Dana has standard consumer preferences over two goods: hours spent watching football (W

) and hours spent playing football (P

). He is indifferent between the bundles:A=(2W,1P)

andB=(1W,2P)

. He is offered a third bundleC=(1.5W,1.5P)

.

Based on the preference assumptions, what might we say about Dana's preferences for C relative to A or B?

(Select each correct answer.)

Dana might prefer C to A, and C to B

Dana might prefer C to A, and A to B

Dana might prefer C to A, and B to C

Dana might prefer A to C, and B to C

Dana might be indifferent between C, A, and B

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Problem PS2.1.2

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Like Dana, Eric has standard consumer preferences over two goods: ice cream and chocolate. Eric's marginal rate of substitution of ice cream for chocolate is 2.

The total utility of ice cream is twice the total utility of chocolate for Eric

The total utility of ice cream is half the total utility of chocolate for Eric

Neither of the above

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Problem PS2.1.3

1 point possible (graded)

Suppose Finley spends $1,000 a year on food. The government now gives him $500 in food stamps.

What do we know about Finlay's spending? Assume food is a normal good.

(Select each correct answer.)

The effect of the food stamps on Finley's cash expenditure must be the same as the effect of a hypothetical $500 gift in cash

The effect of the food stamps on Finley's cash expenditure must be the same as the effect of a hypothetical $500 voucher than can be spent only on non-food

Finlay might consume exactly $1,000 a year on food

Finlay might consume less than $1,000 a year on food

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