Old_Final_Exam

# Old_Final_Exam - Economics 100A Old Final Exam Questions 1...

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Economics 100A Old Final Exam Questions 1. Steve's utility function is U(x,y)=2x+y. Steve has \$300 a week to spend. The price of good x is \$4. Steve currently doesn't consume any y. Steve has received an invitation to join a club devoted to the consumption of y. If he joins the club, Steve can get a discount on the purchase of y. If he belonged to the club, he could buy good y for \$1 a unit. How much is the most Steve would be willing to pay to join this club? (a) Nothing (b) \$200 a week (c) \$150 a week (d) \$100 a week (e) None of the above. Answer: (c) 2. Desmond has lived in Australia, Belgium, and Canada. His tastes never changed but his income and prices did. In Australia his commodity bundle was (x1,x2)=(7,8), in Belgium it was (9,4), and in Canada it was (7,5). Prices in Canada were (p1,p2)=(3,3), and prices in Australia are (p1,p2)=(16,4). (a) Desmond's consumption in Australia is directly revealed preferred to his consumption in Belgium. (b) His consumption in Australia is indirectly revealed preferred to his consumption in Belgium. (c) His consumption in Australia is indirectly but not directly revealed preferred to his consumption in Canada. (d) We can't tell if he was better off in Belgium or in Australia. (e) None of the above.

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## This note was uploaded on 09/14/2009 for the course ECON 100A taught by Professor Babcock during the Summer '07 term at UCSB.

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Old_Final_Exam - Economics 100A Old Final Exam Questions 1...

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