Spring 2010 - Exam 1 - Blue

Spring 2010 - Exam 1 - Blue - A partial representation of...

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A partial representation of Ellen’s tastes and preferences over baskets of two goods, Good X and Good Y, is shown in the graph below: Current market prices for Good X and Good Y are P X = 36 and P Y = 24. Ellen’s income that she has available to purchase X and Y is is M = 288. She is a utility maximizer, and consumes integral quantities of X and Y. 1. Ellen’s marginal rate of substitution at her utility maximizing basket of X and Y equals ______ units of Y per unit of X. a) -1/2 b) -2/3 c) -3/2 d) -2 e) -3 2. The price of good X falls to P X = 18. The price of good Y and Ellen’s income remain unchanged. The change in Ellen’s quantity demanded of good X following this fall in the price of X due to the substitution effect equals _____ units of X. a) -3 b) -1 c) 0 d) +1 e) +3 3. The price of good X falls to P X = 18. The price of good Y and Ellen’s income remain unchanged. The change in Ellen’s quantity demanded of good X following this fall in the price of X due to the income effect equals _____ units of X. a) -3 b) -1 c) 0 d) +1 e) +3 Exam 1 – BLUE Version Page 1 of 7 Spring 2010- Econ 415 Units of X 10 5 0 5 10 Units of Y 15 15
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4. The change in quantity demanded of good X caused, ceteris paribus, by this fall in the price of P X to 18 equals ____ units of X. a) -1 b) +1 c) +2 d) +3 e) + 4 5. We can determine that in this range of prices of goods X and Y and income M, Ellen considers good Y to be: a) a substitute for good X. c) a normal good. b) a complement for good X. d) an inferior good. 6. We can determine that in this range of prices of goods X and Y and income M, Ellen considers good X to be: a) a normal good. b) a luxury good c) an inferior good d) a Giffen good. 7. At his current level of consumption of goods X and Y Jim’s marginal rate of substitution is – 2 units of Y per unit of X. He is spending all of his income, facing prices P X = $3.00 per unit and P Y = $2.00 per unit. Based upon this information we can conclude: a) Jim is maximizing his utility. b) Jim can increase his satisfaction consuming more units of X and less units of Y. c) Jim can increase his satisfaction consuming fewer units of X and more units of Y. d) Jim can increase his satisfaction consuming fewer units of X and fewer units of Y. 8. Leontief preferences over baskets of two goods X and Y are represented by the utility function: a) U(X,Y) = α X + β Y, where α and β are positive constants. b) U(X,Y) = β X α Y (1- α ) , where α and β are positive constants. c) U(X,Y) = θ × Min{ α X, β Y}, where α , β , and θ are positive constants. d)
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This note was uploaded on 05/18/2010 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue University-West Lafayette.

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Spring 2010 - Exam 1 - Blue - A partial representation of...

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