practitceexam2-A

practitceexam2-A - ECON 251 Fall 2007 Exam #2 (Practice...

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ECON 251 Fall 2007 Exam #2 (Practice Exam #2 A for Spring 2008) 1. Kirsten spends all of her $1,000 of income on Zen Players and iPods. A Zen Player costs $100, and an iPod costs $200. At her current consumption of Zen Players and iPods, the marginal utility of a Zen Player is 22, while the marginal utility of an iPod is 110. What is the slope of Kirsten’s indifference curve at her current consumption of Zen Players and iPods? (Assume the quantity of iPods is measured on the x axis, and the quantity of Zen Players is measured on the y axis.) a. 2 b. -2 c. 5 d. -5 2. At Kirsten’s current consumption of Zen Players and iPods, her indifference curve is _________ than her budget line, so she should purchase more _____________ and fewer __________. a. steeper; iPods; Zen Players b. steeper; Zen Players; iPods c. flatter; iPods; Zen Players d. flatter; Zen Players; iPods 3. Refer again to the problem above. When Kirsten maximizes her utility given her budget, her marginal rate of substitution will be equal to a. 2 b. ½ c. 5 d. 1/5 4. When a consumer is maximizing utility, which of the following is true? a. MRS = Py/Px b. MRS = MUy/MUx c. the budget line is tangent to the indifference curve d. MUy = MUx 5. When the price of an inferior good increases, the substitution effect _________ its quantity demanded while the income effect ________ its quantity demanded. a. raises; lowers b. raises; raises c. lowers; raises d. lowers; lowers
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6. The graph above shows the result of an increase in the price of curds. The substitution effect of the price increase is shown as the movement from _______ to _________, while the income effect is shown as the movement from ______ to _________. a. a;b;b;d b. a;d;d;b c. d;b;b;a d. d;a;a;b 7. According to the same graph above, which of the following is true? a. Curds and whey are complements in consumption. b. Curds and whey are substitutes in consumption. c. Curds and whey are both inferior goods. d. Curds are normal goods, but whey is an inferior good. 8. How does an increase in the wage rate affect the budget line that describes the relationship between income and leisure? a. An increase in the wage rate makes the budget line steeper and increases the x- intercept. b.
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This test prep was uploaded on 04/18/2008 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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practitceexam2-A - ECON 251 Fall 2007 Exam #2 (Practice...

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