MT2Spring2008A

# MT2Spring2008A - Trost Midterm 2 Spring 2008 Econ 2005...

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Trost Midterm 2 – Spring 2008 1 Econ 2005 Spring 2008 Professor: Steve Trost MIDTERM 2 March 19, 2008 FORM A PLEASE TURN IN ONLY THE SCANTRON SHEET. KEEP THE EXAM FOR REVIEW. BE SURE ALL QUESTIONS ARE FILLED IN ON THE SCANTRON SHEET USING A #2 PENCIL. PLEASE MAKE SURE THAT YOU HAVE ALL 11 PAGES OF THE EXAM. INSTRUCTIONS FOR THE SCANTRON SHEET: 1. PLEASE WRITE YOUR NAME IN THE APPROPRIATE BLANK 2. WRITE YOUR ID (HOKIE PASSPORT) NUMBER AND FILL IN THE BUBBLES. 3. WHERE IT SAYS “COURSE”, PUT ECON 2005 4. WHERE IT SAYS “COURSE REF” PUT THE TIME OF THE CLASS IN WHICH YOU ARE ENROLLED. 5. WHERE IT SAYS “DATE” PUT THE DATE 6. UNDER “FORM” PUT “A” (AND FILL IN THE BUBBLE) HONOR PLEDGE: I HAVE NEITHER GIVEN NOR RECEIVED UNAUTHORIZED ASSISTANCE ON THIS EXAM.

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Trost Midterm 2 – Spring 2008 2
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The Bollo Bakery sells 300 muffins at a price of \$1 per muffin. Its explicit costs for producing 300 muffins are \$250. Bollo ʹ s economic profits are A) \$35. B) \$50. C) \$250. D) indeterminate from this information. 1) Refer to the information provided in Figure 6.1 below to answer the questions that follow. Figure 6.1 2) Refer to Figure 6.1. Assume Tom ʹ s budget constraint is AC . He does not spend his entire income at point A) A. B) B. C) D. D) E. 2) 3) Refer to Figure 6.1. Assume Tom is on budget constraint AC . If the price of a hot dog is \$2.50, Tom ʹ s monthly income is A) \$40. B) \$60. C) \$80. D) \$100. 3) 4) If a household ʹ s income is doubled, its budget constraint will A) pivot at the Y - intercept. B) shift in parallel to the old one. C) not be affected. D) shift out parallel to the old one. 4) 5) Price decreases will ________ a household ʹ s choice set. A) increase B) not change C) decrease D) sometimes increase and other times decrease 5) Refer to the information provided in Scenario 2 below to answer the questions that follow. SCENARIO 2: You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of \$100,000. Your costs for rent and supplies were \$50,000. To start this business you invested an amount of your own capital that could pay you a return of \$20,000 a year. 6) Refer to Scenario 2. During the year your economic costs were A) \$70,000. B) \$60,000. C) \$50,000. D) \$20,000. 6) 1

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7) Richard is consuming X and Y so that MU x/ P x = 6 and MU y/ P y = 10. To maximize utility, Richard should A) continue to consume the same amount of X and Y , as the consumer is already maximizing utility. B) consume less of both X and Y . C) consume less X and more Y . D) consume more X and less Y . 7) 8) Marginal cost A) equals the increase in AV C resulting from producing one more unit. B) always equals average cost. C) is the average cost of production divided by output. D) is the increase in total cost resulting from producing one more unit.
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## This note was uploaded on 10/24/2008 for the course ECON 2005 taught by Professor Zirkle during the Spring '07 term at Virginia Tech.

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MT2Spring2008A - Trost Midterm 2 Spring 2008 Econ 2005...

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