PS3 - Economics 1 Name:_ _ Problem Set 3 nd (Due in class...

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Economics 1 Analysis, Problems, and Polices Name:_____ ____ Problem Set 3 (Due in class on October 22 nd , 2007) I. Multiple Choice Questions (For each of the following questions, choose the best answer and explain clearly why you chose that answer over the other choices) 1. The vending machine in the basement of Silsby sometimes has Chex Mix for 65 cents. You put in a dollar, but the machine is out of change, spits back your dollar and won't give you a snack. You think to yourself, "Just take my dollar, keep the @#! change and give me my Chex Mix. If you had gotten the snack for 65 cents, then your consumer surplus from it must have been C a) at least a dollar b) at least 65 cents c) at least 35 cents- the consumer surplus is the value of the chex mix minus the actual price paid for it and then summed over the quantity of the chex mix bought (1). Since the chex mix is worth $1 to me, and I would pay 65 cents for it, I get a consumer surplus of 35 cents. d) cannot tell 2. If the utility derived from your last dollar spent on bagels is less than that derived from the last dollar spent on doughnuts, then you C a) are currently maximizing utility b) should buy fewer doughnuts and more bagels to maximize utility c) should buy more doughnuts and fewer bagels to maximize utility- If the marginal utility per dollar of doughnuts exceeds that of bagels, then I should buy more doughnuts and less bagels in order to increase my total utility
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This note was uploaded on 05/29/2008 for the course ECON 1 taught by Professor Chang during the Fall '07 term at Dartmouth.

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PS3 - Economics 1 Name:_ _ Problem Set 3 nd (Due in class...

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