ECO2003P_CT_TEST - ECO2003P: INTERMEDIATE MICROECONOMICS...

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ECO2003P: INTERMEDIATE MICROECONOMICS CONSUMER THEORY TEST 3 DECEMBER 2008 This test comprises of 20 multiple choice questions and has 10 pages including the cover page. Questions that are correctly answered will earn you 4 marks, while each incorrectly answered question attracts a penalty of 1 negative mark. In all of the cases below, choose the MOST correct answer
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1. Both Minato & Beluga are sit-down restaurants. If Catherine is prepared to pay full price at Minato but only half price at Beluga for the same amount of sushi (i) Catherine is expressing a preference for diversity if she eats at both places (ii) Beluga’s sushi and Minato’s sushi are perfect substitutes (iii) Consumer surplus from Beluga’s sushi is definitely greater than cons umer surplus from Minato sushi (iv) The opportunity cost of eating at Beluga may be greater than the opportunity cost of eating at Minato if Minato is less popular (v) Catherine might perceive a difference in the quality of sushi at Minato and Beluga A) (i), (ii) & (v) B) (i), (iv) & (v) C) (i), (iii) & (v) D) (ii), (iii) & (v) 2. Considering Luke’s raincoat consumption habits, which of the following statements apply if Luke is a rational consumer: (i) Luke’s demand for a raincoat depends on the weather (ii) Luke’s demand for a raincoat relies on the cost of getting wet being greater than the benefit derived from other goods he could spend his money on (iii) Luke’s demand for a raincoat is independent of income (iv) Luke’s reservation price for a raincoat is the m aximum he is willing to pay for a raincoat (v) Luke’s cross -price elasticity for substitutes would remain constant, independent of location A) (i), (ii) &(iv) B) (i), (ii) & (v) C) (i), (iv) & (v) D) (ii), (iii) & (iv) The following equation for utility must be used to answer questions 3-7. Consider an individual, Daniel, who consumes just two things; x (cars) and y (girls), with utility function of the form U(x,y)=x 1/4 y 3/4 . 3. Calculate the slope of Daniel ’s indifference curve when the consumption of goods x and y is 4 units each. A) 1/3 B) 6 C) 4 D) 1/4
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4. Daniel decreases consumption of good x from 4 units to 3 units. How many additional units of y would you have to give Daniel in order to return him to his previous level of well-being? Answers rounded to two decimal places. A)
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This note was uploaded on 05/23/2011 for the course ECON 203 taught by Professor Jules during the Spring '11 term at University of Cape Town.

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ECO2003P_CT_TEST - ECO2003P: INTERMEDIATE MICROECONOMICS...

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