ECON2150 Final Test Practice Questions with
Verified 100% Correct Answers
infinity - ✔✔what is the MRS for perfect complements when x/y < cx/cy
undefined - ✔✔what is the MRS for perfect complements when x/y = cx/cy
0 - ✔✔what is the MRS for perfect complements when x/y > cx/cy
indifference curve - ✔✔all the different points where the utility is the same for a
consumption bundle
1. -MRS is the slope of the indifference curve
2. MRS > 0 in twin power
3. going North-East increases utility - ✔✔what are the 3 qualities of an indifference
curve?
on the x and y axis - ✔✔where is the indifference curve when utility = - infinity
(perfect complements)
PxX + PyY = I - ✔✔what is the budget equation?
1. satisfies the budget equation ("feasible")
2. generates as much utility as any other basket - ✔✔maximizing the mudget
equation = finding (x,y) which...
, utility maximizer - ✔✔a basket which maximizes utility subject to the budget
equation
maximized utility - ✔✔the utility generated by a utility maximizer
Px, Py, I - ✔✔when maximizing total utility, what variables are exogenous?
x, y, u - ✔✔when maximizing total utility, what variables are endogenous?
x, y - ✔✔when maximizing total utility, what variables are choice variables?
a. x = 0 or y = 0
b. MRSxy = Px/Py - ✔✔necessary first-order condition states that if a basket is a
maximizer then?
both x and y are positive - ✔✔a basket is said to be interior if?
x = 0 or y = 0 (or both) - ✔✔a basket is said to be on the boundary if?
MRSxy = Px/Py - ✔✔a basket satisfies the tangency equation if?
interior - ✔✔----- survivors satisfy both the budget equation and the tangency
equation
1. balances: ax/px = ay/py
Verified 100% Correct Answers
infinity - ✔✔what is the MRS for perfect complements when x/y < cx/cy
undefined - ✔✔what is the MRS for perfect complements when x/y = cx/cy
0 - ✔✔what is the MRS for perfect complements when x/y > cx/cy
indifference curve - ✔✔all the different points where the utility is the same for a
consumption bundle
1. -MRS is the slope of the indifference curve
2. MRS > 0 in twin power
3. going North-East increases utility - ✔✔what are the 3 qualities of an indifference
curve?
on the x and y axis - ✔✔where is the indifference curve when utility = - infinity
(perfect complements)
PxX + PyY = I - ✔✔what is the budget equation?
1. satisfies the budget equation ("feasible")
2. generates as much utility as any other basket - ✔✔maximizing the mudget
equation = finding (x,y) which...
, utility maximizer - ✔✔a basket which maximizes utility subject to the budget
equation
maximized utility - ✔✔the utility generated by a utility maximizer
Px, Py, I - ✔✔when maximizing total utility, what variables are exogenous?
x, y, u - ✔✔when maximizing total utility, what variables are endogenous?
x, y - ✔✔when maximizing total utility, what variables are choice variables?
a. x = 0 or y = 0
b. MRSxy = Px/Py - ✔✔necessary first-order condition states that if a basket is a
maximizer then?
both x and y are positive - ✔✔a basket is said to be interior if?
x = 0 or y = 0 (or both) - ✔✔a basket is said to be on the boundary if?
MRSxy = Px/Py - ✔✔a basket satisfies the tangency equation if?
interior - ✔✔----- survivors satisfy both the budget equation and the tangency
equation
1. balances: ax/px = ay/py
