AGEC 105
AQ#2
Capps
Name: _____KEY_____________________________
FALL 2013
UIN # ______________________________
(1 pt)
1. The mathematical representation of the satisfaction a consumer derives from a bundle of
goods is called the ____utility function______________________________.
(2 pts)
2. Given the information below, what is the marginal utility associated with drinking coffee?
Show all work.
Total Utility
48
88
Quantity of Hamburgers
2
10
3.
MU =
𝟖𝟖−𝟒𝟖
𝟏𝟎−𝟐
=
𝟒𝟎
𝟖
=5
8
6
2
4
5
8
10
(1 pt)
(a) The graph deals with _indifference or iso-utility_______ curves.
(1 pt)
(b) Among points A, B, C, and D, which combination of wings and hamburgers yields the
highest level of satisfaction? ______8________ Wings ______8_______ Hamburgers
(1pt)
(c) Among points A, B, C, and D, which combination of wings and hamburgers yields the
lowest level of satisfaction?
_____2_________ Wings ______5_________ Hamburgers
(2 pts)
(d) Given points A and B, how many wings is this consumer willing to give up in order to get
one more hamburger? Show all work!
𝟖−𝟔
𝟐
= -𝟔= 𝟒−𝟏𝟎
(1 pt)
𝟏
=
𝟑
𝟏
𝟑
MRS (marginal rate of
substitution)
(e) What is the technical name of the situation described in (d)?______________________
1
AGEC 105
AQ#2
Capps
(1 pt)
4. The shift in the budget line in the graph to
the right is due to: (Circle the correct answer.)
FALL 2013
QHamburgers
15
0
10
0
(a) an increase in the price of hamburgers.
(b) an increase in the price of tacos.
(c) a rise in income
(d) a fall in income.
.
10
0
(1 pt)
5. The clockwise rotation of this diagram may be best explained as: (Circle the correct answer.)
(a) The price of pork rose.
(b) The price of beef rose.
(c) Total consumer income allotted to
beef and pork fell.
(d) The price of beef fell.
QPork
10
0
12
0
(2 pts)
15 QTacos
0
14 QBeef
0
6. Illustrate a demand curve for Peter Pan peanut butter. Be sure to label your axes.
P
Q
2
AGEC 105
AQ#2
Capps
FALL 2013
7. Mr. Valentine wishes to buy steak and pork. Mr. Valentine has a budget of $20.
Steak
(lbs)
4
2
•
5
A
10
Pork (lbs)
(1 pt)
(a) At point A, the consumer is said to be in ____equilibrium___________________.
(4 pts)
(b) Fill in the entries in the table below in conjunction with point A.
Quantity of Steak
(lbs)
2
(1 pt)
(1 pt)
Price of Steak
($/lb)
$5
Price of Pork
($/lb)
$2
𝟒
(c) The marginal rate of substitution at point A is equal to − 𝟏𝟎
=-
𝟐
𝟓
.
8. Assume that for a given consumer, the marginal utility of cheap food is 100 and the price of
cheap food is $40. Also, assume that the marginal utility of environmental quality is 200 and the
price of environmental quality is $100. This consumer: (Circle the correct answer.)
(a)
(b)
(c)
(d)
(2 pts)
Quantity of Pork
(lbs)
5
is in equilibrium.
𝟏𝟎𝟎 𝐌𝐔𝐂𝐅
=
= 2.5
should buy more cheap food.
𝟒𝟎
𝐏𝑪𝑭
should buy more environmental quality.
can’t tell; insufficient information given to answer this question. 𝟐𝟎𝟎
𝐌𝐔
9. TRUE or FALSE. Circle the correct answer.
𝟏𝟎𝟎
=2=
𝐄𝐐
𝐏𝐄𝐐
T F (a) Indifference curves may intersect.
T F (b) The share of the food dollar for food eaten at home is slightly more than 50%.
T F (c) In order to construct the budget line, one only needs to know the prices of the goods
in question.
T F (d) Equity equals liabilities minus assets.
3
AGEC 105
AQ#2
Capps
(2 pts)
(1pt)
FALL 2013
10. Consider the following diagram, which deals with shrimp
from Galveston Bay.
(1pt)
(a) This diagram is technically called a/an
___Engel__________________ curve.
(1pt)
(b) From this diagram, we can conclude that
shrimp from Galveston Bay is a/an
___normal______________ good.
11. The retail value of one dozen eggs is $2.89. Farmers receive $1.04 for this dozen of eggs.
What is the farmer’s share of the retail dollar? _____36_______%
BONUS (1pt): Completely off the wall question: In the United States today, what is the annual
number of Coca-Cola soft drink products drunk each year per person?
(I will accept as the correct answer plus or minus 5%.)
300 Coca-Cola soft drink products are drunk annually per person
Correct answer plus/minus 5% = 285 to 315
Sign the Aggie Pledge:
An Aggie does not lie, cheat or steal
or tolerate those who do.
_______________________________________
Signature
________________
Date
4