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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following algebraic forms for a demand curve yields an isoelastic demand curve? A) log(Q) = a - b log(P) + c log(I) B) Q = a - bP + cI C) Q = a - b log(P) + c log(I) D) log(Q) = bP + cI 1) 2) Mikey is very picky and insists that his mom make his breakfast with equal parts of cereal and apple juice any other combination and it ends up on the floor. Cereal costs 4 cents per tablespoon and apple juice costs 6 cents per tablespoon. If Mikey ʹ s mom budgets $8 per month for Mikey ʹ s breakfast, how much cereal and juice does she buy? A) 40 tablespoons each of cereal and juice B) 40 tablespoons of cereal and 75 tablespoons of juice C) 80 tablespoons each of cereal and juice D) 100 tablespoons of cereal and 67 tablespoons of juice 2) 3) Suppose the quantity of nursing services demanded exceeds the quantity of nursing services supplied. The nursing wage rate will: A) not change. B) decrease. C) increase. D) none of the above 3) 4) To demonstrate the anchoring phenomenon, Kahneman and Tversky would ask research subjects very difficult questions that should be answered with a number between zero and 100. Before asking for the respondent ʹ s answer, they would also spin a large wheel that generated random number outcomes from zero to 100. If the respondents were subject to the anchoring effect, then we should expect that: A) their responses are wrong most of the time. B) their responses are uncorrelated with the numbers generated by the wheel. C) their responses are correlated with the numbers generated by the wheel. D) none of the above 4) 5) Coffee and cream: A) are complements. B) have a positive cross price elasticity of demand. C) are both more inelastic in demand in the long run than in the short run. D) are both luxury goods. 5) 6) Alfred derives utility from consuming iced tea and lemonade. For the bundle he currently consumes, the marginal utility he receives from iced tea is 16 utils, and the marginal utility he receives from lemonade is 8 utils. Instead of consuming this bundle, Alfred should: A) buy more iced tea and lemonade. B) buy more iced tea and less lemonade. C) buy less iced tea and lemonade. D) buy more lemonade and less iced tea. E) none of the above is necessarily correct. 6) 1
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7) Which of the following statements about the diagram below is true? A) Demand becomes more inelastic as price declines. B) Demand is infinitely elastic. C) Demand is completely inelastic. D) Demand becomes more elastic as price declines. 7) 8) The expected value is a measure of A) central tendency. B) variability. C) uncertainty. D) risk. 8) 9) Use the following two statements in answering this question: I. For all Giffen goods the substitution effect is larger than the income effect.
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This note was uploaded on 07/27/2009 for the course FIN 470 taught by Professor Kamath during the Spring '09 term at Cleveland State.

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