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
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*Sign up*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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