Microeconomics Sample Questions for Exam 2

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Department
Economics
Course
ECON-E 201
Professor
James Self
Semester
Fall

Description
Economics E201 Professor Self Sample Questions for Exam Two Fall 2013Your exam will have two parts covering the topics in chapters 4 page 91 through end of chapter 5 and 6 fromthe Parkin chapters and chapter 10 up to page 317 up to but not including the income and substitution effectfrom Hubbard that are found in your textbook and any material we discussed in class that is not in your textPart one will have between 20 and 25 multiple choice questions and part two will have short answer questions Part One MULTIPLE CHOICEOn your answer sheet darken in the letter of your choice for eachquestionYou should choose the suggested answer that BEST completes the statement or answers thequestion1Robinson spends all his income on mangos and bananas Mangos cost 3 per pound and bananascost 2 per pound The marginal utility is 30 for the last pound of mangos purchased and 10 for thelast pound of bananas If Robinson could buy any amount of bananas and mangos to include onlysmall pieces of each fruit then to maximize his utility Robinson should buyAmore mangos and fewer bananasBmore bananas and fewer mangosConly mangosDthe present combination of goods2The income elasticity of demand for vacations is 5 If incomes increase by 3 percent next year thequantity of vacations demanded at todays price will increase bypercentA5B3C15D533You are the new vice president in charge of advertising at Taco Bell In your upcoming advertisingcampaign you plan to degrade the fast food competitor whose product is the closest substitute forTaco Bells tacos That would be the fast food chain whose cross elasticity of demand with yourtacos is equal toAnegative 175Bpositive 100Cnegative 211Dpositive 1554Last year Jacks income was 15000 and he bought 50 bags of potato chips This year his incomeis 18000 and he buys 55 bags of potato chips Therefore JacksAprice elasticity of demand for potato chips is 052Bincome elasticity of demand for potato chips is 052Cincome elasticity of demand for potato chips is 166Dprice elasticity of demand for potato chips is 1661Economics E201 Professor Self Sample Questions for Exam Two 5A negative value for the cross elasticity of demand between two goods indicates thatAone of the goods is normal and the other is inferiorBthe goods are complementsCthe goods are substitutesDeach good is price inelastic6When the Smiths were shopping for their present home the asking price from the previous ownerwas 250000 The Smiths had decided they would pay no more than 245000 for the houseAfter negotiations the Smiths actually purchased the house for 239000 Therefore the previousowner earned a producer surplus ofA6000B5000C11000D239000Ean amount unknown given the information in the question7When the competitive market is producing at an allocative efficient quantity Aonly the total amount of producer surplus is maximizedBonly the total amount of consumer surplus is maximizedCthe sum of the total amount of consumer surplus plus the total amount of producer surplusequals zeroDthe total amount of surplus is maximizedEconsumer and producer surplus is maximized but total surplus is minimized8Adam Smith argued that each person in a competitive market is led to promote theAefficient use of societys resources even though it is no persons intention to make societybetter offBefficient use of societys resources because each persons intention is to make society betteroffCinefficient use of societys resources because it is no persons intention to make society betteroffDinefficient use of societys resources even though each persons intention is to make societybetter off2
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