Professor Coughlin

Econ 306

Homework 4

Directions:

I. Answer questions 1-5 (one point each) (1-2 are T/F and 3-5 are multiple choice)

II.
Please complete the homework 4 problems on the Aplia Website. (Problem
1: 3 points, Problem 2: 2 points)

1. A consumer with convex preferences who is indifferent between the bundles (1,4) and (9,2) will think the bundle (5,3) is at least as good as either of the first two bundles.

2. The marginal rate of substitution measures the distance between one indifference curve and the next one.

3. Clara consumes goods x and y. Her indifference curves are described by the formula
y=k/(x+5). Higher values of k correspond to better indifference curves. Which of the following is
true?

a) Clara likes good y and hates good x.

b) Clara prefers bundle (11,13) to bundle (13,11).

c) Clara prefers bundle (7,3) to bundle (3,7).

d) Clara likes good x and hates good y.

e) More than one of the above statements are true.

4. Jean-Pierre consumes only apples and bananas. He prefers more apples to less, but he gets
tired of bananas. If he consumes fewer than 28 bananas per week, he thinks that one banana is a
perfect substitute for one apple. But you would have to pay him one apple for each banana
beyond 28 that he consumes. The indifference curve that passes through the consumpution
bundle with 31 apples and 40 bananas also pass through the bundle with X apples and 23
bananas, where X equals:

a) 21

b) 24

c) 30

d) 32

e) None of the above.

5. In the case of perfect complements, the indifference curves are:

a) L-shaped

b) linear

c) upward sloping

d) convex sets

e) concentric circles