{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Mid-trimester%20test%202007

# Mid-trimester%20test%202007 - VICTORIA UNIVERSITY OF...

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: VICTORIA UNIVERSITY OF WELLINGTON FACULTY OF COMMERCE AND ADMINISTRATION SCHOOL OF ECONOMICS AND FINANCE MID­TRIMESTER TEST, 2007 ECON 201: MICROECONOMICS INSTRUCTIONS: · Duration of test: 50 minutes. · Total marks: 100, 20 mult iple cho ice quest ions @ 5 marks each. · Pocket calculators can be used, but not notes or books. · Please fill in your student ID number and cho ice of answer for each quest io n carefully on the separate one­page answer sheet. · For any calculat ions, use the back of the quest ion pages, or the margins or any empt y space on the quest ion pages. Only the answer sheet is to be returned at the conclusio n of the test. · There are SEVEN pages of quest ions – check that your set is co mplete. Question 1 The diagram below shows a change in the equilibrium price and quantit y of co ffee: P B P2 A P1 Q1 Q2 Qcoffee The change could be due to which of the fo llowing? (a) (b) (c) (d) A failure of the coffee harvest in Brazil which drives up the price A rise in consumers’ inco mes when coffee is an inferior (but not a Giffen) good) A sharp increase in the pr ice o f tea (which is a substitute for coffee) A change in consumer tastes away fro m coffee in favour of wine Question 2 Non­satiat ion implies that: (a) (b) (c) (d) Wit h standard convexit y assumpt ions, indifference curves have negative slope Consumers are unable to attain their constrained optimum Marginal ut ilit y is negat ive at the optimum The Marginal Rate of Subst itution of x for y is increasing Question 3 At the choke price on a linear demand curve: (a) (b) (c) (d) Elast icit y o f demand is zero Elast icit y o f demand is (minus) one Elast icit y o f demand is (plus) 100 Elast icit y o f demand is (minus) infinit y ECON 201 2007 Mid­trimester test 1 Question 4 On the demand curve Q = 600 – 40P, when P = 5, the elast icit y o f demand is (a) (b) (c) (d) ­0.1 ­0.5 ­1.25 ­2.0 Question 5 - If the demand curve is Q = 6 P (a) (b) (c) (d) 1 2 and P=37, t he elast icit y o f demand is ­1.0 ­0.5 ­0.75 ­3.0 Question 6 For two goods i and j the cross­price elast icit y o f demand is: (a) DQi P j × DP Q j i (b) DQi P × i DP Q j i (c) (d) DQi P j × DPi Q i DQi Pi × DPi Q i Question 7 A negat ive cross­price elast icit y o f demand between two goods means that the goods are (a) (b) (c) (d) subst itutes Giffen goods complements non­durable goods ECON 201 2007 Mid­trimester test 2 Question 8 Consistency o f preferences implies that (a) (b) (c) (d) If A f B and C f B then A f C If A f B and B f E then A f E If A f C and E p C then A p E If A f B and B p E then the consumer is indifferent between A and E Question 9 A consumer’s utilit y funct ion is U=4xy and the prices of the two goods are Px=8 and Py=24. The consumer’s inco me is 1,200. Which of the fo llowing is correct? (a) (b) (c) (d) The consumer’s optimal quantit y of good x is 50 The consumer’s marginal ut ilit y o f income is 12.5 The consumer’s optimal quantit y of good y is 75 1 The MRSxy at the optimum is /4 Question 10 A consumer’s preferences over two goods are represented by: U ( x , y ) = 1 3 2 x y 50 The prices are Px and Py , and an amount of money E can be spent on these goods. The two utilit y maximis ing demand funct ions are: (a) 6 E 1 E x = × and y = × 7 Py 7 Px (b) 2 E 3 E x = × and y = × 5 Py 5 Px (c) 2 E 1 E x = × and y = × 3 Py 3 Px (d) x = 37 E 3 E × × and y = 50 Py 50 Px ECON 201 2007 Mid­trimester test 3 Question 11 0 4 7 Consider the Cobb­Douglas production function Q = 18 L . K 0. . This is an example o f (a) (b) (c) (d) Decreasing returns to scale Perfect subst itutabilit y of inputs A Leont ieff production funct ion Increasing returns to scale Question 12 The demand curve for a good is Q = 48,000 – 120P. When the price is \$50, consumer surplus is (a) (b) (c) (d) \$14.7 millio n \$2.1 millio n \$9.6 millio n \$7.35 millio n Question 13 Composite g o o d y M K R E A C U2 B U 1 xA xC x In the diagram, Co mpensating Variat ion is the distance (a) (b) (c) (d) KM AB KR BE ECON 201 2007 Mid­trimester test 4 Question 14 In a Leontieff (fixed­proportions) production function, the elast icit y o f subst itution is given by (a) (b) (c) (d) s = ¥ s = 1 s = 0 1 £ s < ¥ Question 15 2 A firm has total short­run cost C = 5q + 90 and half o f its fixed costs are sunk. Its shut­down price is (a) \$20 (b) \$30 (c) \$35 (d) \$40 Question 16 The market for widgets is in lo ng­run equilibrium. All suppliers face the same 2 average cost curve, AC = 300 – q + 0.02q . The demand curve is D(P) = 642,000 – 36P. The number of suppliers is (a) 37,165 (b) 21,054 (c) 25,266 (d) 63,149 ECON 201 2007 Mid­trimester test 5 Question 17 Suppose the production o f cars is characterised by the production funct io n 2 L + K Q = L + K , with marginal products MPL = and L L + K MPK = . K ( ) ( ) ) ( The price of labour is \$10 per unit and the pr ice of capital is \$1 per unit. If a car manufacturer wishes to produce 121,000 cars, its cost­minimis ing quant it ies of labour and capital will be (a) L = 100 and K = 10,000 (b) L=121 and K = 1,210 (c) L=1,210 and K = 121,000 (d) L = 1,000 and K = 100,000 Question 18 For the production funct ion Q = LK , when the price o f labour is w and the price o f capital is r, the demand curve for labour is (a) (b) (c) (d) rQ w r L = Q w wQ L = r L = L= Q w ECON 201 2007 Mid­trimester test 6 Question 19 2 A firm faces the production funct ion Q = L K 3 . The price of labour is w = 10 and the price o f capital is r = 5. The Lagrangian mult iplier in the firm’s cost­ minimisat ion problem is (a) l = (b) l = (c) l = (d) l = 1 2 LK 3 5 2 L K 2 5 LK 3 5 3 2 LK Question 20 K per period Q=100 before technical progress Q=100 after technical progress L per period The technical progress shown in the diagram above is (a) (b) (c) (d) Capital­saving Labour­saving Neutral Eliminated by the change in relat ive factor prices ******************************************** ECON 201 2007 Mid­trimester test 7 ...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online