202 final exam (Spring 2010 11 am)

202 final exam (Spring 2010 11 am) - Name(TA's name NOT...

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                                                             Name: (TA’s name NOT necessary) NORTHWESTERN UNIVERSITY DEPARTMENT OF ECONOMICS SPRING 2010 ECONOMICS 202 (section 50): INTRODUCTION TO MICROECONOMICS PROF. ZELDER Final Exam June 7, 2010 For section I of the exam (multiple choice), please circle the single correct answer. For section II of the exam (short answer), please explain your answers with a few sentences, including diagrams and/or equations where necessary or useful. Please use the front of the page, only writing on the back if you run out of room. I. Multiple Choice (4 points each; 40 points total): Circle the single correct answer to each question. (1) (4 points) Fredo is trying to decide whether to buy a laser printer or an inkjet printer. The laser printer costs $400 to purchase, while the inkjet printer costs $100. The only other difference between the two printers is in terms of the ink cartridges: Each laser cartridge costs $100 and produces 20,000 copies before it runs out of ink, while each inkjet cartridge costs $20 and produces 1,000 copies before it runs out of ink. There are no other differences between the two types of printers (such as print quality, or speed, or anything else), and unfinished ink cartridges have zero resale value. Also, when he buys a printer, it does not come with a cartridge already in place, so he has to buy that, too. Which of the following statements is true? (a) It is irrational for Fredo to buy the laser printer. (b) It is rational for Fredo to buy the laser printer if he plans to make 18,000 copies. (c) It is rational for Fredo to buy the inkjet printer if he plans to make 30,000 copies. (d) It is rational for Fredo to buy the inkjet printer if he plans to make 24,000 copies. (e) None of the above is true. (2) (4 points) Suppose that Milton spends all of his nominal income I on two goods, x and y. The prices of the two goods are P x = 2 and P y = 3, and Milton’s income is I = 50. 1
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