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practiceexam2 - ECON 251 Practice Exam #2 Fall 2006 1. Dave...

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ECON 251 Practice Exam #2 Fall 2006 1. Dave has an income of $60 per week and spends all his income on video games and potato chips. Each video game costs $20 and each bag of potato chips costs $4. Which of the following represents Dave’s budget line? (V = the quantity of video games and P = the quantity of potato chips) a. 0.2V + 5P = 60 b. 5P + 0.2V = 60 c. 20V + 4P = 60 d. 4V + 20P = 60 2. Refer to the information in the previous question. Suppose that the quantity of video games is graphed on the vertical axis and the quantity of bags of potato chips is graphed on the horizontal axis. If the price of potato chips falls from $4 to $3, the budget line a. becomes steeper. b. becomes flatter. c. shifts leftward but its slope does not change. d. shifts rightward but its slope does not change. 3. With his $60 of weekly income, Dave (the same Dave from the previous two problems) recently purchased 2 video games and 5 bags of potato chips. The marginal utility of the second video game was 10, while the marginal utility of the fifth bag of potato chips was 5. Based on this information, how should Dave have changed his consumption to reach a consumer equilibrium? a. Dave should have bought more video games and fewer bags of potato chips. b. Dave should have bought more bags of potato chips and fewer video games. c. Dave should have bought more video games and more potato chips. d. Dave was choosing the optimal quantities of video games and bags of potato chips, so he shouldn’t make any changes.
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Jonathan likes to consume pineapples and oranges. The price of pineapples is $10, and the price of oranges is $5. The following table shows the total utilities to Jonathan from consuming pineapples and oranges. Based on this information, what is the marginal utility of the 3rd orange? Quantity of pineapples Total utility from pineapples Quantity of oranges Total utility from oranges 0 0 0 0 1 80 1 80 2 150 2 140 3 210 3 190 4 260 4 230 5 300 5 260 a. 25 b. 50 c. 90 d. 120 5. Refer to the table in question above. Which of the following represents the consumer equilibrium if Jonathan has $30 of income? a. 2 pineapples, 2 oranges b. 2 pineapples, 4 oranges c. 3 pineapples, 0 oranges d. 1 pineapple, 4 oranges 6. At Jonathan’s consumer equilibrium, what is the marginal utility per dollar spent on the last unit consumed of each good? a. 6 b. 8 c. 10 d. 60 7. Refer to the table above. At the consumer equilibrium, what is the marginal rate of substitution if the quantity of pineapples is graphed on the vertical axis and the quantity of oranges is graphed on the horizontal axis? a.
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practiceexam2 - ECON 251 Practice Exam #2 Fall 2006 1. Dave...

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