practiceexam2B

practiceexam2B - ECON 251 Practice Exam #2B (Based on...

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ECON 251 Practice Exam #2B (Based on Spring 2008 exam #2) Spring 2009 1. Chris has $80 a week that he spends on widgets and gadgets. A widget costs $5 and a gadget costs $8. One week, Chris spent all of his income and found that the marginal utility from the last widget was 30 and the marginal utility from the last gadget was 24. To increase his utility, what should Chris do? a. Chris is already maximizing his utility, so he shouldn’t change anything. b. Chris should buy fewer of both widgets and gadgets. c. Chris should buy more widgets and fewer gadgets. d. Chris should buy fewer widgets and more gadgets. 2. Philip can consume pizza or croissants. The table below gives combinations of pizzas and croissants that are on his budget line. If the price of a pizza is $8, then his income is _____ and the price of a croissant is _______ Possibility Pizzas (per month) Croissants (per month) A 5 0 B 4 1 C 1 4 D 0 5 a. $40; $5 b. $40; $8 c. $32; $8 d. $8; $60 3. Currently, Tom is spending all his income consuming ice cream and cake where the marginal utility per dollar for ice cream is less than marginal utility per dollar for cake. In order to maximize his utility what should Tom do? a. He should increase the consumption of ice cream and decrease the consumption of cake. b. He should decrease the consumption of ice cream, but his consumption of cake already maximizes his utility. c. He should increase the consumption of ice cream, but his consumption of cake already maximizes his utility. d. He should decrease the consumption of ice cream and increase the consumption of cake 4. Tom has $30 budget to spend on ice cream and cake. Ice cream costs $3 per pint and cake costs $6. If we graph the quantity of ice cream on the x axis, what is the slope of Tom’s budget line a. -1/2 b. -2 c. 1/2 d. 2 5. Based on the information above, when Tom maximizes his utility given his budget, what is
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his marginal rate of substitution (assuming the quantity of ice cream is still graphed on the x axis)? a. -1/2 b. -2 c. 1/2 d. 2 6. Based on the above figure, when the price of milkshakes decreases, the consumer changes consumption from point a to point c. The marginal rate of substitution from point a to point c has changed from _______ to _______. a. 8, 4 b. 1, 2 c. 2, 1 d. 4, 8 7. Based on the same figure above, when the price of milkshakes decreased, the quantity of soft drinks purchased ________, indicating that milkshakes and soft drinks are _____________. a.
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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.

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practiceexam2B - ECON 251 Practice Exam #2B (Based on...

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