2009SecondMidtermA_Edward - Economics 2010 Sec 300 Second...

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Page 1 Economics 2010 Sec 300 Second Midterm Fall 2009 – Version A There are 56 questions on Version A The test bank questions and the questions we created are mixed together. Name: __________________________ Date: _____________ Some explanations added. 1. Basic consumer theory, as we learned in class, assumes that individual rank goods not bundles. A) True B) False Basic consumer theory assumes that individuals rank bundles, not goods. One ranks goods in the context of bundles. If I approach you on the street and offer you a candy bar or a carrot you will decide between them in the by comparing your current bundle with a carrot added to your current bundle with a candy bar added. You cannot rank individual goods without knowledge of the other stuff in the bundle. 2. Suppose the state of Oklahoma decides to produce only two goods—oil and football helmets. As oil production increases, the production of football helmets will: A) not sure. B) decrease at a decreasing rate. C) decrease. D) increase. 3. Along a given supply curve, an increase in the price of a good will: A) decrease producer surplus and increase consumer surplus. B) increase consumer surplus. C) increase producer surplus. D) decrease producer surplus. 4. Ceteris paribus, a decrease in the price of a good will always increase an individual's consumer's surplus. A) True B) False A decrease in a price will never decrease consumer’s surplus, but it might not increase it. For example if the original price is so high you buy zero and then the price is lowered but you still buy zero, consumer’s surplus does not increase (zero before and after the price decrease)
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Page 2 5. The _________ is the maximum amount of Good X a consumer would be willing to give up in order to obtain an additional unit of Good Y: A) marginal rate of exchange. B) average rate of substitution. C) marginal rate of substitution. D) marginal rate of utility exchange. 6. Which of the following policies is most likely to reduce traffic congestion in a large metropolitan area? A) an increase in the price of subway and bus fare to and from the city B) asking citizens to carpool C) a toll road that requires each car to pay a fee to enter the city center D) a limited number of free “early bird” parking passes given only to those who arrive prior to 6 A.M. 7. Empirically, an increase in the number of doctors (an increase in the supply of treatment) typically increases the amount of treatment but does not decrease the cost of treatment. What might explain this? A) Demand for medical treatment is without limit B) Demand is perfectly inelastic with respect to price C) The presence of a doctor tends to increase the demand for treatments As per our discussion in class of the evidence and how doctors increase the demand for treatment. D) None of the above. 8. Which of the following goods is likely to have the most inelastic price elasticity.
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This note was uploaded on 07/17/2011 for the course ECON 102 taught by Professor Jarv during the Summer '09 term at Rio Hondo College.

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2009SecondMidtermA_Edward - Economics 2010 Sec 300 Second...

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