Sample Midterm 1

Sample Midterm 1 - Economics 148 Sample Midterm Directions:...

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Economics 148 – Sample Midterm Directions: You have 75 minutes to complete the exam. Please place your final answer in the space provided below. Partial credit will be given for work that is both carefully done and legible. Good luck! Problem A (20 points) – Welfare Economics Consider a pure exchange economy with two individuals (1 and 2), each of whom consumes food and drinks. U 1 D U 2 food U 2 A B C U 1 drinks Individual 1 Individual 2 Indifference curves for individual 1 are labeled U 1 and U 1 , while the indifference curves for individual 2 are labeled U 2 and U 2 .
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1) Allocation C is Pareto Efficient: TRUE or FALSE 2) Allocation A is Pareto Efficient: TRUE or FALSE 3) Allocation B is Pareto Efficient TRUE or FALSE 4) Allocation B is a Pareto improvement over (or relative to) allocation C TRUE or FALSE 5) Allocation C is a Pareto improvement over (or relative to) allocation B TRUE or FALSE 6) Allocation D is a Pareto improvement over (or relative to) allocation B TRUE or FALSE 7) At allocation C, 2 2 1 1 food drinks food drinks MU MU MU MU < , where represents the marginal utility to individual 1 from consuming drinks and similarly for the other expressions. 1 drinks MU TRUE or FALSE 8) At allocation D, 2 2 1 1 food drinks food drinks MU MU MU MU < , where represents the marginal utility to individual 1 from consuming drinks and similarly for the other expressions. 1
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Sample Midterm 1 - Economics 148 Sample Midterm Directions:...

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