Practice Exam 1 - University of Illinois at...

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University of Illinois at Urbana-Champaign ECON302 Intermediate Microeconomics Exam 1 October 1, 2008 H. Arvin-Rad Instructions. This is a closed-book exam. Please answer all questions in parts I and II. Show your work. Name: NetID: Section: PART I: Multiple Choice Questions (50 points) 1 Which of the following represents an example of positive analysis? a) How will the equilibrium price of corn be affected by a government subsidy? b) What is the best way to assist low-income families with affordable housing? c) Would taxes on emissions be the best way to reduce pollution? d) How can the government best design a tax cut? 2 Which of the following would cause an unambiguous decrease in the equilibrium quantity in a market? a) a rightward shift in supply and a rightward shift in demand. b) a rightward shift in supply and a leftward shift in demand. c) a leftward shift in supply and a rightward shift in demand. d) a leftward shift in supply and a leftward shift in demand. 3 Identify the truthfulness of the following statements: I. The price elasticity of demand must be negative if demand slopes downward. II. One special case of a linear demand curve is an isoelastic (constant elasticity) demand curve. a) Both I and II are true. b) Both I and II are false. c) I is false; II is true. d) I is true; II is false. 4 When a linear demand curve can be expressed as Q d = 40 - 5 P , which region corresponds to the elastic portion of the demand curve? a) Price ranges from 4 to 0. b) Price ranges from 8 to 4. c) Quantity ranges from 20 to 40. 1
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d) Only where quantity equals 20. 5 Suppose that when the price of good A is $5, the quantity demanded of good B is 30 units, and when the price of good A increases to $10, the quantity demanded of good B decreases to 15 units. From this we can conclude that: a) The cross price elasticity of demand of good B with respect to the price of good A is 0.5 b) The goods are substitutes c) The cross price elasticity of demand of good B with respect to the price of good B is negative d) The goods are complements because the cross price elasticity is -0.5 6 The assumption that preferences are complete requires the consumer a) to rank any two baskets. b) to say that basket C is preferred to basket A if basket B is preferred to basket A and basket C is preferred to basket B.
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Practice Exam 1 - University of Illinois at...

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