Sample questions and Exam

Sample questions Note The designing for providing sample questions is to show the format of questions that will be given in the midterm exam. The midterm exam will have more of two(prenominal) unbowed false questions and short firmness of purpose problems than those presented here. For more short answer problem types please look at the exercises sets.True-false questions T take away the two statements I. X is an inferior good. II. X exhibits Giffens Paradox. The following is true II implies I, but I does not necessarily imply II. F T F speak out that at current consumption levels an respective(prenominal)s marginal improvement of consuming an extra hot hound is 10 whereas the marginal utility of consuming an extra soft inebriety is 2. Then the MRS (of soft soak ups for hot dogs)that is, the number of hot dogs the individual is involuntary to give up to get one more soft drink is 1/5. If the charge of X falls, the budget constraint shifts inward in a parallel fashion. T F T F estimate a cup of coffee at the campus coffee deceive is $2. 50 and a cup of hot tea is $1. 25. Suppose a pupils beverage budget is $20 per week.The algebraic expression represents the budget constraint. Suppose a cup of coffee at the campus coffee shop is $2. 50 and a cup of hot tea is $1. 25. Suppose a bookmans beverage budget is $20 per week. Suppose the student simply prefers more caffeine to less and that the tea sold has just one-third the caffeine as the coffee. The student will secure a mix of coffee and tea. T F (The student will buy only coffee) T F In economic theory, the demand for a good must depend only on income and its own hurt and not on the prices of other goods.T F If two goods be substitutes, then an improver in the price of one of them will increase the demand for the other. 1 T F If consumers spend all of their income, it is inconceivable for all goods to be inferior goods. A good is a highlife good if the income elasticity of demand for it is gre ater than 1. A symmetrynal consumer spends her blameless income. If her income doubles and prices do not alteration, then she will necessarily contain to consume twice as much of every good as she did before.A consumer has the utility head for the hills U(x y) = min(x,2y) If the price of good x is nada and the price of good y is p then the consumers demand sour for good y is m/2p. Suppose a teenager likes both rap music (R) and outlandish music (C) with a set of preferences so that U = C1/2R1/2. Point (C, R)=(100, 1) makes the teen the happier than point (C, R)=(25, 25). If a persons indifference curves can be represented as a heterosexual banknote, the person views the goods as complements (but not perfect). T T F F T F T F T F pitiful answer problems 1.Walt consumes strawberries and cream but only in the fixed ratio of three boxes of strawberries to two cartons of cream. At any other ratio, the excess goods ar totally useless to him. The price of a box of strawberries is 10 and the cost of a carton of cream is 10. Walts income is 200. How many boxes of strawberries does Walt demand? autonomic nervous system Walt demands 12 boxes of strawberries. (NOTE that the utility function is U=min2x,3y) 2. Fanny consumes only grapefruits and grapes. Her utility function is U(x y) = x3y6 where x is the number of grapefruits consumed and y is the number of grapes consumed.Fannys income is 48, and the prices of grapefruits and grapes are 1 and 3, respectively. How many grapefruits will she consume? Ans 16 3. Katie Kwasis utility function is U(x1 x2) = 2(ln x1)+ x2. Given her current income and the current relative prices, she consumes 5 units of x1 and 20 units of x2. If her income 2 doubles, while prices stay constant, how many units of x1 will she consume after the change in income? Ans 5 3. Suppose a new health care initiative for the working scummy will be paid for with a reduction to the earned income tax credit.Suppose the average working poor family has income of $12,000 from work and an additional $4000 from the EITC. If there are two goods, H (healthcare) and C (all other consumption), what will be the equation for a budget line with the EITC? (Let prices of all goods and healthcare be normalized to 1). Ans C = $16,000 H 4. Suppose a teenager has $20 and likes both rap music (R) and bucolic music (C) with a set of preferences so that U = C1/2R1/2. Suppose that the iTunes price of a rap music song is and the price of a country music song is . What is the greatest level of affordable utility? Ans v50 3