Question
Consider a consumer who consumes two goods, x and y, with a daily income of I=100 . On Monday the price of x is px=1
Consider a consumer who consumes two goods, x and y, with a daily income of I=100
.
On Monday the price of x is px=1 and the price of y is py=2
.
On Tuesday the price of x is px=2 and the price of y is py=1
Below are different consumption decisions by different consumers. All of them are facing the same prices and income. We say that a utility function is "consistent" with the participant's choices if maximizing the function on any given day yields that participant's actual choice on that day.
Question 4
Daniel chose the bundle (x,y)=(100,0)
on Monday, and the bundle (x,y)=(0,100)
on Tuesday.
a.
The utility function u(x,y)=xy
is consistent with these choices
b.
There do not exist strictly convex preferences that are consistent with these choices.
c.
The utility function u(x,y)=3x+y
is consistent with these choices.
d.
There may exist a strictly convex utility function that is consistent with these choices, but it is not one of the answers provided.
e.
The utility function u(x,y)=x-y
is consistent with these choices.
f.
The utility function u(x,y)=y-x
is consistent with these choices
g.
The utility function u(x,y)=x+y
is consistent with these choices.
Question 5
Alice chose the bundle (x,y)=(0,50)
on Monday, and the bundle (x,y)=(0,100)
on Tuesday.
Question 5Answer
a.
The utility function u(x,y)=xy
is consistent with these choices
b.
There may exist a strictly convex utility function that is consistent with these choices, but it is not one of the answers provided.
c.
The utility function u(x,y)=2x+y
is consistent with these choices.
d.
The utility function u(x,y)=x+y
is consistent with these choices.
e.
The utility function u(x,y)=x-y
is consistent with these choices.
f.
The utility function u(x,y)=y-x
is consistent with these choices
g.
There do not exist strictly convex preferences that are consistent with these choices.
h.
The utility function u(x,y)=3x+y
is consistent with these choices.
Question 6
Benjamin chose the bundle (x,y)=(50,25)
on Monday, and the bundle (x,y)=(25,50)
on Tuesday.
a.
The utility function u(x,y)=xy
is consistent with these choices
b.
The utility function u(x,y)=x-y
is consistent with these choices.
c.
There do not exist strictly convex preferences that are consistent with these choices.
d.
The utility function u(x,y)=y-x
is consistent with these choices
e.
The utility function u(x,y)=2x+y
is consistent with these choices.
f.
The utility function u(x,y)=3x+y
is consistent with these choices.
g.
There may exist a strictly convex utility function that is consistent with these choices, but it is not one of the answers provided.
h.
The utility function u(x,y)=x+y
is consistent with these choices.
Question 7
Charlotte chose the bundle (x,y)=(25,37.5)
on Monday, and the bundle (x,y)=(37.5,25)
on Tuesday
a.
There may exist a strictly convex utility function that is consistent with these choices, but it is not one of the answers provided.
b.
The utility function u(x,y)=2x+y
is consistent with these choices.
c.
The utility function u(x,y)=xy
is consistent with these choices
d.
There do not exist strictly convex preferences that are consistent with these choices.
e.
The utility function u(x,y)=x+y
is consistent with these choices.
f.
The utility function u(x,y)=3x+y
is consistent with these choices.
g.
The utility function u(x,y)=y-x
is consistent with these choices
h.
The utility function u(x,y)=x-y
is consistent with these choices.
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