ECON 100 Fall -2007 Practice Midterm

ECON 100 Fall -2007 Practice Midterm - Economics 100A Fall...

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1 Economics 100A - Fall 2007 - Practice Midterm #1 True/False Indicate whether the statement is true or false. ____ 1. A consumer prefers more to less of every good. Her income rises, and the price of one of the goods falls while other prices stay constant. These changes must have made her better off. ____ 2. If preferences are convex, then for any commodity bundle x , the set of commodity bundles that are worse than x is a convex set. ____ 3. A person with the utility function U ( x , y ) = y + x 2 has convex preferences. ____ 4. Mark strictly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A . These preferences can be represented by a utility function. ____ 5. Ambrose’s utility function is U ( x , y ) = x + 4 y 1 2 . The price of x is $1 and the price of y is $2. If his income rises from $100 to $150, his consumption of y increases by more than 10% but less than 50%. ____ 6. If the price elasticity of demand for a good is –1, then doubling the price of that good will leave total expenditures on that good unchanged. ____ 7. If preferences are homothetic, then the slope of the Engel curve for any good will decrease as income increases. ____ 8. Prudence was maximizing her utility subject to her budget constraint. Then prices changed. After the price change she was better off. Therefore the new bundle costs more at the old prices than the old bundle did. ____ 9. Josephine buys 3 quarts of milk and 2 pounds of butter when milk sells for $2 a quart and butter sells for $1 a pound. Wilma buys 2 quarts of milk and 3 pounds of butter at the same prices. Josephine’s marginal rate of substitution between milk and butter is greater than Wilma’s. ____ 10. Wanda Lott has the utility function U ( x , y ) = max{ x , y }. Wanda’s preferences are convex. Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 11. Quincy lives on pretzels and seafood salads. The price of pretzels is 1 dollar per bag and the price of seafood salads is 2 dollars each. Quincy allows himself to spend no more than 14 dollars a day on food. He also restricts his consumption to 3,400 calories per day. There are 600 calories in a bag of pretzels and 200 calories in a seafood salad. If he spends his entire money budget each day and consumes no more calories than his calorie limit, he can consume up to a. 2 bags of pretzels per day but no more. b. 5 seafood salads per day but no more. c. 4 bags of pretzels per day but no more. d. 5 bags of pretzels per day but no more. e. None of the above.
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