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ECON 251
Practice Exam #2A (Based on Fall 2008 Exam #2)
Spring 2009
1.
Lisa’s income is $15. The price of milk (per gallon) is $3 and the price for chocolate
is $6 per pound.
What is the equation of Lisa’s budget line?
(M = quantity of milk
and C = quantity of chocolate)
a.
3C + 6M = 15
b.
4518C = 6M
c.
3M + 6C = 15
d.
2C + M = 15
2.
Lisa’s income is $15. The price of milk (per gallon) is $3 and the price for chocolate
is $6 per pound.
If the quantity of chocolate is measured on the x axis, what is Lisa’s
marginal rate of substitution when she maximizes her utility given this budget?
a.
½
b.
2
c.
3
d.
5
3.
Lisa’s income is $15. The price of milk (per gallon) is $3 and the price for chocolate
is $6 per pound.
If the price of milk rises to $6 per gallon, and the price of chocolate
rises to $9 per pound, the slope of the budget line changes from ___________ to
___________.
(Assume the quantity of chocolate is still measured on the x axis.)
a.
5; 2.5
b.
2; 1.5
c.
1/2; 2/3
d.
5; 1.5
4.
Tim buys only soda and pizza, and he only buys amounts that maximize his total
utility. The marginal utility from a soda is 10, and the price of a soda is $1. The
marginal utility from a pizza is 80. Thus the price of a pizza must be
a.
$80
b.
$10
c.
$8
d.
$4
5.
A consumer maximizes utility where which of the following is true?
a.
The budget line is twice as steep as the indifference curve.
b.
The consumer’s marginal rate of substitution is maximized.
c.
Marginal utility per dollar is equal across all goods
d.
The consumer spends all income on the cheapest good possible.
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View Full Document 6.
The table below shows the utility Tom receives from consuming bottled water and
soda. The price of water is $1, the price of soda is $2, and Tom has $7 of income.
What is Tom’s marginal utility per dollar spent on the 3
rd
bottle of water?
Soda
Water Bottle
Quantity
Total utility
Quantity
Total utility
0
0
0
0
1
30
1
25
2
50
2
40
3
65
3
50
4
73
4
58
5
80
5
65
a.
50
b.
25
c.
10
d.
5
7.
Based on the table for Tom above, if Tom maximizes his utility, he will buy _______
bottles of water and _____________ sodas.
a.
1; 3
b.
4; 3
c.
2; 4
d.
3; 2
8.
Based on the table below and an income of $10, how many CD's and
movie tickets
will Rob consume when the price of CD's is $2, and the price of movie tickets is $2?
Assume that Rob's goal is to maximize utility.
Q movie
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This note was uploaded on 01/29/2010 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue UniversityWest Lafayette.
 Spring '08
 ROWE

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