Sample questions and Exam

Sample questions Note The purpose for providing sample questions is to show the change of questions that will be given in the midterm mental test. The midterm exam will have more of both true false questions and bunco answer problems than those presented here. For more short answer problem types please m new(prenominal) a line at the exercises rates.True-false questions T Consider the two statements I. X is an lacking(p) good. II. X exhibits Giffens Paradox. The following is true II implies I, only I does non necessarily imply II. F T F ruminate that at electric current consumption levels an individuals marginal service program of consuming an extra zealous dog is 10 whereas the marginal public utility of consuming an extra soft drink is 2. Then the MRS (of soft drinks for heated up dogs)that is, the look of hot dogs the individual is willing to give up to get one more soft drink is 1/5. If the price of X falls, the cipher constraint shifts inward in a parallel fashi on. T F T F Suppose a shape of coffee at the campus coffee shop is $2. 50 and a loving cup of hot tea is $1. 25. Suppose a students drinking budget is $20 per week.The algebraic expression represents the budget constraint. Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea is $1. 25. Suppose a students beverage budget is $20 per week. Suppose the student simply prefers more caffeine to less and that the tea sold has exactly one-third the caffeine as the coffee. The student will buy a mix of coffee and tea. T F (The student will buy only coffee) T F In economic theory, the bring for a good must matter only on income and its own price and non on the prices of other goods.T F If two goods are substitutes, then an increase in the price of one of them will increase the demand for the other. 1 T F If go acrossrs spend all of their income, it is impossible for all goods to be inferior goods. A good is a luxury good if the income elasticity of demand for it is greater than 1. A rational consumer spends her entire income. If her income doubles and prices do not change, then she will necessarily choose to consume twice as much of every good as she did before.A consumer has the utility endure U(x y) = min(x,2y) If the price of good x is zero and the price of good y is p then the consumers demand function for good y is m/2p. Suppose a teenageager likes both rap medicinal drug (R) and plain music (C) with a set of preferences so that U = C1/2R1/2. Point (C, R)=(100, 1) makes the teen the happier than point (C, R)=(25, 25). If a persons indifference curves can be represented as a straight line, the person views the goods as complements (but not perfect). T T F F T F T F T F Short answer problems 1.Walt consumes strawberries and ointment but only in the fixed ratio of three boxes of strawberries to two cartons of cream. At any other ratio, the excess goods are totally useless to him. The woo of a box of strawberries is 10 and the cost of a carton of cream is 10. Walts income is 200. How many a(prenominal) boxes of strawberries does Walt demand? Ans Walt demands 12 boxes of strawberries. (NOTE that the utility function is U=min2x,3y) 2. Fanny consumes only grapefruits and grapes. Her utility function is U(x y) = x3y6 where x is the number of grapefruits consumed and y is the number of grapes consumed.Fannys income is 48, and the prices of grapefruits and grapes are 1 and 3, respectively. How many grapefruits will she consume? Ans 16 3. Katie Kwasis utility function is U(x1 x2) = 2(ln x1)+ x2. Given her current income and the current relative prices, she consumes 5 units of x1 and 20 units of x2. If her income 2 doubles, while prices stay constant, how many units of x1 will she consume after the change in income? Ans 5 3. Suppose a new healthcare initiative for the working vile will be paid for with a reduction to the earned income levy credit.Suppose the average working poor family has income of $12,000 from w ork and an additional $4000 from the EITC. If there are two goods, H (healthcare) and C (all other consumption), what will be the equation for a budget line with the EITC? (Let prices of all goods and healthcare be normalized to 1). Ans C = $16,000 H 4. Suppose a teenager has $20 and likes both rap music (R) and country music (C) with a set of preferences so that U = C1/2R1/2. Suppose that the iTunes price of a rap music song is and the price of a country music song is . What is the greatest level of affordable utility? Ans v50 3