Suppose Miles’ utility function is such that u(A)=40 and u(B)=50, while Janis’ utility function is such that u(A)=40 and u(B)=42. Based on this information, which one of the following statements is correct?Group of answer choicesMiles and Janis have different tastes over bundles A and BMiles and Janis have the same tastes over bundles A and BMiles likes bundle B more than Janis doesMiles likes bundle B less than Janis doesNone of the above

Suppose the tastes of a consumer are described by the utility function . Consider bundles A=(1,16) and B=(16,1). Which of the following statements best describes the consumer’s preferences over bundles A and B?Group of answer choicesThe consumer strictly prefers A to BThe consumer strictly prefers B to AThe consumer is indifferent between A and BFor the consumer, A is at least as good as BFor the consumer, B is at least as good as A

Question 1Joe’s preferences are described by the following utility functionU (x, y) = xαyβwith α > 0 and β > 0.(a) Let I denote Joe’s income, and px and py denote the prices of good x and y, respectively.Find Joe’s optimal consumption bundle.(b) Now, suppose α = 6, β = 2, px = 2, py = 3 and I = 24. Evaluate Joe’s optimal choice.(c) Suppose px increases by 50%. What is Joe’s new optimal consumption bundle? Calculateboth the Income Effect and the Substitution Effect.Question 2Collin likes milkshakes (m) and sushi (s). His preferenes over these two goods are representedby the following utility functionU (m, s) = 2√m + s.Collin’s income is $100 and the price of sushi is $10.(a) Suppose the price of milkshakes is initially $2. Find Collin’s optimal consumption bundle.(b) Draw a graph (with m on the horizontal axis and s on the vertical axis) to show Collin’sbudget line, his indifference curve, and his optimal bundle.(c) Suppose the price of milkshakes increases to $5. How many units of milkshake and sushiare in Collin’s new optimal consumption bundle?(d) Draw a new graph for the new optimal bundle (or add it to the graph you have drawnabove in part (b)).(e) What are the substitution and income effects that result from the increase in the price ofmilkshake? Calculate these effects algebraically and illustrate them on a new graph.(f) What is the amount of additional income needed for Collin to achieve the initial level ofutility? What is the amount of additional income needed for Collin to purchase the initialbundle? What is the ideal cost of living index?

From the perspective of indifference approach, the size of utility differences can be established.TrueFalse

Consider an individual with preferences over two goods.   This consumer is maximising utility when:  They receive the same utility from each good.   They spend the same amount of money on each good.   The MRS is greater than the ratio of the prices of the two goods. Correct!  None of the above

The figure depicts indifference curves for consumption today and consumption later for Abraham and Sarah. These indifference curves are unusual as they are straight lines. Which of the following statements is correct?Select one correct answer  Group of answer choicesAbraham is more likely to want to smooth his consumption than Sarah.Abraham is more impatient than SarahSarah is more willing to give up more units of future consumption for the same amount of current consumption.Sarah’s indifference curve exhibits a higher degree of diminishing marginal returns to consumption than Abraham’s