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Mid%2Dsemester_exam_2007

# Mid%2Dsemester_exam_2007 - THE AUSTRALIAN NATIONAL...

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THE AUSTRALIAN NATIONAL UNIVERSITY Mid-Semester Examination March 2007 MICROECONOMICS 1 (ECON1101) Study Period: 15 minutes Writing Period: 90 minutes Permitted Materials: Non-programmable Calculators Answer all of the following questions in the script book. Each question is worth 10 marks. 1. Miriam has the following marginal benefit schedule for litres of wine Quantity (litres) Marginal Benefit (\$) 0 20 1 16 2 12 3 8 4 4 5 0 a. Use the cost-benefit principle and the table to explain how many litres of wine Miriam should consume when the price of wine is \$10 and wine can only be bought in one litre bottles. b. Sketch her marginal benefit (MB) curve with MB on the y-axis. c. Calculate the slope and find the equation of this line. d. Use the equation to explain how many litres Miriam should consume when the price of wine is \$10 a litre and wine can also be bought in half litre bottles. Illustrate your answer. 2. Assume that students Tom and Jo live in a big house that has started to look like a pig-sty.

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