Econ 201 Second Exam 2008

Econ 201 Second Exam 2008 - Econ 201 Microeconomics Page 1...

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Econ 201 Microeconomics Page 1 John Vahaly Name: Econ 201 (H) Microeconomics SECOND HOURLY EXAMINATION Part I. Multiple Choice (40%) Directions: For each question, mark in pencil on the answer sheet provided the one best answer to each question. 1. Fines for littering are an attempt to a. completely eliminate unsightly highway clutter. b. encourage motorists not to slow down and dump trash (keep speed constant). c. reduce roadside litter to reasonable levels. d. punish people who generate an external benefit. 2. Why can some restaurants, but not car dealers, offer buffets where customers can buy all the want for a fixed price? a. Principle of Diminishing Marginal Utility b. Law of Increasing Opportunity Cost c. Law of Diminishing Returns d. Law of Demand 3. When the price of a product falls, consumer purchases reflect the impact of two effects, both of which tend to increase the quantity demanded. They are the substitution effect and the a. prestige effect. b. utility effect. c. price effect d. income effect. 4. For items people purchase that require some training or learning before they can be fully used, such as Nintendo’s Wii or downhill skiing, a. marginal utility may initially rise when first units are consumed. b. demand can be upward sloping. c. total utility can be at its maximum for the first unit consumed. d. total utility will initially be negative.
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Econ 201 Microeconomics Page 2 5. In the U.S., saving for retirement appears to perhaps indicate that consumers may not be as rational as economists imply they are because a. many workers have no idea of when their Social Security income will start. b. workers do not evaluate alternative means of saving and just follow the path of least resistance. c. workers are saving too much money for their retirement needs. d. place too much emphasis on the impact of inflation. 6. The concept of “bounded rationality” in behavioral economics recognizes that the efforts to obtain relevant information when buying an automobile, a house, a PC, or other major purchase a. are examples of purchases where the Law of Diminishing Marginal Utility does not apply. b. itself requires scarce time and effort and therefore having complete information about products is not optimal. c. assumes people are able to correctly estimate utils per dollar for “lumpy” purchases when only one of the item will be bought. d. requires producers to recognize their responsibility in helping individuals make the appropriate purchasing decision (they are “bound” to help the consumer). (This is not the right answer.) 7. When gasoline prices nearly tripled in the 1970s, one change was the near-extinction of full-service gasoline pumps. Observers concluded self-service arose because drivers wanted relief from the higher gasoline price (self-serve was sold at a discount). When the price of gasoline fell in the 1980s and 1990s (adjusted for inflation), a. full-service gasoline stations returned to dominate the market. b. drivers continued to use self-serve and spend the savings on other items.
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Econ 201 Second Exam 2008 - Econ 201 Microeconomics Page 1...

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