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Unformatted text preview: Ecn 100 - Intermediate Microeconomic Theory University of California - Davis August 12, 2009 Instructor: John Parman Midterm 1 - Solutions You have until 1:50pm to complete this exam. Be certain to put your name, id number and section on both the exam and your scantron sheet and fill in test form A on the scantron. Answer all multiple choice questions on your scantron sheet. Choose the single best answer for each question; if you fill in multiple answers for a question you will be marked wrong. Answer the long answer questions directly on the exam. You must show your work for full credit. Answers may be left as fractions. Please place a box around final answers when appropriate. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (60 points) 1. On a graph with good x on the horizontal axis and good y on the vertical axis, a consumer’s indifference curves will be downward sloping when: (a) Good x is a bad and good y is a good. (b) Good y is a bad and good x is a good. (c) Neither (a) nor (b) is true. (d) Both (a) and (b) are truse. (c) To get downward sloping indifferences curves, either both goods must be good or both goods must be bad. The scenarios in (a) and (b) would produce upward sloping indifference curves. 2. On a graph with apples on the horizontal axis and bananas on the vertical axis, an increase in the price of apples will: (a) Make the budget line steeper. (b) Make the budget line flatter. (c) Shift the budget line away from the origin. (d) Shift the budget line toward the origin. (a) The slope of the budget line is- p apples p bananas . If the price of apples goes up, the magnitude of the slope gets larger meaning the budget line gets steeper. 3. If salt and pepper are complements and both are normal, ordinary goods, an increase in the price of pepper will: (a) Lead to an increase in the amount consumed of both pepper and salt. (b) Lead to a decrease in the amount consumed of both pepper and salt. (c) Lead to an increase in the amount of salt consumed and a decrease in the amount of pepper consumed. (d) Lead to an increase in the amount of pepper consumed and a decrease in the amount of salt consumed. (b) When the price of pepper rises less pepper is consumed because pepper is an ordinary good. Less salt is consumed because salt and pepper are complements. 2 Midterm 1 - Solutions 4. Adam’s preference are transitive and the utility function U ( x,y ) represents his preferences. Suppose Adam prefers ( x a ,y a ) to ( x b ,y b ) and he prefers ( x a ,y a ) to ( x c ,y c ). Which of the following statements is definitely true? (a) U ( x a ,y a ) > U ( x c ,y c ). (b) ( x b ,y b ) is preferred to ( x c ,y c ). (c) U ( x b ,y b ) ≤ U ( x c ,y c ) (d) (a) and (b)....
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This note was uploaded on 10/22/2010 for the course ECN 100 taught by Professor Parman during the Fall '08 term at UC Davis.
- Fall '08