102mid10 - NAME TA NAME/SECTION Elements of Microeconomics...

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NAME___________________________ TA NAME/SECTION___________________________ Elements of Microeconomics Midterm Exam Spring 2010 [points are in bold ] 1. a. [10] In class we argued that a production-possibilities curve is almost certain to be bowed outward. Explain why this is true. Note: Your answer should explain what a production-possibilities curve is and what goes on the axes. b. [10] Assuming the production-possibilities curve is bowed outward, what do you know about the shape of a supply curve? Illustrate your answer by showing how to derive two points on the supply curve.
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c. [13] What happens to the supply curve for X 1 (there are two goods; X 1 and X 2 ) if: i. An earthquake destroys half of the nation’s resources. ii. The demand curve for X 1 shifts. iii. The price of X 2 shifts. (For all parts of this question, be sure to explain.)
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2. a. [5] Explain what is represented by a consumer’s indifference curve. b. [8] Name three basic properties of a consumer’s indifference curves, and explain why any two of them make sense.
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c. [10]
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