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ECON 302 Final Exam  Summer 2009
Name: ____________________
Form A – 150 points total
Multiple Choice (5 points each)
Identify the choice that best completes the statement or answers the question.
____
1.
Katie Kwasi’s utility function is
u(x
1
,x
2
) = 5(ln x
1
) + x
2
. Given her current income and the current relative
prices, she consumes 10 units of
x
1
and 15 units of
x
2
. If her income doubles, while prices stay constant, how
many units of
x
1
will she consume after the change in income?
a.
10
b.
15
c.
5
d.
20
e.
There is not enough information to determine how many.
____
2.
Consider the goalie’s anxiety at the penalty kick. Let the kicker’s payoffs below represent the kicker’s
probability of success and the goalie’s payoffs the probability of failure.
Goalie
Defend left
Defend right
Kicker
Kick left
50,

50
20,

20
Kick right
40,

40
90,

90
The goalie should defend left with probability
a.
.38.
b.
.63.
c.
.13.
d.
.88.
e.
1.
____
3.
Miss Muffet insists on consuming 2 units of whey per 1 unit of curds. If the price of curds is $5 and the price
of whey is $6, then if Miss Muffet’s income is
m
, her demand for curds will be
a.
5
c
+ 6
w
=
m
.
b.
.
c.
5
m
.
d.
.
e.
.
____
4.
Suppose that Dent Carr’s longrun total cost of repairing
s
cars per week is
c
(
s
) =
3s
2
+ 108
. If the price he
receives for repairing a car is $18, then in the long run, how many cars will he fix per week if he maximizes
profits?
a.
4.50
b.
0
c.
6
d.
3
e.
9
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5.
Herbie’s utility function is
u(x,y) = x + 8y –y
2
/2,
where
x
is the number of
x
’s he consumes per week and
y
is
the number of y’s he consumes per week. Herbie has $200 a week to spend. The price of
x
is $1. The price of
y
is currently $4 per unit. Herbie has received an invitation to join a club devoted to the consumption of
y
. If
he joins the club, Herbie can get a discount on the purchase of
y
. If he belonged to the club, he could buy
y
for
$1 a unit. How much is the most Herbie would be willing to pay to join this club?
a.
$33
b.
$21
c.
$4.50
d.
$16.50
e.
None of the above.
____
6.
Two partners start a business. Each has two possible strategies, spend full time or secretly take a second job
and spend only part time on the business. Any profits that the business makes will be split equally between
the two partners, regardless of whether they work full time or part time for the business. If a partner takes a
second job, he will earn $50,000 from this job plus his share of profits from the business. If he spends full
time on the business, his only source of income is his share of profits from this business. If both partners
spend full time on the business, total profits will be $200,000. If one partner spends full time on the business
and the other takes a second job, the business profits will be $80,000. If both partners take second job, the
total business profits are $20,000.
a.
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 Spring '10
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