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# exam2-pink - ECON 251 Exam#2-Pink Fall 2006 Quantity Total...

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ECON 251 Exam #2--Pink Fall 2006 Quantity of pens Total utility from pens Quantity of pencils Total utility from pencils 0 0 0 0 1 90 1 70 2 155 2 120 3 200 3 150 4 225 4 165 5 240 5 174 6 246 6 176 1. The table above gives the utility from pens and pencils. If pens and pencils both cost \$5 each and the consumer has an income of \$45, which of the following combinations maximizes the consumer’s utility (consumer equilibrium)? a. 3 pens and 6 pencils. b. 4 pens and 5 pencils. c. 5 pens and 4 pencils. d. 6 pens and 3 pencils. 2. The table below contains different combinations of pizza and burgers that Jayson can afford in a given week. His income is \$100 per week. What are the prices of pizzas and burgers? Basket Pizzas Burgers A 0 25 B 4 17 C 8 9 D 12.5 0 a. A pizza costs \$6 and a burger costs \$4. b. A pizza costs \$8 and a burger costs \$2. c. A pizza costs \$8 and a burger costs \$4. d. A pizza costs \$6 and a burger costs \$8.

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1 2 3 4 5 5 1 2 3 4 smoofers B 1 b 6 7 8 IC 1 widgets 3. If movie tickets cost \$10, and sodas cost \$2, and your income is \$30, what would the equation of your budget line be? (M = quantity of movie tickets and S = quantity of sodas) a. 30 = 10M + 2S b. 30 = 5M + S c. 10 = 2S + 30/M d. 30 = 2M + 10S 4. At point ‘ b ’ on the following graph, which of the following is true? The budget line is labeled “B 1 ”. a. The budget line is tangent to the indifference curve. b. To maximize utility, the consumer should purchase more smoofers and fewer widgets. c. The only combinations of smoofers and widgets that will increase utility above that at point ‘b’ are not affordable. d. The marginal rate of substitution is less than the relative price of smoofers. 5. Refer to the previous graph. What is the consumer’s marginal rate of substitution at point ‘b’? a. 5 widgets per smoofer b. 5 smoofers per widget c. 3.5 widgets per smoofer d. 3.5 smoofers per widget
6. Refer to the last graph. What is the marginal rate of substitution at the point where the consumer maximizes his utility, given the budget line B 1 ? a. 2.5 b. 3 c. 1.25 d. 1.5 7. If two goods are perfect substitutes, then the shapes of the indifference curves are a. bowed toward the origin. b. bowed away from the origin. c. straight lines. d. right-angled lines. 8. Suppose the price of a pair of shoes is \$25 and the price of a T-shirt is \$15. The consumer’s budget is entirely allocated. If the marginal utility of a pair of shoes is 100 units and the marginal utility of a T-shirt is 75 units, the consumer is a. in equilibrium because his or her utility is maximized. b. not in equilibrium and should purchase fewer shoes and more shirts. c. not in equilibrium and should purchase fewer shirts and more shoes. d.

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exam2-pink - ECON 251 Exam#2-Pink Fall 2006 Quantity Total...

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