University of Pittsburgh-Pittsburgh Campus - ECON 1100 Intermediate Econ First Quiz Fall 2014 1)Diminishing marginal rate of substitution can be seen when indifference curves                   A

University of Pittsburgh-Pittsburgh Campus - ECON 1100

Intermediate Econ First Quiz Fall 2014

1)Diminishing marginal rate of substitution can be seen when indifference curves

                  A. cross.

1. 2. are convex.
   3. are downward sloping.
   4. become flatter as we move down and to the right.
2. Ann’s utility function is

   

   . If she consumes 2 units of x and 8 units of y.
   1. Ann would be willing to make small exchanges of y for x in which she would give up 4 units of y to get an additional unit of x.
   2. Ann would be willing to make small exchanges of y for x in which she would give up 1 units of y to get 4 additional units of x.
   3. Ann would be willing to make small exchanges of y for x in which she would give up 1 units of y to get and additional unit of x.
   4. D. None of the above.
3. Ann is always willing to trade y for x at a constant rate. Specifically, she is always willing to trade (i.e. give up) 1/3 units of y to get an additional unit of x. Draw a picture of several of Ann’s indifference curves.
4. Bob has preferences represented by the utility function U(x,y) = 10x+5y. He consumes 10 units of x and 9 units of y. If his consumption of x is lowered to 1, how many units of y must he have in order to be exactly as well off as before?