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practiceexam2A-3 - Page 1 of 14 ECON 251 Exam #2 Pink...

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Unformatted text preview: Page 1 of 14 ECON 251 Exam #2 Pink Spring 2010 (Practice Exam #2A for Fall 2010) 1. Carolina consumers Gatorade and Cheerios. The above graph shows her budget line. Which of the following could have caused the budget line to change as depicted in the above graph? a. An increase in Carolinas income b. A decrease in the price of Gatorade and a decrease in the price of Cheerios c. An increase in the price of Cheerios d. A decrease in the price of Gatorade 2. If Gatorade is an inferior good for Carolina, we would expect the change in price of Gatorade shown above to result in which of the following when Carolina maximizes her utility? a. An income effect that increases the quantity of Gatorade she chooses, and a substitution effect that increases the quantity of Gatorade she chooses b. An income effect that increases the quantity of Gatorade she chooses, and a substitution effect that decreases the quantity of Gatorade she chooses c. An income effect that decreases the quantity of Gatorade she chooses and a substitution effect that increases the quantity of Gatorade she chooses d. An income effect that decreases the quantity of Gatorade she chooses and a substitution effect that decreases the quantity of Gatorade she chooses Page 2 of 14 Quantity Total Utility from Books Total Utility from Pizza 1 20 10 2 28 19 3 34 25 4 38 30 5 39 32 3. Miles likes to consume books and pizza. What is the marginal utility Miles receives from the 3 rd slice of pizza? a. 25 b. 10 c. 6 d. 19 4. If Miles has an income of only $30 to spend on books and pizza, and pizza and books both cost $5 each, what is the slope of Miles budget line? a.-1 b.-6 c.-1/6 d. Cannot be determined without additional information 5. Again using the table above, and assuming Miles always spends his entire income, Miles should consume ________ books and __________ pizzas when he maximizes his utility. a. 5, 1 b. 1, 5 c. 3, 3 d. 4,2 6. Again using the information provided in the table above, what is the marginal utility per dollar spent on the last pizza purchased? a. 4 b. 6/5 = 1.2 c. 4/5 = 0.8 d. 10 Page 3 of 14 7. Gary spends $40 a month on movies and magazines. The price of a movie is $10 and the price of a magazine is $5. When Gary maximizes his utility, the marginal utility from movies is _____________ the marginal utility from magazines. a. less than b. equal to c. half d. twice 8. Based on the information in the problem above, which of the following points would be on Garys budget line? a. 3 magazines and 2 movies b. 8 magazines and 2 movies c. 6 magazines and 2 movies d. 4 magazines and 2 movies 9. If the quantity of movies is measured on the X axis, what will the slope of Garys indifference curve be when he is maximizing his utility given his income?...
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practiceexam2A-3 - Page 1 of 14 ECON 251 Exam #2 Pink...

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