, m, is greater than $0. Under which of the following situations would consumers spend all of their income on just x1? Choose one or more: A. X1 and x2 are perfect complements. B. The consumer has Cobb-Douglas preferences, and p2 > pi. C. xi...
1) Choose whether this statement is true or false and explain please a. In a two-good...
1) Choose whether this statement is true or false and explain please a. In a two-good world if one good is an inferior good the other good must be a luxury. b. When the price of a good changes, the substitution effect can be found by comparing the equilibrium quantities purchased on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line. c. A Giffen...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x , price of Y is P Y and the consumer income is m. a. Derive and interpret the budget constraint and its slope. b. If slope is -3, how will you interpret it? c. Suppose a government wants to discourage the excessive consumption of X and decides to impose a tax t 1 if someone consume more than X 1 but less than X...
Explain why the following is true: If preferences are homothetic, then both goods are normal. Explain...
Explain why the following is true: If preferences are homothetic, then both goods are normal. Explain why the following is false: If both goods are normal, then preferences are homothetic. True or False: For U(X, Y) and the income offer curve is either a vertical line or horizontal line not out of the origin, then the Engels curve for one of the goods will be vertical line not out of the origin. Explain why the following is true: If the...
Determine whether each of the following statements is TRUE or FALSE. Justify all the answers in f...
Determine whether each of the following statements is TRUE or FALSE. Justify all the answers in few sentences 1. (6 points) In the general neoclassical model with perfect competition, constant returns to scale, homothetic preferences. (a) The consumption bundle under autarky may not be affordable under free trade (b)Let p be the price vector under autarky, p be the price vector under trade, and m be the vector of net imports under trade. Thern , (p* -pP)o (c) With 2...
Question 2. Consider the following 8 bundles of goods x and y: A = (8,4) B...
Question 2. Consider the following 8 bundles of goods x and y: A = (8,4) B = (5,6) C = (5,9) D = (10,3) E =(1,4) F =(6,5) G=(2,8) H =(7,8) (a) Come up with an example of a utility function that will produce the following order of preference for the bundles, where H is most preferred, A and G are equally preferred, and E is least preferred. H , C , B , F , A = G ,...
Consider an exchange economy with two consumers, A and B, who can consume only two goods....
Consider an exchange economy with two consumers, A and B, who can consume only two goods. Suppose consumers’ preferences are represented by a Cobb- Douglas utility function of the form u(x1i,x2i) = x1ix2i (here i is for consumer A or B) for a consumption bundle of two goods (x1i,x2i). The consumers have endowments eA = (e1A;e2A) = (4;1) and eB = (e1B;e2B) = (1;4). The price of good 1 is p1 and the price of good 2 is p2. You...
1. True or False, and explain briefly. 1) The assumption that more is better implies that the indifference curves are upward sloping 2) Convexity of indifference curves implies that consumers are willing to give up more to get an extra the more they have 3) Consider the following three bundles. Bundle Good Goody If Bundles A and B are on the same indifference curve, preferences satisfy all the usual assumptions introduced in the lecture, Bundle Cis preferred to Bundle A...
9. Explain why two indifference curves that represent distinct levels of preference (or utility) can not cross and how this would violate the assumption that preferences are transitive. Provide a sketch to support your answer. homo economicus agent's preferences can be represented using a Cobb-Douglas utility functionn The agent's "taste for good 1 relative to good 2 depends on a single parameter, a. The larger the value of a, the more good 2 she is willing to give up to...
Which statement is true or false:
a. The principle that "More is better" results in indifference curves reflecting greater preferences the further they are from the origin. b. If two goods are perfect substitutes, then the indifference curves for those two goods would be upward sloping and straight.
d
See Hint Let x1 represent a typical good (i.e., consumers prefer more of good x1 to less). Let x2 represent a second good in a two-good world. Both goods have continuous indifference curves and income, m, is greater than $0. Under which of the following situations would consumers spend all of their income on just x1? Choose one or more: A. X1 and x2 are perfect complements. B. The consumer has Cobb-Douglas preferences, and p2 > pi. C. xi...
Determine whether each of the following statements is TRUE or FALSE. Justify all the answers in few sentences 1. (6 points) In the general neoclassical model with perfect competition, constant returns to scale, homothetic preferences. (a) The consumption bundle under autarky may not be affordable under free trade (b)Let p be the price vector under autarky, p be the price vector under trade, and m be the vector of net imports under trade. Thern , (p* -pP)o (c) With 2...
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