FINAL S07

FINAL S07 - FINAL EXAMINATION (3 hours, 200 points) Spring...

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FINAL EXAMINATION (3 hours, 200 points) Spring 2007 Circle the name of your instructor: Gunning Inal Ozsoy Soligo NAME: __________________________________________________________ PLEDGE:_________________________________________________________ __________________________________________________________________ __________________________________________________________________ PART I: MULTIPLE CHOICE (3 pts each; 36 points in total) 1. Which of the following will lead to a shift in the supply of Florida oranges? Assume that orange is normal good. I. A severe frost in California, the other major orange-supplier state II. An increase in households’ income III. Decrease in the price of oranges a) I and III b) III only c) II and III d) II only e) None of the above 2. An inferior good a) is a giffen good b) has a demand curve that shifts rightward when income rises c) has a demand curve that shifts leftward when income rises d) has a demand curve that shifts rightward when income rises and is perfectly inelastic. 1
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When a consumer's marginal rate of substitution of good X for good Y exceeds the ratio of the price of X to the price of Y, a) the marginal utility per dollar expenditure on good X exceeds the marginal utility per dollar expenditure on good Y. b) the consumer is maximizing total utility. c) the consumption bundle chosen by the consumer lies along the price consumption curve. d) the total utility obtained from the consumption of good X exceeds the total utility obtained from the consumption of good Y. 4. As an economist you are asked to observe the market for Sudafed tablets. You know that 10,000 tablets sell for $3.00 each. Suppose that consumers realize that Sudafed is far tastier after they cook it, causing an increase in demand. The market now sells 12,000 tablets for $5.00 each. The arc elasticity of demand is a) 4/11 b) 11/4 c) 1/1000 d) 1000 e) Cannot be determined 5. Jane maximizes her utility by consuming 1 glass of wine and 5 bottles of beer. If beer sells for $1 and wine for $3, Jane’s marginal utility for consuming one more bottle of beer is a) 1/3 of the marginal utility from consuming an extra glass of wine b) 1/5 of the marginal utility from consuming an extra glass of wine c) the same as that from consuming an extra glass of wine d) 5 times as high as the marginal utility from consuming an extra glass of wine. 6. A perfectly competitive firm operating in the short-run faces a market price for its product of $20 and is able to hire its workers at $10 per hour. The firm will hire labor until the marginal product of labor is a) 200. b) 2. c) 1/2. d) 5. e) None of the above. 7. Suppose a lubricant plant is producing a new form of highly slick lubricant. If the marginal private cost is equal to the marginal social cost (the sum of the marginal cost to the firm and society), then the marginal external cost a) equals the MSC b) equals the MC of the firm c) is zero d) depends on the amount of lubricant that society enjoys. 2
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This note was uploaded on 12/07/2009 for the course ECON 211 taught by Professor Na during the Fall '08 term at Rice.

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FINAL S07 - FINAL EXAMINATION (3 hours, 200 points) Spring...

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