ECON 10A Final Problem Set with Complete Solutions

ECON 10A Final Problem Set with Complete Solutions You have $400 to spend. Suppose you can spend your money on apples and bananas. The price of apples is $5 each, and the price of bananas is $8 each. If you spend all of your money on apples, what is the maximum number of apples you can afford? a.20 b. 40 c. 80 d. 100 ANSWER C. 80 Given the budget constraint x1 + 4x2 = 10, find the slope of the budget constraint when x2 is plotted on the vertical axis and x1 is plotted on the horizontal. a.4 b.-4 c.-0.4 d.-0.25 ANSWER D. -0.25 You currently have an income of $30, the price of good 1 is $5 and the price of good 2 is $2.5. Assume that good 2 is plotted on the vertical axis and good 1 is plotted on the horizontal axis. If the price of good 2 increases to $3, how does this change the vertical intercept? a. The vertical intercept decreases from 12 to 10 b. The vertical intercept does not change c. The vertical intercept increases from 10 to 12 d. The vertical intercept increases from 6 to 10 ANSWER A. The vertical intercept decreases from 12 to 10 Suppose (x1, x2) = (4, 10) and (x1, x2) = (16, 3) are on the same indifference curve and the agent's indifference curves are strictly convex to the origin. What can be inferred? a. None of the above