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**Unformatted text preview: **Econ 001: Midterm 2 March 21, 2007 – Dr. Spiegel Instructions: !!! This is a 60-minute examination. !!! Write all answers on this question packet. Show all work. Use diagrams where appropriate and label all diagrams carefully. !!! This exam is given under the rules of Penn's Honor system. !!! The use of Programmable Calculators is in violation of Departmental rule. It is strictly forbidden! The Midterm has two parts. Part 1 consists of 6 multiple-choice questions. Part 2 consists of 3 short answer questions. *** Unless specified otherwise, assume regular, linear, downward sloping demand curves and regular, linear and upward sloping supply curves, and indifference curves that are convex to the origin. *** Good Luck!! Part I: Multiple Choice Questions (4 points each/24 points total): Write down the correct answer in the margin. Jo has a given income to spend on apples and oranges. Based on the table below, Jo is maximizing her utility. Product Price Quantity Total Utility MU of Last Unit Apples $.50 50 1000 20 Oranges $.75 40 500 30 The following 3 questions refer to the table above. 1. The marginal utilities of the last dollar spent on apples and oranges, respectively, are as follows: a. 20, 30 b. 1000, 500 c. 50, 40 d. 40, 40 e. 0.66, 0.66 1 2. The given income of Jo that she spends on apples and oranges is: a. $50 b. $90 c. $55 d. $100 e. None of the above 3. If the price of apple decreases, then a. The total utility definitely increases b. The consumption of either apples or oranges, or both increases c. Jo spends the same amount of dollars d. (a), (b), (c) are all correct e. (a) and (c) are correct 4. Which of the following is consistent with a perfectly competitive industry in the long-run equilibrium?...

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