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Practice%20Exam%201%20-%20Key - Name Practice Exam 1 Key...

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1 Name _________________________________________________ Practice Exam 1 - Key ECON 3550 / 5030 Please show all your work and explain your answers. Without an explanation for your answer, you will not receive credit. Clearly label all graphs for full credit and please write legibly. A. True / False __F __ 1. When the price of hamburger meat increases, the equilibrium price of hamburger buns increases. price of hamburger demand for hamburger buns decreases, since these goods are complements price of hamburger buns __F_ _ 2. If an individual is consuming two goods, X and Y, such that MRS > Y X P P (when good X is on the horizontal axis), then this person should consume less of good X and more of good Y in order to increase utility. Explain your answer both graphically and in words. MRS > Y X P P current indifference curve (U 1 ) is steeper than budget constraint at current consumption bundle (X 1 , Y 1 ) consume more X and less Y (X 2 , Y 2 ) to reach indifference curve U 2 Y (higher total utility) Y 1 Y 2 U 2 U 1 X 1 X 2 X
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2 B. Essay and Problem Solving 3. Suppose the demand curve for a good is given by the following equation: P = 500 – ¼Q. The supply curve is given by: P = 100 + ½Q , where P measures the price of the good (measured in dollars per unit) and Q represents the quantity of the good (measured in units per week).
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