# Second Midterm Answer Key v2-2(2) - ECONOMICS 211 SECOND...

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ECONOMICS 211 SECOND MIDTERM EXAMINATION, FALL 2009 (2 hours, 100 points) Calculators are allowed on this exam. NAME: _______________________________________________________________________ PLEDGE:___________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ PART 1: MULTIPLE CHOICE: Write the letter of the correct answer in the blank (3 points each; 42 points in total) __B__1. A consumer maximizes his total satisfaction from a given income if a) his total expenditure on each good yields equal satisfaction. b) the last dollar spent on each good yields equal satisfaction. c) the last unit of each good yields equal satisfaction. d) his total quantity of each commodity is proportional to its price. __A__2. When the 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. __B__3. Equilibrium occurs where an indifference curve is tangent to the budget line because a) demand equals supply at that point. b) all other points on the budget line bring lower satisfaction. c) all other points on the indifference curve bring lower satisfaction 1

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d) all income is spent. __D__4. The budget line shows a) the combination of goods which can be purchased by an individual who has a particular income regardless of prices. b) all combinations of goods which satisfies the individual equally well. c) all combinations of goods which satisfy the individual equally well at given prices and income level. d) which combinations of goods can be purchased by an individual with a particular income with prices of the goods fixed. __D_5.Which of the following events is NOT a sunk cost for a firm? a) A firm spends \$100,000 marketing a new product b) A football team gives a signing bonus of \$1,000,000 to a new player c) A trucking firm consumes \$20,000 worth of diesel fuel d) A farmer buys a piece of farmland worth \$500,000 _B__6. The law of diminishing marginal returns suggests that: a) Increasing production by one unit will add more to marginal cost than to marginal revenue. b) Adding successive units of any input to a fixed amount of other inputs will eventually increase output by successively smaller amounts. c)
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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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Second Midterm Answer Key v2-2(2) - ECONOMICS 211 SECOND...

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