Midterm2S2011aAnswersWeb - Econ 001: Midterm 2 (Dr. Stein)...

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Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011 Instructions: This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label all diagrams carefully. Write your name and your Recitation Instructor's name in every blue book that you use. This exam is given under the rules of Penn's Honor system. All blue books, blank or filled, must be handed in at the end of this exam. No blue books may be taken from the room. No calculators are allowed! The Midterm has 2 parts. Part 1 consists of 8 multiple-choice questions. Part 2 consists of 2 short-answer questions. You need 2 blue books. You are required to use the two blue books as follows: 1. BOOK 1 : write your answers to the 8 multiple-choice questions on the first page and then write your answers to the first short-answer question in the remainder of the book. 2. BOOK 2 : write your answers to the second short-answer question . Part I: Multiple Choice Questions (Best 7 out of 8: 4 points each/28 points total): Please answer all MC questions. Only the best 7 will count towards your grade. 1. Which of the following statements are correct: I. A consumer will choose to purchase where the Marginal Rate of Substitution is equal to the relative price ratio. II. If both income and prices double, consumption of both goods will be unchanged. III. If prices double and income is constant the MRS will be unchanged. a. I b. I and II c. II and III d. I, II and III
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2. We learn that between P=$1 and P=$2 the demand for chewing gum is downward sloping. Which of the following statements must be true between these prices I. Chewing gum is an inferior good. II. If chewing gum is an inferior good, the income effect must be smaller than the substitution effect. a. Only I. b. Only II. c. Both I and II. d. Neither I nor II. 3. If we are told that the firm has fixed costs and that it is producing where marginal productivity is diminishing, which of the following statements will be true : a. MC will be upward sloping b. AFC curve is downward sloping c. ATC is increasing as long as MC is above ATC d. Both a and c are true, but b is not. e. Both b and c are true, but a is not. f. a, b & c are all true. 4. John sells cotton in a competitive industry. Recently, he hired a financial analyst to analyze his firm’s performance. The analyst recommends that John increase his production. The analyst must have concluded that the firm’s a. marginal cost exceeds marginal revenue. b. total revenue exceeds marginal revenue. c. marginal revenue exceeds total cost. d.
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This note was uploaded on 01/14/2012 for the course ECON 101 taught by Professor Profeessor during the Spring '11 term at Aachen University of Applied Sciences.

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Midterm2S2011aAnswersWeb - Econ 001: Midterm 2 (Dr. Stein)...

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