Question 1
Let QD= -5P + 54 and QS= P - 6. Equilibrium can be found at
Answer
Q = 4; P = 10
Q = 6; P = 10
P = 6; Q = 0
Q =; P = 2
5 points
Question 2
Suppose a production possibilities frontier can be expressed as 9X2+ Y2= 81 what is the opportunity cost of going from 1 unit of X to 2 units of X (in terms of units of Y)?
Answer
a. 45
b. sqrt of 45
c. sqrt of 72 - sqrt of 45
d. 1
5 points
Question 3
The Ricardian notion that of diminishing returns implies that
Answer
As more input is used more output will be made.
As more input is used less output will be made.
As more input is used the increase in output will increase.
As more input is used the increase in output will decrease.
5 points
Question 4
Suppose the equilibrium quantity is
Answer
2
3
4
5
5 points
Question 5
If the production possibilities frontier can be expressed as 4X2+ Y2= 16 then the point X = 1; Y = 4 is
Answer
outside the production possibilities frontier
on the production possibilities frontier
inside the production possibilities frontier
in the wrong quadrant to be on the graph
5 points
Question 6
If society is producing a combination of goods on its production possibilities frontier
Answer
it must be employing all available resources.
it must be growing.
it is using all the available natural resources but may not be using all available labor resources.
Both a and b.
5 points
Question 7
Suppose right (R) and left (L) shoes are only useful if produced in equal proportion and societal happiness is expressed as min(R,L). The contour lines would be
Answer
downward sloping lines
upward sloping lines
L-shaped
backward L-shaped
5 points
Question 8
IfY=X2+Z2, the contour lines
Answer
are concentric circles.
are parabolas.
are hyperbolas.
intersect whenever either X or Z is zero.
5 points
Question 9
Suppose you can write generic supply and demand curves such that QS= A + BP and QD= D + CP. Equilibrium price is given by
Answer
5 points
Question 10
The underlying reason early economists believed a (short-run) supply curve would be upward sloping is because of
Answer
decreasing average costs
increasing average cost
decreasing marginal costs
increasing marginal costs
5 points
Question 11
If an individual has a constant MRS of shoes for sneakers of 3/4 (that is, he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of shoes) then, if sneakers and shoes are equally costly, he or she will
Answer
buy only sneakers.
buy only shoes.
spend his or her income equally on sneakers and shoes.
wear sneakers only 3/4 of the time.
5 points
Question 12
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. What is the algebraic expression of the budget?
Answer
5 points
Question 13
If bundles of goods A and B lie on the same indifference curve, one can assume the individual
Answer
prefers bundle A to bundle B.
prefers bundle B to bundle A.
enjoys bundle A and B equally.
bundle A contains the same goods as bundle B.
5 points
Question 14
The X-intercept of the budget constraint represents
Answer
how much of good Y can be purchased if no good X is purchased and all income is spent.
how much of good X can be purchased if no good Y is purchased and all income is spent.
total income divided by the price of X.
a and c.
5 points
Question 15
Suppose an individual's MRS (of steak for beer) is 2:1. That is, at the current consumption choices he or she is willing to give up 2 beers to get an extra steak. Suppose also that the price of a steak is $1 and a beer is 25¢. Then in order to increase utility the individual should
Answer
buy more steak and less beer.
buy more beer and less steak.
continue with current consumption plans.
Not enough information to answer the question.
5 points
Question 16
If an individual's indifference curve map does not obey the assumption of a diminishingMRS, then
Answer
the individual will not maximize utility.
the individual will buy none of good X.
tangencies of indifference curves to the budget constraint may not be points of utility maximization.
the budget constraint cannot be tangent to an appropriate indifference curve.
5 points
Question 17
An increase in an individual's income without changing relative prices will
Answer
rotate the budget constraint about the X-axis.
shift the indifference curves outward.
shift the budget constraint outward in a parallel way.
rotate the budget constraint about the Y axis.
5 points
Question 18
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 isand the price of a country music song is. Which level of utility is affordable?
Answer
9
16
25
5 points
Question 19
The point of tangency between a consumer's budget constraint and his or her indifference curve represents
Answer
complete satisfaction for the consumer.
the equivalence of prices the consumer pays.
constrained utility maximization for the consumer.
the least he or she can spend.
5 points
Question 20
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 the same amount of caffeine as the coffee. The student will buy
Answer
all tea.
all coffee.
a mix of coffee and tea.