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# practiceexam2C - ECON 251 Exam#2 Pink Spring 2009(Practice...

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Econ 251 Page 1 of 10 Spring 2009 Exam 2 Pink ECON 251 Exam #2 Pink Spring 2009 (Practice Exam #2C for Fall 2010) 1. The table below shows Catherine’s marginal utilities of milk and coffee. Suppose coffee costs \$2/bottle and milk costs \$2/bottle and each week she has a maximum of \$10 spends on coffee and milk. Then she should consume __ bottles of milk and _____ bottles of coffee. Bottles per week Milk Coffee 1 80 55 2 60 50 3 40 45 4 20 40 a. 3:2 b. 4;1 c. 1;4 d. 2;3 2. At the fair you have \$12 and spend all of your money on cotton candy and roller- coaster rides. If cotton candy costs \$3 and roller coaster rides cost \$4, then which of the following bundles would be on your budget line? a. 2 cotton candies and 1 roller coaster ride b. 2 cotton candies and 2 roller coaster rides c. 4 cotton candies and 0 roller coaster rides d. 1 cotton candy and 2 roller coaster rides 3. Using the information in the problem above, what is the marginal rate of substitution at the utility-maximizing bundle if the quantity of cotton candy is measured on the x- axis? a. 1/2 b. 2/3 c. 3/4 d. 4/3 4. Using the information above, if the price of cotton candy increases to \$4, which of the following would be the slope of the new budget line? (Assume still that quantity of cotton candy is measured on the x axis.) a. -1/2 b. -2/3 c. -3/4 d. -1

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Econ 251 Page 2 of 10 Spring 2009 Exam 2 Pink 5. Tom spends all his income on pizzas and Pepsi. The price of a pizza is \$8 and the price of a can of Pepsi is \$1. If he is maximizing his utility, then what must be true about the marginal utility of the last pizza he consumes? a. The marginal utility of the last pizza he consumes must be less than the marginal utility of the last Pepsi consumed. b. The marginal utility of the last pizza he consumes must be equal to 1/8. c. The marginal utility of the last pizza he consumes must be 8 times greater than the marginal utility of the last Pepsi he consumes. d. The marginal utility of the last pizza he consumes must be equal to 8. 6. Shelby consumes alfalfa (A) and broccoli (B). Her budget line is defined by the equation Q B = 9 – 2/3 Q A , where the quantity of alfalfa is measured on the x axis. If she has \$27 in income, what are the prices of alfalfa and broccoli? a. Alfalfa costs \$2, and broccoli costs \$3. b. Alfalfa costs \$8, and broccoli costs \$10. c. Alfalfa costs \$6, and broccoli costs \$9. d. Alfalfa costs \$3, and broccoli costs \$27. 7. Andrew likes to consume strawberries and ice cream cones. The price of strawberries is \$10 and price of ice cream cones is \$5. The following table shows the combinations of strawberries and ice-cream cones that Andrew can consume, given his \$30 of income. The table further shows the total utilities from consuming. What is the marginal utility of the 2 nd unit of strawberries to Andrew? Quantity of
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## This note was uploaded on 02/27/2012 for the course ECON 251 taught by Professor Blanchard during the Fall '08 term at Purdue.

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practiceexam2C - ECON 251 Exam#2 Pink Spring 2009(Practice...

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