Econ 212 Midterm answersheet

Econ 212 Midterm answersheet - Partial credits: 2 point:...

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Econ 212 Mid-Term Exam Answer Section TRUE/FALSE 1. ANS: F 2. ANS: F 3. ANS: F 4. ANS: F 5. ANS: F 6. ANS: F 7. ANS: T 8. ANS: F MULTIPLE CHOICE 9. ANS: B 10. ANS: D 11. ANS: E 12. ANS: A 13. ANS : D 14. ANS : A PROBLEM 15. ANS: (a)10 x and 10 y . 6 points if you get everything right. Partial credits: If you write down maximize utility subject to budget constraint you get 3 points. If you write down the correct MRS and equate it to price ratio, you get 2 points. (b)5 x . Same as above. (c )No. Partial credits: If you write down maximize utility subject to the new budget constraint m=25, you get 4 points. If you write down the correct MRS and equate it to price ratio, you get 3 points. (d) Partial credits: If you get one budget constraint right, you get 2 points. If you get the other budget constraint right you get 2 points. If you get the tangent points right you get 2 points. If you explain the income effect right, you get 2 points If you explain the substitution effect right you get 2 points. 1
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16. ANS: (a) The correct graph looks as follows:
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Unformatted text preview: Partial credits: 2 point: for getting the slope of the saving component of the curve right (ie, showing that the budget constraint is downward sloping not necessarily that it is --0.75) 3 points: for getting the correct Y-axis = 900 3 points: for getting the correct X-axis = 1,000 (ie, showing that the budget line is kinked NOT a straight line connecting (0, 900) to (1200, 0) 2 point: for showing the endowment point (ie, where the kink is) (b) Solving for an optimum (1) Tangency condition At the optimum, the slope of the indifference curve must equal the slope of the budget line: 2 Partial credits: 6 points: for the correct set-up and execution of the problem (ie, either solving the way above, or solving using some other substitution & maximisation method) 2 point: for getting the correct c 1* 2 point: for getting the correct c 2* 2 points: for correctly determining how much the rats eat 3...
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Econ 212 Midterm answersheet - Partial credits: 2 point:...

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