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Midterm

01:220:102 Study Guide - Midterm Guide: Demand Curve, Household Income, Inferior GoodExam


Department
Economic
Course Code
01:220:102
Professor
All
Study Guide
Midterm

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1
Name: ___________________________________ Date: ______________
1.
Sarahs Autoshop reports that their marginal cost, no matter their level of production, is
always equal to $10. This implies that the marginal cost curve for Sarahs Autoshop is
A)
a horizontal line
B)
initially downward sloping as output increases, but then eventually it is upward
sloping.
C)
initially upward sloping as output increases, but then eventually it is downward
sloping.
D)
a vertical line.
2.
Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in
Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery
studio. This means her husband is claiming that she incurred ________ in ________
costs.
A)
$43,002; implicit
B)
$43,002; explicit
C)
$86,004; explicit
D)
$86,004; implicit
3.
Marginal cost is the change in:
A)
total cost resulting from a one-unit change in output.
B)
total cost resulting from a one-unit change in average cost.
C)
average cost resulting from a one-unit change in output.
D)
total cost resulting from a one-unit change in a variable input.
Use the following to answer question 4:
Figure: Income Tax Payments

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4.
(Figure: Income Tax Payments)Look at the figure Income Tax Payments. Which panel
or panels best represent the effects of a regressive income tax?
A)
A
B)
B
C)
C
D)
A and B
5.
Which of the following statements is true?
A)
The slope of the budget constraint depends on how much of each good is
consumed.
B)
In consumer choice theory, we assume all goods and services are inferior.
C)
A budget constraint limits what a poor consumer can spend, but there is no similar
constraint on rich people.
D)
Utility maximization requires seeking the most utility from a given budget.
Use the following to answer question 6:
Figure: The Indifference Curve Map II

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3
6.
(Figure: The Indifference Curve Map II) Look at the figure The Indifference Curve Map
II. Sara enjoys attending Chicago Cubs' baseball games and eating babyback rib dinners.
The figure shows two of her indifference curves for Cubs' tickets and babyback rib
dinners. If she consumes 20 baby back rib dinners and 4 tickets to Cubs' games, she
would be equally happy to give up 8 dinners for ________ more ticket(s) to Cubs'
games.
A)
0.5
B)
2
C)
4
D)
1
Use the following to answer question 7:
Figure: Harold's Indifference Curves
The figure shows three of Harold's indifference curves for bread and cheese.
7.
(Figure: Harold's Indifference Curves) Look at the figure Harold's Indifference Curves.
If the price of bread is $0.50 per loaf, the price of cheese is $1, and Harold has $7 to
spend on bread and cheese, what is Harold's optimal consumption bundle of bread and
cheese?
A)
3 loaves of bread and 2 pounds of cheese
B)
2 loaves of bread and 8 pounds of cheese
C)
4 loaves of bread and 3 pounds of cheese
D)
6 loaves of bread and 4 pounds of cheese
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