CHAPTER 4 T OR F Flashcards
With quasilinear preferences, the slope of indifference curves is constant along all rays through the origin
F
Wanda Lott has the utility function ( U(x, y) = \max(x, y) ). Wanda’s preferences are convex
F
If someone has a utility function ( U = 2\min(x, y) ), then ( x ) and ( y ) are perfect complements for that person
T
Maximilian consumes two goods ( x ) and ( y ). His utility function is ( U(x, y) = \max(x, y) ). Therefore, ( x ) and ( y ) are perfect substitutes for Max
F
A person with the utility function ( U(x, y) = y + x^2 ) has convex preferences.
F
Mr. Surly consumes only two goods and hates them both. His utility function is ( U(x, y) = -\max(x, y) ). Mr. Surly has (weakly) convex preferences
T
Angela’s utility function is ( U(x_1, x_2) = (x_1 + x_2)^3 ). Her indifference curves are downward-sloping, parallel straight lines
T
Henrietta’s utility function is ( U(x_1, x_2) = x_1x_2 ). She has diminishing marginal rate of substitution between goods 1 and 2
T
Alice’s utility function is ( U(x, y) = x^2y ). Steve’s utility function is ( U(x, y) = x^2y + 2x ). Alice and Steve have the same preferences since Steve’s utility function is a monotonic transformation of Alice’s
F
Jean’s utility function is ( U(x, y) = x + y^2 - y ). If we draw her indifference curves with ( x ) on the horizontal axis and ( y ) on the vertical axis, then these indifference curves are everywhere downward-sloping and get flatter as one moves from left to right
F
The utility function ( U(x_1, x_2) = 2\ln x_1 + 3\ln x_2 ) represents Cobb-Douglas preferences.
T
Fiery Demon is a rotgut whisky made in Kentucky. Smoothy is an unblended malt whisky imported from Scotland. Ed regards these brands as perfect substitutes. When he goes into a bar, he sometimes buys only Fiery Demon. Other times he buys only Smoothy. This shows that Ed has unstable preferences
F
Mark strictly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A. These preferences can be represented by a utility function.
F
** A consumer has preferences represented by the utility function ( U(x_1, x_2) = 10(x_1^2 + 2x_1x_2 + x_2^2) - 50 ). For this consumer, goods 1 and 2 are perfect substitutes.
T
A person with utility function ( U(x, y) = 5 + y^2 + 2x ) has non-convex preferences.
T
A person with the utility function ( U(x, y) = 10 + y^2 + x ) has convex preferences.
F
A person with the utility function ( U(x_1, x_2) = \min(x_1 + 2x_2, 2x_1 + x_2) ) has convex, but not strictly convex preferences
T
If one utility function is a monotonic transformation of another, then the former must assign a higher utility number to every bundle than the latter
F
Quasilinear preferences are homothetic when the optimal amount of good 1 is not affordable
F
