HW3_new_Sol

HW3_new_Sol - Homework 3 Solution DUE : IN CLASS 13th...

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Homework 3 Solution DUE : IN CLASS 13 th FEBRUARY 2009 (Friday) ECON 80A Professor: Paroma Sanyal Microeconomic Theory 126 Sachar Bldg. Brandeis University (781) 736-2268 Spring 2009 [email protected] Total 100 points Section 1: Multiple Choice Questions (2 points each) (14 points) 1. The substitution effect is A) always greater than the income effect. C) never greater than the income effect. B) always less than the income effect. D) none of the above. Answer: D 2. The income effect A) moves in the opposite direction from the substitution effect for a normal good. B) moves in the same direction as the substitution effect for an inferior good. C) relates to increases in nominal rather than real income. D) is described by none of the answers above. Answer: D 3. Comparing the income effects between salt and housing, A) the income effect for salt will be greater. B) the income effect for housing will be greater. C) the two income effects will be about the same. D) the two income effects will be in the opposite direction. Answer: B 4. For a Giffen good A) the income effect is greater than the substitution effect. B) the income effect is less than the substitution effect. C) the income effect is in the opposite direction of the substitution effect. D) a and c. E) b and c. Answer: D 5. The demand curve for a Giffen good A)slopes upward. B) slopes downward. C) is a straight line. D) is convex. E) b and c. Answer: A 6. The Engel curve for a Giffen good A)slopes upward. B) slopes downward. C) is a straight line. D) is convex. Answer: B 1
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7. If I get 10 units of pleasure from my first ice cream cone and 2 less units than before from each succeeding cone, I will buy ____ cones and gain _____ units of consumer surplus if the price of a cone = to 5 units of pleasure. A) 4, 28 B) 6, 30 C) 2, 18 D) 3, 9 Answer: D Section 2: TRUE OR FALSE (8 points each) (32 Points) When answering the True or False questions please give an explanation why you think the statement is either True of False. Use graphs whenever possible. For a correct T/F answer you will receive 2 points and the other 6 points are for your explanation) 1.
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This note was uploaded on 10/15/2011 for the course ECON 82 taught by Professor Demsetz during the Spring '09 term at Brandeis.

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HW3_new_Sol - Homework 3 Solution DUE : IN CLASS 13th...

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