ECMA04H  VERSION A
Sketchy Solutions to First Term Test, written on October 20, 2006
These are the answers to VERSION A.
Q1:
C
On the PPF, if X = 7, Y = 20  12.8 = 7.2, so the point (7,7.4) is
unattainable
Q2:
E
opportunity cost of X = dY/dX = .4(1+X);
at X = 3, cost = 1.6
Q3:
B
opportunity cost of Y = dX/dY
at X = 5, dY/dX = 2.4,
so
dX/dY =
5/12
Q4:
E
V = 2X + 20  .2(1+X)
2
to maximize, set dV/dX = 0
dV/dX = 2  .4(1+X) = 0
so
.4(1+X) = 2,
1+X = 5,
X = 4
Q5:
F
I is false because the PPF has nothing to do with tastes; II is true because
bowing out means that the opportunity cost of X rises as X increases; III is
true because the PPF is the boundary between attainable and
unattainable, indicating that there are limited amounts of X and Y, hence
scarcity.
Q6:
A
The rise in income shifts demand to the right
Q7:
H
If wages rise in the tennis racquet industry, supply shifts to the left.
Meanwhile, if golf clubs fall in price, this reduces the demand for tennis
racquets, because golf clubs and tennis racquets are substitutes.
D
shifts left. Quantity clearly falls, but we are not sure what happens to
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 Fall '09
 Cleverland
 Supply And Demand, tennis racquet industry

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