Mid203-2000 - Part of past mid-term examins 1.“If an individual is to maximize the utility received from consumption he or she should spend all

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1.“If an individual is to maximize the utility received from consumption, he or she should spend all available income. . . .” This statement assumes a. that saving is impossible. b. that the individual is not satiated in all goods. c. that no goods are “inferior.” d. both a and b. 2.If an individual’s indifference curve map does not obey the assumption of a diminishing MRS , then a. the individual will not maximize utility. b. the individual will buy none of good X . c. tangencies of indifference curves to the budget constraint may not be points of utility maximization. d. the budget constraint cannot be tangent to an appropriate indifference curve. 3.As an individual moves northwest along his or her indifference curve substituting more and more Y for X , his or her MRS of X for Y a. increases. b. decreases. c. stays the same. d. changes in a way that cannot be determined. 4.The point of tangency between a consumer’s budget constraint and his or her indifference curve represents a. complete satisfaction for the consumer. b. the equivalence of prices the consumer pays. c. constrained utility maximization for the consumer. d. the least he or she can spend. 5.An increase in an individual’s income without changing relative prices will a. rotate the budget constraint about the X-axis. b. shift the indifference curves outward. c. shift the budget constraint outward in a parallel way. e. rotate the budget constraint about the Y axis. 6.When a price increases, the income effect a. is negative for normal goods. b. is negative for inferior goods. c. is negative for a Giffen good. d. is zero for a Giffen good. 7.Consider the two statements: I. X is an inferior good. II. X exhibits Giffen’s Paradox. Which of the following is true? a. I implies II, but II does not necessarily imply I. b. II implies I, but I does not necessarily imply II. c. I and II are statements of the same phenomenon. 8.If good X is a normal good and its price rises, then quantity demanded a. may or may not fall. b.
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This note was uploaded on 02/07/2010 for the course ECONOMICS econ301 taught by Professor Mankiw during the Spring '10 term at American College of Computer & Information Sciences.

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Mid203-2000 - Part of past mid-term examins 1.“If an individual is to maximize the utility received from consumption he or she should spend all

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