Econ 100A MT1 - Department of Economics University of...

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Department of Economics Spring 2008 University of California Prof. Woroch Economics 100A FIRST MIDTERM EXAM – Code #1 GENERAL INSTRUCTIONS : Write your name, your GSI’s name , your SID and the above exam code on the front cover of two blue books. Mark one blue book as #1 and the other #2. Put Parts I in blue book #1, and Part II in #2. There is a total of 100 points with point assignments given in the instructions. I. MULTIPLE CHOICE : For each of the following 15 questions, write the letter of one of the 6 alternatives that completes the statement. Each one is worth 3 points for a total of 45 points. 1. Unexpectedly, an insect infestation destroys 1 billion bushels of this year’s U.S. corn harvest. Which of the following consequences are predicted by supply and demand analysis? (i) The equilibrium price of corn will rise, and the increase will be greater in the short run compared to the long run. (ii) The equilibrium price of corn will rise, and the increase will be greater the more inelastic the market demand for corn. (iii) The equilibrium quantity of corn sold will decline, and the amount of the decrease will be smaller the more elastic is the market demand. a) (i) only. b) (ii) only. c) (iii) only. d) Both (i) and (ii), but not (iii). e) Both (ii) and (iii), but not (i). f) All three: (i), (ii) and (iii). 2. Which one of the following statements about market demands are true? (i) Coke and Pepsi should have a negative cross-price elasticity of demand, as should colas and iced tea drinks, but the latter should have a greater absolute value. (ii) At the mid-point along a linear demand curve, there is “unitary” price elasticity of demand. (iii) The price elasticity of market demand at the equilibrium price is exactly negative of the price elasticity of market supply at that price. a) All three: (i), (ii) and (iii). b) Both (i) and (ii), but not (iii). c) Both (ii) and (iii), but not (i). d) (iii) only. e) (ii) only. f) (i) only. 3. Which of the following examples of consumer behavior violates one or more of the consumer rationality assumptions? (i) The consumer gives up less food to get one more article of clothing the more food she has. (ii) The consumer prefers a free toaster rather than receiving cash equal to the toaster’s market value. (iii) The consumer prefers pasta to chicken, chicken to steak, and steak to pasta. a) (i) only. b) (ii) only. c) (iii) only. d) Both (ii) and (iii), but not (i). e) All three: (i), (ii), and (iii). f) None of the three. 4. Which of the following statements about a utility function are true? (i) The marginal utility of a good will eventually fall, the more of that good in a consumer’s basket, provided the quantities of all other goods are held constant.
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Econ 100A MT1 - Department of Economics University of...

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