Ecmb02 Sample+Exam

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Sample questions

Note: The purpose 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 both true false questions and short answer problems than those presented here. For more short answer problem types please look at the exercises sets.

True-false questions: T Consider the two statements: I. X is an inferior good. II. X exhibits Giffen’s Paradox. The following is true: II implies I, but I does not necessarily imply II. F

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Suppose that at current consumption levels an individual’s marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2. Then 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 price of X falls, the budget constraint shifts inward in a parallel fashion.

T

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T

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Suppose a cup of coffee at the campus coffee shop is $2.50 and a cup of hot tea is $1.25. Suppose a student’s 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 student’s beverage budget is $20 per week. Suppose the student simply prefers more caffeine to less and that the tea sold has exactly one-third the caffeine as the coffee. The student will buy 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 price and not on the prices of other goods.

T

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If two goods are substitutes, then an increase in the price of one of them will increase the demand for the other.

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If consumers 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...
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