1.Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea is $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

Select one:

a. all tea.

b. all coffee.

c. a mix of coffee and tea.

d. there is insufficient information to know.

2."If an individual is to maximize the utility received from consumption, he or she should spend all

available income. . . . " This statement assumes

Select one:

a. that saving is impossible.

b. that the individual is not satiated in all goods.

c. that no goods are "inferior. "

d. Both a and b.

3.Suppose a teenager likes both rap music (R) and country music (C) with a set of preferences so

that U = C^1/2R^1/2. Which point (C, R) makes the teen the happiest?

Select one:

a. 4, 16

b. 25, 1

c. 9, 9

d. 16, 4

4.If the price of X falls, the budget constraint

Select one:

a. shifts outward in a parallel fashion.

b. shifts inward in a parallel fashion.

c. rotates outward about the X-intercept.

d. rotates outward about the Y-intercept.

5.Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea is $1. 25. Suppose

a student's beverage budget is $20 per week. What is the most cups of tea the student could buy?

Select one:

a. 20

b. 16

c. 10

d. 8

6.The point of tangency between a consumer's budget constraint and his or her convex indifference curve

represents

Select one:

a. complete satisfaction for the consumer.

b. the equivalence of prices the consumer pays.

c. constrained utility maximization for the consumer.

d. the least he or she can spend.

7.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 a beer is 25. Then in order to increase utility the individual should

Select one:

a. buy more steak and less beer.

b. buy more beer and less steak.

c. continue with current consumption plans.

d. Not enough information to answer the question.

8.Suppose a teenager likes both rap music (R) and country music (C) with a set of preferences so

that U = C^1/2R^1/2. Which point (C, R) makes the teen the happiest?

Select one:

a. 9, 16

b. 36, 1

c. 49, 4

d. 100, 0

9.Suppose a caffeine-deprived man needs to wake up. Suppose his preferences can be described by U = 3coffee + 2 Tea

If the price of coffee is $4 and the price of tea is $1, he will buy

Select one:

a. all coffee

b. all tea

c. some of both, but more coffee

d. some of both, but more tea

10.The X-intercept of the budget constraint represents

Select one:

a. how much of good Y can be purchased if no good X is purchased and all income is spent.

b. how much of good X can be purchased if no good Y is purchased and all income is spent.

c. total income divided by the price of X.

d. b and c.