sample2-micro08 - 73-150/Kesten SAMPLE QUESTIONS for...

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73-150/Kesten SAMPLE QUESTIONS for MIDTERM 2 ________________________________________________________________________ The following questions/problems are meant to help you prepare for the exam. Some of the midterm problems/questions will be similar to the following. However, you are also responsible from the material/exercises covered in class/recitations and in the homework assignments. You will have 50 minutes in the exam. Also you may need to use a calculator for some of the problems. ________________________________________________________________________ A. Definitions (For this part I will choose some of the following terms [I will only choose from the ones below] and ask you to define them.) Define the following terms. Do not give a mathematical formula as an answer: Homogeneity (of the demand function); Engel curve; Demand curve; Substitution effect; Income effect; Normal/inferior/Giffen good; Price/Cross-price elasticity; Unit elastic/Inelastic/Elastic demand; Consumer surplus; Weak/strong axiom; Actuarially fair gamble/insurance; MRTP; certainty equivalent. B. Explanation Questions (For this part I will choose one or two of the following questions. a. Draw a graph that shows that good X is normal/inferior/Giffen. [I will ask a specific case. Show the substitution and income effects. b. Can both goods X and Y be inferior at the same time? c. Draw a graph that illustrates that quantity demanded for some good X decreases/increases as its price increases/decreases. Show the substitution and income effects on your graph. [I will ask a specific case.] d. Explain the lump-sum principle (for tax/subsidy).
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