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Unformatted text preview: Practice Exam 1 Answers 1 Intermediate Microeconomics 350 I-1 1. If you receive $18 worth of pleasure from the first hole of golf played and your additional pleasure from succeeding holes drops $1 for each hole played, how many holes of golf would you play if you had to pay $2.10 per hole? *a. 16 b. 17 c. 18 d. 19 e. 20 The reservation price measures the benefit you get from consuming a good. The player will play golf until the reservation price is less than or equal to the marginal cost of playing the nth round. The player will use a comparison like the following: Hole Marginal Benefit Marginal Cost 1 $18.00 2.10 2 17.00 2.10 3 16.00 2.10 4 15.00 2.10 5 14.00 2.10 6 13.00 2.10 7 12.00 2.10 8 11.00 2.10 9 10.00 2.10 10 9.00 2.10 11 8.00 2.10 12 7.00 2.10 13 6.00 2.10 14 5.00 2.10 15 4.00 2.10 16* 3.00 2.10 17 2.00 2.10 18 1.00 2.10 19 0.00 2.10 While the golfer could play another, 17th hole, there would be no net benefit from doing so. I-2 2. A goods price falls from $10/unit to $5/unit. From this we may conclude that: a. the good was scarce when the price was $10/unit but is not a scarce good now b. the good was in shortage but now is in surplus c. the supply curve shifted to the left, while the demand curve was unchanged d. the good changed from a good to a bad *e. none of the above To say that a good is scarce is to say that it has a positive price. Since the two prices mentioned are both positive, the good was scarce before, and is still scarce. (a) is false. We cannot say whether the good was in shortage before or is in surplus now. We would need more information. (c) is false. A shift of the supply curve to the left, with the demand curve unchanged, would would need more information....
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This note was uploaded on 04/16/2008 for the course ECON 350 taught by Professor Cunningham during the Spring '07 term at Chapman University .
- Spring '07