Practice_Questions_Midterm_Economics_651 - 1Practice...

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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).
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7. MACROSOFT decided to start developing the new word processor. After six months, the R&D phase is completed (i.e. MACROSOFT has already invested $ 300,000). However, after initial negotiations with its distributors, MACROSOFT revised upward marketing and distribution expenses by $ 150,000 (i.e. total marketing and distribution expenses will amount to $ 300,000). If MACROSOFT’s managers are risk-neutral, they should abandon the project if the expected revenues from sales of the new software are: a) $599,000. b) $449,000. c) $299,000. d) None of the above. 8. A competitive equilibrium price is such that: A) consumers who want to buy the product at the market price are satisfied. B) producers can sell the quantity of product they want to at the current market price.
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This note was uploaded on 11/01/2011 for the course MBA 575 taught by Professor Dr.tvorik during the Spring '11 term at St. Leo.

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Practice_Questions_Midterm_Economics_651 - 1Practice...

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