Content quiz 1

Question 1

Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea are $1. 25. Suppose
a student’s beverage budget is $20 per week. Suppose the student simply prefers more caffeine to less
and that the tea sold has the same amount of caffeine as the coffee. The student will buy

Answer 1

All tea

Question 2

If an individual has a constant MRS of shoes for sneakers of 3/4 (that is, he or she is always willing
to give up 3 pairs of sneakers to get 4 pairs of shoes) then, if sneakers and shoes are equally costly, he
or she will

Answer 2

buy only sneakers

Question 3

Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea are $1. 25. Suppose
a student’s beverage budget is $20 per week. What is the market tradeoff between coffee and tea?

Answer 3

1 coffee to 2 tea

Question 4

Suppose an individual’s MRS (of steak for beer) is 2:1. That is, at the current consumption choices
he or she is willing to give up 2 beers to get an extra steak. Suppose also that the price of a steak is $1
and beer is 25¢. Then in order to increase utility the individual should

Answer 4

Buy more beer and less steak

Question 5

An increase in an individual’s income without changing relative prices will

Answer 5

shift the budget constraint outward in a parallel way

Question 6

Suppose a little girl likes peanut butter and jelly sandwiches with exactly 2T of jelly and 1T of
peanut butter. Suppose further that her mom agrees to make sandwiches to those exact specifications
and the price of peanut butter is $. 25/T and the price of jelly is $. 10/T. If she has $1. 8 to spend on
peanut butter and jelly ingredients (ignore the bread) in a week, how many sandwiches will she
make?

Answer 6

4

Question 7

If the price of X falls, the budget constraint

Answer 7

rotates outward about the Y-intercept.

Question 8

Suppose a teenager likes both rap music (R) and country music (C) with a set of preferences so
that U = C1/2R1/2. Which point (C, R) makes the teen the happiest?

Answer 8

49,4

Question 9

Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea are $1. 25. Suppose
a student’s beverage budget is $20 per week. What are the most cups of tea the student could buy?

Answer 9

16

Question 10

Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea are $1. 25. Suppose
a student’s beverage budget is $20 per week. If you were going to write an algebraic expression of
this budget line of the form. B would be

Answer 10

-1/2