Principles of Macroeconomics

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Econ 101 – Principles of Microeconomics Student Name: Korinna K. Hansen Section #: TA Name: Second Midterm Examination – Spring 2007 Version 1 DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SO. READ THESE INSTRUCTIONS FIRST. You have 50 minutes to complete this exam. This exam consists of 30 multiple-choice questions. The first 10 (problems 1 through 10) are worth 2 points each. The next 20 (problems 11 through 30) are worth 4 points each. Please answer all questions on the scantron sheet you are given using a #2 pencil . If there is an error on the exam or you do not understand something, make a note on your exam booklet and we will address this issue after this examination is complete. You cannot ask any questions about the exam while the exam is administered. When you are finished, please bring both the scantron sheet and this exam booklet to the place indicated by the instructors. NO CELLPHONES, CALCULATORS, FORMULA SHEETS ARE ALLOWED. CHOOSE THE BEST ANSWER FOR EACH QUESTION. GOOD LUCK! How to fill out the scantron sheet: 1. Print your last name , first name , and middle initial in the spaces marked “Last Name”, “First Name”, and “MI”. Fill in the corresponding bubbles below. 2. Print your student ID number in the space marked “Identification Number”. Fill in the bubbles. 3. Write the number of the discussion section you are registered for under “Special Codes” spaces ABC, and fill in the bubbles. For Discussion sections see the last page. 4. Write the version number of your exam booklet under “Special Codes” space D, and fill in the bubble. The version number is on the top of this page.
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1) Assume that your marginal rate of substitution between apricots and peaches is MU P / MU A = -2/3 and that the price of apricots is $3, while the price for peaches is $2 per pound. Therefore (at your current position along your budget line) it must be that you are consuming: a) too many apricots and two few peaches to maximize utility. b) just the right amount of apricots and peaches to maximize utility. 2) Bus rides are an inferior good. Therefore the Engel curve for bus rides has a ___________ slope. a) positive b) negative 3) When the price of a normal good decreases the income effect ______________ the substitution effect for a ___________ price effect. a) reinforces /larger b) takes away from/smaller 4) Given a typical production process when average product (AP) decreases, the marginal product (MP) _________________ a) decreases also always. b) first increases and then decreases 5) The diminishing returns in a production process imply that marginal cost is a) decreasing b) increasing 6) As the quantity produced by a firm increases, the difference between average total cost and average variable cost a) increases b) decreases 7) The following is information for Patty’s Pizza Palace: Total Costs = $ 40,000 Fixed Costs = $ 10,000 Total Revenue = $ 35,000 Given this information Patty’s Pizza Palace should: a) shut down.
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