midterm3b - ECONOMICS 304 K BRONARS 43 MULTIPLE CHOICE (2...

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ECONOMICS 304 K – BRONARS 43 MULTIPLE CHOICE (2 POINTS EACH) PLUS ONE SHORT ANSWER NAME __________________________ UTEID __________________________ 1) In the above figure, if income is $45.00, the price of hamburgers is $1.50, and the price of gasoline is $1.00, then which is the correct budget line? A) F B) I C) H D) G 2) Patty spends $10 a week on bagels and soda. The price of a bagel is $2 and the price of soda is $1 a can. Patty buys 2 bagels and 6 cans of soda. Her marginal utility from bagels is 20 units. Now the price of a bagel rises to $3 and the price of a can of soda rises to $1.50. Patty now buys ________ bagels and her marginal utility from bagels ________. She buys ________ cans of soda and her marginal utility from soda _________. A) fewer than 2; increases; fewer than 6; increases B) fewer than 2; decreases; fewer than 6; decreases C) fewer than 2; is 20 units; fewer than 6; is 10 units D) 2; is 20 units; 6; is 10 units 3) Rembrandt paintings are expensive and not as vital for life as milk, which is cheap. Marginal utility theory explains this paradox of value: The total utility from a Rembrandt painting is ________ than the total utility from milk, and the marginal utility from a Rembrandt painting is ________ than the marginal utility from milk. A) larger; smaller B) smaller; larger C) smaller; smaller D) larger; larger 4) Steak is a normal good. If the price of a pound of steak does not change, as a consumer's income increases the consumer surplus from steak A) decreases. B) increases if the demand for steak is elastic and decreases if the demand is inelastic. C) increases. D) remains the same.
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5) Ben thinks that playing another round of a video game is worth $2.00; to play another round costs Ben $0.50. Ben's consumer surplus from playing another round of the video game is A) $0.50. B) $1.00. C) $0. D) $1.50. 6) In the above figure, CBL is the cost of breaking the law. If it is illegal to buy, but not illegal to sell, then the price will be A) $300. B) $500. C) $200. D) $400. 7) If sanctions are imposed on buyers but NOT on sellers of an illegal good, then the equilibrium price ________ and the equilibrium quantity ________. A) rises; decreases B) falls; increases C) rises; increases D) falls; decreases 8) Sarah consumes only strawberries and cream, and she is spending all of her income. Her marginal utility of her last dish of strawberries is 200 and her marginal utility of her last pint of cream is 200. The price of strawberries is $1.00 per dish and the price of cream is $2.00 per pint. To maximize her utility, Sarah should A) definitely buy no cream at her consumer equilibrium. B) buy more cream and less strawberries. C) not change her purchases of strawberries and cream.
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midterm3b - ECONOMICS 304 K BRONARS 43 MULTIPLE CHOICE (2...

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