Quiz1 - A P = and 5 d A Q = At point B 5 B P = and 15 d B Q...

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RUTGERS UNIVERSITY Department of Economics Intermediate Microeconomics Analysis Instructor: Mriduchhanda Paul Quiz 1 1. Which of the following is False? a) Rightward shift in demand + unchanged supply curve = higher equilibrium price and larger equilibrium quantity b) Rightward shift in demand + Rightward shift in supply curve = lower equilibrium price and smaller equilibrium quantity c) Leftward shift in supply + unchanged demand curve = higher equilibrium price and smaller equilibrium quantity d) Leftward shift in demand + unchanged supply curve = lower equilibrium price and smaller equilibrium quantity e) Rightward shift in supply + unchanged demand curve = lower equilibrium price and larger equilibrium quantity Ans: B 2. Suppose we postulate a linear demand curve d Q a bP = - and observe, through supply shifts, two points on the demand curve. At point A, 20
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Unformatted text preview: A P = and 5 d A Q = . At point B, 5 B P = and 15 d B Q = . The choke price for this demand curve is a) 18.33 b) 27.5 c) –8.33 d) 0.67 Ans: B 3. Consider the utility function 2 ( , ) 3 5 U x y x y = + with 6 x MU x = and 5 y MU = . a) Is the assumption that ‘more is better’ satisfied for both goods? b) What is , x y MRS for this utility function? c) Is the , x y MRS diminishing, constant, or increasing as the consumer substitutes x for y along an indifference curve? Ans: a) Yes as both MU X and MU Y are positive. That is, as consumption of the goods increases, utility increases too. b) , x y MRS = MU X /MU Y = 6x/5 c) Derivative of MRS XY with respect to x is 6/5, that is positive. That is, as x increases, MRS XY increases. That is, MRS XY is increasing as the consumer substitutes x for y along an indifference curve ....
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This note was uploaded on 02/29/2012 for the course 220 320 taught by Professor Raven during the Summer '10 term at Rutgers.

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Quiz1 - A P = and 5 d A Q = At point B 5 B P = and 15 d B Q...

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