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# practiceexam2A - ECON 251 Exam #2 Pink Spring 2009...

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ECON 251 Exam #2 Pink Spring 2009 (Practice Exam #2A for Fall 2009) 1. The table below shows Catherine’s marginal utilities of milk and coffee. Suppose coffee costs \$2/bottle and milk costs \$2/bottle and each week she has a maximum of \$10 spends on coffee and milk. Then she should consume __ bottles of milk and _____ bottles of coffee. Bottles per week Milk Coffee 1 80 55 2 60 50 3 40 45 4 20 40 a. 3:2 b. 4;1 c. 1;4 d. 2;3 2. At the fair you have \$12 and spend all of your money on cotton candy and roller- coaster rides. If cotton candy costs \$3 and roller coaster rides cost \$4, then which of the following bundles would be on your budget line? a. 2 cotton candies and 1 roller coaster ride b. 2 cotton candies and 2 roller coaster rides c. 4 cotton candies and 0 roller coaster rides d. 1 cotton candy and 2 roller coaster rides 3. Using the information in the problem above, what is the marginal rate of substitution at the utility-maximizing bundle if cotton candy is measured on the x-axis? a. 1/2 b. 2/3 c. 3/4 d. 4/3 4. Using the information above, if the price of cotton candy increases to \$4, which of the following would be the slope of the new budget line? (Assume still that cotton candy is measured on the x axis.) a. -1/2 b. -2/3 c. -3/4 d. -1 Econ 251 Page 1 of 8 Fall 2009 Exam 2 Pink

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5. Tom spends all his income on pizzas and Pepsi. The price of a pizza is \$8 and the price of a can of Pepsi is \$1. If he is maximizing his utility, then what must be true about the marginal utility of the last pizza he consumes? a. The marginal utility of the last pizza he consumes must be less than the marginal utility of the last Pepsi consumed. b. The marginal utility of the last pizza he consumes must be equal to 1/8. c. The marginal utility of the last pizza he consumes must be 8 times greater than the marginal utility of the last Pepsi he consumes. d. The marginal utility of the last pizza he consumes must be equal to 8. 6. Shelby consumes alfalfa (A) and broccoli (B). Her budget line is defined by the equation Q B = 9 – 2/3 Q A , where the quantity of alfalfa is measured on the x axis. If she has \$27 in income, what are the prices of alfalfa and broccoli? a. Alfalfa costs \$2, and broccoli costs \$3. b. Alfalfa costs \$8, and broccoli costs \$10. c. Alfalfa costs \$6, and broccoli costs \$9. d.
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## This note was uploaded on 02/10/2010 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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practiceexam2A - ECON 251 Exam #2 Pink Spring 2009...

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