midterm 2009 - Elements of Microeconomics Midterm Exam...

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Elements of Microeconomics HAME:______________ Midterm Exam March 4, 2009 TA or SECT #_________________ 1. a. [9] We often say that “Specialization is the reason for the shape of the production possibilities curve.” Explain what this statement means and why it is correct. b. [6] If the production possibilities curve is linear, what is the shape of the supply curve? [Somewhere in your answer you should tell us what a supply curve is.] Explain. c. [9] There are two goods, X 1 and X 2 . (The ppc is bowed out, not linear as in part b.) What happens to the supply curve for X 2 when the price of X 1 doubles? Explain. d. [9] A profit-maximizing entrepreneur will produce at the point where price equals marginal cost. Explain why this is so [and of course in the process you will have to explain what marginal cost is].
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2. A consumer faces the budget constraint shown in the graph below, derived from the following data: P 1 = 1 P 2 = 1 Y = 20 The X 2 store now offers a deal: If you buy at least 10 units, all ADDITIONAL units are half-price.
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  • Summer '11
  • BrianPhelan
  • Microeconomics, Willie, relevant indifference curve

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