AGEC 105Capps AQ#2 FALL 2013

Name: _____KEY_____________________________ 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 Quantity of Hamburgers48 288 10

3.

(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!

8−64−10 = - 2

6 = - 13 = 1

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(1 pt) (e) What is the technical name of the situation described in (d)?______________________

1

4 5 8 10

8

62

MU = 88−4810−2 = 40

8 = 5

MRS (marginal rate of substitution)

AGEC 105Capps AQ#2 FALL 2013

(1 pt) 4. The shift in the budget line in the graph to the right is due to: (Circle the correct answer.)

(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.

.

(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.

(2 pts) 6. Illustrate a demand curve for Peter Pan peanut butter. Be sure to label your axes.

P

Q

2

15

150

100

10

QTacos

QHamburgers

1412

10

QBeef

QPork

AGEC 105Capps AQ#2 FALL 2013

7. Mr. Valentine wishes to buy steak and pork. Mr. Valentine has a budget of $20.

(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)

Quantity of Pork(lbs)

Price of Steak($/lb)

Price of Pork($/lb)

2 5 $5 $2

(1 pt) (c) The marginal rate of substitution at point A is equal to −41 0 = - 2

5 .

(1 pt) 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) is in equilibrium. (b) should buy more cheap food.(c) should buy more environmental quality.(d) can’t tell; insufficient information given to answer this question.

(2 pts) 9. TRUE or FALSE. Circle the correct answer.

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

• A

Steak (lbs)

Pork (lbs)

4

2

5 10

• A

Steak (lbs)

Pork (lbs)

4

2

5 10

10040 =

MUCF

PCF = 2.5

20010 0 = 2 =

MU EQ

PEQ

AGEC 105Capps AQ#2 FALL 2013

(2 pts) 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.

(1pt) 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 personCorrect answer plus/minus 5% = 285 to 315

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Sign the Aggie Pledge:An Aggie does not lie, cheat or steal

or tolerate those who do.

_______________________________________ ________________Signature Date

AGEC 105Capps AQ#2 FALL 2013

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