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Exam 2: Consumers and Their Preferences

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Question 21

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The function U = xy is an example of a(n)

A) multiplicative utility function
B) additive utility function
C) cardinal utility function

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Question 22

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According to Fehr and Schmidt, if xⱼ > xᵢ, then an inequality-averse person i would have a utility function like

A) U_i(x) = x_i
B) U_i(x) = x_i - b(x_i - x_j)
C) U_i(x) = x_i - a(x_j - x_i)

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Question 23

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Which of the following institutions exists in a primitive state of nature?

A psychological assumption about agents that states that they are interested only in their own utility is called selfishness.

The results of the Dictator game seem to violate which of the following assumptions?

Why are economically feasible sets bounded?

The assumption on consumption sets that states that it is possible to add consumption bundles is called

The property of consumption sets that implies that it is possible to combine two bundles to produce a third by consuming fractions of them is called convexity.

The divisibility assumption is the assumption on consumption sets that states that

Imagine that you are a member of a team working on an economics group project. You have to choose between doing your share of the work to increase the group grade or sliding by on the work of the other team members. This example could be a case study for

Which assumption or assumptions permits the derivation of the existence of a continuous utility function?

The reduced set of consumption bundles, each of which satisfies the budget constraint, is called the economically feasible consumption set.

Not included in the economic definition of rationality is the concept that

One reason that agents cannot consume infinite amounts of goods is that

A pychological assumption about consumer preferences that states that more of anything is always better is called satiation.

If you believe that the amount of utility an agent receives from raspberries directly depends on how many units of apples the agent consumes, what type of utility function should you use?

Michelle Wu's favorite 16-ounce drinks are iced tea, lemonade, and an "Arnold Palmer," which is a mixture of iced tea and lemonade. Explain how these three drinks form a convex set.

An assumption on consumer preferences that states that any bundle is at least as good as itself is called

Which of the following is not a psychological assumption made about economic agents?

A place where agents can go and exchange one good for another at a fixed price is called a