Sample questions and Exam

Sample questions Note The purpose for providing sample questions is to show the format of questions that willing be given in the midterm exam. The midterm exam will have more than of both true false questions and short result problems than those presented here. For more short answer problem types please look at the exercises even ups.True-false questions T Consider the two statements I. X is an inferior good. II. X exhibits Giffens Paradox. The following is true II implies I, but I does non necessarily imply II. F T FSuppose that at current consumption levels an singulars marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2. hence the MRS (of soft drinks for hot dogs)that is, the number of hot dogs the individual is willing to give up to get one more soft drink is 1/5. If the value of X falls, the budget constraint shifts inward in a parallel fashion. T F T F Suppose a cup of burnt umber at the campus coffee shop is $2. 50 and a cup of hot teatime is $1. 25. Suppose a students 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 students beverage budget is $20 per week. Suppose the student simply prefers more caffeine to less and that the tea sell has exactly one-third the caffeine as the coffee. The student will sully a mix of coffee and tea. T F (The student will buy only coffee) T F In economic theory, the contain for a good must depend only on income and its own price and not on the prices of other goods.T F If two goods are substitutes, indeed an increase in the price of one of them will increase the demand for the other. 1 T F If leadrs spend all of their income, it is impossible for all goods to be inferior goods. A good is a luxury good if the income elasticity of demand for it is greater than 1. A rational consumer spends her entire inc ome. If her income doubles and prices do not change, then she will necessarily choose to consume twice as some(prenominal) of every good as she did before.A consumer has the utility function U(x y) = min(x,2y) If the price of good x is zero and the price of good y is p then the consumers demand function for good y is m/2p. Suppose a teenager likes both cuff music (R) and country 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 dependable line, the person views the goods as complements (but not perfect). T T F F T F T F T F Short 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 are totally fruitless to him. The cost of a box of strawberries is 10 and the cost of a carton of cream is 10. Walts income is 200. How man y 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 healthcare initiative for the working poor will be compensable 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 country 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