1. Suppose that U = U(P, M)=P - (M) where P and M are peanuts and marshmallows. The marginal utility of marshmallows, MU_M, is given by:

a. -2M

b. U(P,M)*M

c. P+2M

d. U(P,M)+M

2. Kyle's utility function is U = 4X *3.7Y, where X is units of good X and Y is units of good Y. What is the marginal utility of good X?

a. 4X + 3.7

b. 4X+14.8Y

c. 14.8Y

d. 3.7Y

3. The income elasticity of demand for A is -0.02, and the income elasticity of demand for good B is 0.99. Based on these estimates, Good B is a_____ and Good A is a _____.

a. inferior good; normal good

b. inferior good; inferior good

c. luxury good; normal good

d. normal good; inferior good

4. Which of the following factors shift demand?

I. consumer income

II. prices of the good

III. prices of substitute goods

IV. having identical goods

a. I and III

b. I, III and IV

c. I, II, III, IV

d. I and IV