To maximize utility, consumers choose a consumption bundle OA. where the slope of the budget constraint is equal to the ratio of the price of the good on the horizontal axis divided by the price of the good on the vert axis (multiplied by minus one). B. on the highest indifference curve given the budget constraint. Oc. where indifference curves intersect one another. OD. where the marginal utility of each product is maximized. E. where the slope of the highest indifference curve is equal to the marginal rate of substitution.

To maximize utility, consumers choose a consumption bundle OA. where the slope of the budget constraint is equal to the ratio of the price of the good on the horizontal axis divided by the price of the good on the vert axis (multiplied by minus one). B. on the highest indifference curve given the budget constraint. Oc. where indifference curves intersect one another. OD. where the marginal utility of each product is maximized. E. where the slope of the highest indifference curve is equal to the marginal rate of substitution.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.2P

See similar textbooks

Similar questions

Suppose that the following utility function is given (x,Y) xY. Which of the following is correct? OYis a good and X is a bad and indifference curve is positively sloped. X is a good and Y is a bad and indifference curve is negatively sloped. O Both X and Y are bads and indifference curve is negatively sloped. Both X and Y are goods and indifference curve is negatively sloped
-uppose John is currently at point A on the indifference curve to the right. If he moves to point B, en A. the level of utility remains constant because the marginal utility of pizza increases and the marginal utility of Pepsi decreases. OB. the level of utility increases because the marginal utility of pizza increases. OC. the level of utility remains constant because the marginal utility of pizza decreases and the marginal utility of Pepsi increases. OD. the level of utility decreases because the marginal utility of Pepsi decreases. Pepsi (bottles per week) B Pizza (slices per week)
A consumer’s preferences between goods x and y are representedby the utility function u(x, y) = 2min{x, y}+10. Suppose this consumer hasincome of $16, the price of good x is $3 and the price of good y is $1. Suppose the price of good x increases to $7 while the price of good y andthe consumer’s income stay constant. Calculate the magnitudes of the compensating and the equivalent variations. Explain what each measures.
Answer the following short questions:a. Suppose that a consumer’s preferences between goods x andy are represented by the utility function u(x, y) = x^2 + 16xy + 64y^2. If these two goods have the same price, describe the optimal consumptionchoice of this consumer.b. Suppose that when the price of a good change, the incomeand substitution effects change the consumer’s demand for that goodin opposite directions.i. Is this good a normal or an inferior good? Explain.ii. Is this good a Giffen or an ordinary good? Explain.c. Is the following statement true or false? The differencebetween a monopolist’s marginal cost and its profit-maximizing price issmaller when the demand is more elastic.
1. Assume well behaved preferences for a consumer. If total income goes up, ceteris paribus what would be the impact on the Budget line? 2. Assume well behaved preferences for a consumer. If total price of good on Y axis goes up, ceteris paribus what would be the impact on the Budget line? 3. Differentiate between the concept of Income effect and Substitution effect in Price Decomposition