HW1_Soln - HOMEWORK 1 SOLUTION DUE : IN CLASS 30th JANUARY...

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HOMEWORK 1 SOLUTION DUE : IN CLASS 30 th JANUARY 2009 (Friday) ECON 80A Professor: Paroma Sanyal Microeconomic Theory 126 Sachar Bldg. Brandeis University (781) 736-2268 Spring 2009 psanyal@brandeis.edu Total Points 100 Section 1: Multiple Choice Questions (2points each) (Total 2 points) 1. Which is not true of market equilibrium? (a) All sellers who want to sell at the equilibrium price can find a buyer to sell to. (b) The highest possible welfare is achieved even if many externalities exist. (c) All buyers who want to buy at the equilibrium price can find a seller to buy from. (d) Circumstances can change from day to day which make any equilibrium very tentative. Answer: B 2. You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for ski lift tickets and you could have earned $100 as a waiter at a job you love so much you would do it as a volunteer. What is the total cost of the ski weekend? (a) $230 (b) $130 (c) $100 (d) $80 Answer: A 3. The law of demand states that (a) Scarcity can never be solved. (b) When the price of a product falls, people buy more of it, ceteris paribus. (c) Supply creates its own demand. (d) Prices will continue to rise as long as the population grows. Answer: B 4. If the number of suppliers in the microcomputer industry increases, what would we expect to happen? (a) The number of microcomputers sold will rise. (d) The supply curve will shift right. (b) The price of microcomputers will fall. (e) All of the above will happen. (c) Movement along the demand curve will occur. 1
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Answer: E 5. Your bank account pays 3% interest. You loan a friend $100 for one year. Assuming the loan is paid on time the opportunity cost of the loan is (a) $3. (b) $100. (c) $103. (d) $0. Answer: A 6. If you receive $18 worth of pleasure from the first hole of golf played and your additional pleasure from succeeding holes drops $1 for each hole played, if the cost per hole is zero, how many holes of golf will you play? (a) 16 (b) 17 (c) 18 (d) 19 Answer: C or D 7. My income rose and the price of good y rose also. That means that my demand curve for good X shifted right. (a) This statement is always true. (b) This statement will always be true if good y is a substitute for good x. (c) This statement will always be true if good x is a normal good. (d) This statement will always be true if good y is a substitute for x and x is a normal good. Answer: D 8. As the supply curve becomes steeper, the proportion of a sales tax paid by the seller (a) increases. (b) decreases. (c) stays the same. (d) does none of the above. Answer: A
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HW1_Soln - HOMEWORK 1 SOLUTION DUE : IN CLASS 30th JANUARY...

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