makeupexam2-251-fall2007

# makeupexam2-251-fall2007 - ECON 251 Makeup Exam#2 Fall 2007...

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ECON 251 Makeup Exam #2 Fall 2007 1. Which of the following situations would be graphed as in the picture above? a. The price of soda rose, while the price of chips remained unchanged. b. The price of soda rose, and the price of chips rose. c. The prices of both soda and chips fell. d. The price of soda fell, while the price of chips remained unchanged. 2. When the price of a normal good decreases, the substitution effect _________ its quantity demanded while the income effect ________ its quantity demanded. a. raises; lowers b. raises; raises c. lowers; raises d. lowers; lowers 3. If the marginal rate of substitution is 8, which of the following does this imply? a. The consumer would maximize his utility by purchasing less of good y and more of good x. b. The consumer would maximize utility by purchasing less of good x and more of good y. c. Good x costs 8 times as much as good y. d. The consumer is willing to give up 8 units of good y to get one more unit of good x. 4. When a consumer is maximizing utility, the marginal rate of substitution is equal to a. the magnitude of the slope of the budget line b. MUx/MUy c. the magnitude of the slope of the indifference curve d. all of the above Soda  Chips

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5. Carrie spends all her income on gum and ChapStick. A pack of gum costs 50 cents, and a tube of ChapStick costs \$1. At the current combination of gum and ChapStick that Carrie chooses, her marginal rate of substitution is 2 (good y = ChapStick, and good x = gum). To maximize her utility, Carrie should a. buy more gum and less ChapStick b. buy more ChapStick and less gum c. maintain the current combination of gum and ChapStick d. move to a lower indifference curve 6. According to the graph below, the substitution effect of the change in the price of milkshakes changes consumption of milkshakes from _______ to _________, while the income effect of the price change in milkshakes changes consumption of milkshakes from ______ to ________. a. 1;2;3;5 b. 2;3;3;5 c. 3;2;2;5 d. 2;5;5;3 7. According to the graph in the previous problem, a. milkshakes are inferior goods. b. soft drinks are inferior goods. c. soft drinks and milk shakes are substitutes in consumption. d. soft drinks and milk shakes are complements in consumption. 8. The labor supply curve for an individual can bend backward if a. the income effect of a wage increase outweighs the substitution effect of a wage increase.
b. the substitution effect of a wage increase outweighs the income effect of a wage increase. c.

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makeupexam2-251-fall2007 - ECON 251 Makeup Exam#2 Fall 2007...

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