Econ 212 Practice MidTerm Exam
True/False 16 points
Indicate whether the statement is true or false.
____
1.
If there are two goods and the prices of both goods rise, then the budget line must become steeper.
____
2.
If there are two goods, if a consumer prefers more of each good to less, and if she has a diminishing marginal rate of sub
stitution, then her preferences are convex.
____
3.
Nancy’s psychology teacher will give her a course grade that is the maximum of her scores on two midterm examina
tions. Nancy has convex preferences over the possible combinations of midterm scores.
____
4.
If one utility function is a monotonic transformation of another, then the former must assign a higher utility number to
every bundle than the latter.
____
5.
If two goods are substitutes, then an increase in the price of one of them will increase the demand for the other.
____
6.
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.
____
7.
If two goods
x
and
y
are perfect complements, then if the price of
x
falls, the entire change in the de
mand for
x
is due to the income effect.
____
8.
If a person is a net seller of some good and the price of that good decreases, she might possibly be
come a net buyer.
Multiple Choice
32 points
Identify the choice that best completes the statement or answers the question.
____
11.
This weekend, Martha has time to read 40 pages of economics and 30 pages of sociology. Alternatively, she could read
10 pages of economics and 90 pages of sociology. Which of these equations describes all combinations of pages of eco
nomics,
E
, and sociology,
S
, that she could read over the weekend?
a.
E
/2 +
S
= 50.
b.
E
+
S
= 100.
c.
E
+
S
= 70.
d.
2
E
+
S
= 110.
e.
All of the above.
____
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 Spring '08
 Yu
 e. Carlos

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