econ 212 midterm exam

econ 212 midterm exam - Name: Econ 212 Mid-Term Exam...

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Name: Econ 212 Mid-Term Exam True/False (24 points total, 3 points each) Indicate whether the statement is true or false. ____ 1. If there are two goods with positive prices and the price of one good is reduced, while income and other prices remain constant, then the size of the budget set is reduced. ____ 2. The marginal rate of substitution measures the distance between one indifference curve and the next one. ____ 3. With quasilinear preferences, the slope of indifference curves is constant along all rays through the origin. ____ 4. Alice’s utility function is U ( x , y ) = x 2 y . Steve’s utility function is U ( x , y ) = x 2 y + 2 x . Alice and Steve have the same preferences since Steve’s utility function is a monotonic transformation of Alice’s. ____ 5. Donald’s utility function is U ( x , y ) = x + y 1/2 . Currently he is buying some of both goods. If his income rises and prices don’t change, he will buy more of both goods. ____ 6. A rational consumer spends her entire income. If her income doubles and prices do not change, then she will necessarily choose to consume twice as much of every good as she did before. ____ 7. A Giffen good must be an inferior good. ____ 8. If a person has no nonlabor income, a decrease in wages causes the budget line between leisure and other goods to shift downward in a parallel fashion. Multiple Choice (24 points total, 4 points each)
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This note was uploaded on 01/26/2010 for the course ECONOMICS EC212 taught by Professor Yu during the Spring '08 term at Mt. Holyoke.

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econ 212 midterm exam - Name: Econ 212 Mid-Term Exam...

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