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Econ 302 Exam 2 FA07 - Exam 2 Ec302 secs 7 and 13 Rashid...

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Exam 2 Ec302, secs 7 and 13. Rashid. You will have to answer 50 MC or T/F questions. There are more than 50 questions on the exam, but there are no bonus questions. If you do an- swer more than 50 ,all your wrong answers will be included in your grade. So if you answer 53 questions and get 50 correct, you will only get 47 It will help if you cross out all the questions you wish to omit at the very beginning . (The extra questions are there in case you missed a topic, or there is ambiguity in the question etc) No calculators allowed Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Sir Plus has a demand function for mead that is given by the equation D ( p ) = 100 – p . If the price of mead is $85, how much is Sir Plus’s net consumer’s surplus? a. 15 b. 225 c. 56.25 d. 112.50 e. 7,650 ____ 2. Bernice has the utility function u ( x , y ) = min{ x , y }, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $20 per week and was paying a price of $2 per pair of earrings, then if the price of earrings rose to $5, the compensat- ing variation of that price change (measured in dollars per week) would be closest to a. $20. b. $41. c. $40. d. $10. e. $39. ____ 3. If Bernice (whose utility function is min{ x , y }, where x is her consumption of earrings and y is money left for other stuff) had an income of $16 and was paying a price of $8 for earrings when the price of earrings went up to $10, then the equivalent variation of the price change was ____ 4. Lolita’s utility function is U ( x , y ) , where x is her consumption of cow feed and y is her con- sumption of hay. If the price of cow feed is $.10, the price of hay is $1, and her income is $2 and if Lolita chooses the combination of hay and cow feed that she likes best from among those combinations she can af- ford, her utility will be ____ 5. Kitty’s utility function for BMWs and money is given by 16,000 x + y , where x is the number of BMWs she has and y is the amount of money she has. Her income is $23,000. Her reservation price for one BMW is
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____ 6. Suppose every Buick owner’s demand for gasoline is 20 – 5 p for p less than or equal to 4 and 0 for p > 4. Every Dodge owner’s demand is 15 – 3 p for p less than or equal to 5 and 0 for p > 5. Suppose that Gas Pump, South Dakota, has 100 Buick owners and 250 Dodge owners. If the price of gasoline is $4, what is the total amount of gasoline demanded in Gas Pump? a. 1,500 gallons b. 375 gallons c. 1,125 gallons d. 750 gallons e. None of the above. ____
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