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econ 212 practice midterm

# econ 212 practice midterm - Econ 212 Practice Mid-Term Exam...

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Econ 212 Practice Mid-Term 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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econ 212 practice midterm - Econ 212 Practice Mid-Term Exam...

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