midIIAS_302_f08 - Midterm II Version A December 4 2008...

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Midterm II Economic 302 Name:__________________ Version A Section 9 December 4, 2008 Net-ID:_________________ Before beginning the exam, please verify that you have 7 pages with 32 questions in your exam booklet. On Your scantron sheet, you must place your full name, university ID number, Net-ID. Make sure you bubble in the correct exam version. Please choose the BEST response to the following questions and record your answers on the scantron sheet provided with a number 2 pencil . Only answers marked on the scantron will be counted. Good Luck! 1) True or false : For a budget spent entirely on two normal goods, an increase in the price of one will necessarily decrease the consumption of both. A) True B) False 2) Mike spends all his income on tennis balls and basketball tickets. His demand curve for tennis balls is elastic. True or false : If the price of tennis balls goes down, he consumes more basketball tickets (assume price of basketball ticket remains fixed.). A) True B) False 3) True or false : The ICC (Income Consumption Path) always passes through the origin. A) True B) False 4) True or false : for a luxury good the income effect always exceeds the substitution effect. A) True B) False 5) True or false : The marginal product curve intersects the average product curve at the latter curve's minimum point. A) True B) False 1
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6) For a straight line demand curve, what is the price elasticity at the revenue maximizing point? A) Price elasticity is greater than -1. B) Price elasticity is less than -1. C) Price elasticity is equal to -1. D) Price elasticity is not defined. Sam spends $6/wk on orange juice and apple juice. Orange juice costs $2/cup while apple juice costs $1 /cup. Sam views 1 cup of orange juice as a perfect substitute for 3 cups of apple juice. 7) What is Sam’s optimal consumption bundle of orange juice and apple juice? A) (0 apple juice, 3 orange juices) B) (6 apple juices, 0 orange juices) C) (2 apple juices, 2 orange juices) D) (4 apple juices, 1 orange juice) 8) Suppose in problem (7) the price of apple juice reduces to $0.60/cup, while the price of orange juice remains constant. How many apple juice cups would Sam buy? A) 6 B) 2 C) 10 D) 0 Use the following information to answer questions 9, Suppose the inverse demand curve for calculators is P = 60 – 0.5 Q . 9)
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midIIAS_302_f08 - Midterm II Version A December 4 2008...

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