Practice Exam II Summer 11

Practice Exam II Summer 11 - Sam Houston State University...

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Unformatted text preview: Sam Houston State University Dr. Fidel Gonzalez INTERMEDIATE MICROECONOMICS PRACTICE EXAM II Answer all the questions using a scantron. All questions are worth one point. Questions 1 to 49 are required. Question 50 is bonus. Good luck! Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. One way to look at the consumer's optimal choice is as one in which the marginal utility of the last dollar spent a. is equal to the marginal utility per dollar saved. b. is equal to -P1/P2 c. in all goods is the same d. is higher in the more preferred goods ____ 2. The consumer's optimal choice is represented by a. MRS = P 1 /P 2 b. MU 1 /P 2 = MU 2 /P 1 c. -MU 2 /MU 1 =- P 2 /P 1 d. -MU 1 /MU 2 = - P 1 /P 2 e. none of the above ____ 3. For well-behaved ICs as a person consumes less of a good then a. the price of the good will rise b. total utility will rise c. marginal utility will decline d. expenditure on the good will increase e. marginal utility will rise ____ 4. Suppose that at current consumption levels an individual’s marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2. Then the MRS (of soft drinks for hot dogs)—that is, the number of hot dogs the individual is willing to give up to get one more soft drink is a. 1/5 b. 1/2 c. 2 d. 5 ____ 5. The reason behind a diminishing marginal utility can be stated as follows: a. As the amount of a good consumed increases, the sum of satisfaction received tends to decrease. b. As the amount of a good consumed increases, the additional satisfaction gained from consuming additional units tends to decrease. c. As the amount of a good consumed decreases, the additional satisfaction gained from consuming additional units tends to increase. d. As the amount of a good consumed increases, the sum of satisfaction received tends to increase but at a diminishing rate. e. b and d ____ 6. If an individual has a constant MRS of shoes for sneakers of 3/4 (that is, he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of shoes) then, if sneakers and shoes are equally costly, he or she will a. spend his or her income equally on sneakers and shoes. b. buy only sneakers. c. wear sneakers only 3/4 of the time. d. buy only shoes. ____ 7. Terence has $50 per week to spend on Subway sandwiches and milkshakes. The price of a Subway sandwich is $5 and the price of a milshake is $4. He buys 6 sandwiches and 5 milshakes. The marginal utility of the 6th sandwich is 25 and the marginal utility of the 5th milkshake is 24. Which of the following is true a. He is maximizing his utility b. He is not maximizing his utility because he is not spending all of his income....
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This note was uploaded on 06/19/2011 for the course ECON 3357 taught by Professor Fidel during the Summer '11 term at Sam Houston State University.

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Practice Exam II Summer 11 - Sam Houston State University...

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