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Solutions(Midterm) - Solutions Version 1 ECON 203 MIDTERM...

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Solutions Version 1 ECON 203 MIDTERM 2010 Instructions: The exam consists of 2 Parts (A and B). Part A Multiple choice questions and part B contains two longer questions. Allocate your time accordingly, in order to answer, all questions . Good luck! Time allowed: 50 minutes Total marks: 50 Part A: ( 3 marks each) Multiple choice questions: Question #1 If A, B, C, and D are any four market baskets, and if the consumer has ranked them so that D is preferred to C, A is not preferred to B, and B is not preferred to C, then a. A is preferred to C. b. A is preferred to D. c. B is preferred to D. d. D is preferred to A. e. D is not preferred to B. Answer: D Question #2 The marginal benefit of a good x is given by the equation MB = 40 – 2x, and its marginal cost MC = 10 + x, with x in kilograms and MB and MC in $/kilogram. The optimal level of x (in kilograms) is A) 0 B) 10 C) 15 D) 20 E) 30. Ans: B Question #3 In 1976, a frost in Brazil killed over 500 million coffee trees and damaged many more. A civil war in Angola, a major supplier of coffee, cut back its crop. And, an earthquake in Guatemala disrupted the flow of coffee. In spite of these calamities, these three
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producers reported an increase in export earnings. On the basis of this information, which of the following must be true?
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