Practice+Exercises+for+Midterm+I+-+Fall+2011 (1)

# Practice+Exercises+for+Midterm+I+-+Fall+2011 (1) - UCI Fall...

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UCI- Fall 2011 Practice for Midterm I Prof El Hag Scenario 2.1: The demand for books is: Q d = 120 - P The supply of books is: Q s = 5P 1) Refer to Scenario 2.1. What is the equilibrium price of books? A) 5 B) 10 C) 15 D) 20 E) none of the above Answer: D 2) Refer to Scenario 2.1. What is the equilibrium quantity of books sold? A) 25 B) 50 C) 75 D) 100 E) none of the above Answer: D 3) The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter? A) +15% B) +45% C) +4.5% D) -4.5% Answer: C 4) A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for b, we can use observed values for Q and P and then set -b(P/Q) equal to the: A) income elasticity of demand. B) cross-price elasticity of demand. C) price elasticity of demand. D) price elasticity of supply. Answer: C

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5) If X and Y are perfect substitutes, which of the following assumptions about indifference curves is not satisfied? A) Completeness B) Transitivity C) More is preferred to less D) Diminishing MRS E) none of the above (All of the above assumptions are satisfied.) Answer: D 6) If a consumer is always indifferent between an additional one grapefruit or an additional two oranges, then when oranges are on the horizontal axis the indifference curves: A) will be straight lines with a slope of -1/2. B) will be straight lines with a slope of -1. C) will be straight lines with a slope of +1/2. D) will be right angles whose corners occur on a ray from the origin with a slope of +2. E) none of the above Answer: A 7) An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing market basket? A) MRSxy is at a maximum. B) Px/Py = money income. C) MRSxy = money income. D) MRSxy = Px/Py. E) all of the above Answer: D 8) Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying __________ of the good and the income effect results in the person buying __________ of the good. A) more, more B) more, less C) less, more D) less, less Answer: D 9) The bandwagon effect corresponds best to which of the following? A) Snob effect B) External economy C) Negative network externality D) Positive network externality Answer: D
10) If an Engel curve has a positive slope A) both goods are normal. B) the good on the horizontal axis is normal C) as the price of the good on the horizontal axis increases, more of both goods in consumed. D) as the price of the good on the vertical axis increases, more of the good on the horizontal axis

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## This note was uploaded on 12/13/2011 for the course ECON 100A taught by Professor Safarzadeh during the Fall '09 term at UC Irvine.

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Practice+Exercises+for+Midterm+I+-+Fall+2011 (1) - UCI Fall...

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