1Practice Questions Midterm Economics 651
1.
Assume Barbara likes driving fast, but hates getting injured. If Congress passes a law for
mandatory airbags, Barbara is likely to experience an increased number of accidents.
Why?
a)
The benefits of driving faster increase.
b)
The expected cost of being in an accident at any given speed decreases.
c)
(a) and (b).
d)
None of the above.
2
Robert only consumes X and Y, and his indifference curves have the usual convex shape.
Consider the consumption bundles (3, 9), (6, 6), and (9, 3) (hint: they lie on a straight
line). If
Robert is indifferent between (3, 9) and
(9, 3), then:
a)
he prefers (3, 9) over (6, 6).
b)
he prefers (9, 3) over (6, 6).
c)
he prefers (6, 6) over both (3, 9) and (9, 3).
d)
(a) and (b).
3.
Assume the quantity of X is measured on the horizontal axis, and the quantity of Y is
measured on the vertical axis. Assume the price of X is $3, and the price of Y is $6. If
Amanda has $90 to spend on X and Y , then:
a)
she can buy at most 30 X.
b)
her budget line has a slope of – 2.
c)
(a) and (b).
d)
None of the above.
4.
Assume Joseph spends his entire income on X and Y, and his indifference curves have
the usual convex shape. If Joseph maximizes his utility, then:
a)
he spends his entire available income.
b)
no other bundle is both affordable and preferred.
c)
the slope of his indifference curve is equal to the slope of his budget line.
d)
All of the above.
5.
Marginal costs:
a)
are the incremental costs associated with making a decision.
b)
are the expenditures already made that can’t be covered.
c)
are not relevant in making a decision.
d)
(a) and (c).
6.
Assume the quantity of apples is measured on the horizontal axis and the quantity of
oranges is measured on the vertical axis. If the budget line rotates upward, while keeping
the same horizontal intercept, then:
a)
the price of apples decreased.
b)
the price of oranges decreased.
c)
the available income increased.
d)
(b) and (c).