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Midterm

# ECON 100A Study Guide - Midterm Guide: Peanut Butter, Economic Equilibrium, Substitute GoodExam

Department
Economics
Course Code
ECON 100A
Professor
All
Study Guide
Midterm

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UCI- Fall 2011
Practice for Midterm I
Prof El Hag
Scenario 2.1:
The demand for books is: Qd = 120 - P
The supply of books is: Qs = 5P
1) Refer to Scenario 2.1. What is the equilibrium price of books?
A) 5
B) 10
C) 15
D) 20
E) none of the above
2) Refer to Scenario 2.1. What is the equilibrium quantity of books sold?
A) 25
B) 50
C) 75
D) 100
E) none of the above
3) The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3.
If we expect the price of jelly to decline by 15%, what is the expected change in the quantity
demanded for peanut butter?
A) +15%
B) +45%
C) +4.5%
D) -4.5%
4) A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity
demanded, P is the product price, and I is consumer income. To compute an appropriate value
for b, we can use observed values for Q and P and then set -b(P/Q) equal to the:
A) income elasticity of demand.
B) cross-price elasticity of demand.
C) price elasticity of demand.
D) price elasticity of supply.
5) If X and Y are perfect substitutes, which of the following assumptions about indifference
curves is not satisfied?
A) Completeness

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B) Transitivity
C) More is preferred to less
D) Diminishing MRS
E) none of the above (All of the above assumptions are satisfied.)
6) If a consumer is always indifferent between an additional one grapefruit or an additional two
oranges, then when oranges are on the horizontal axis the indifference curves:
A) will be straight lines with a slope of -1/2.
B) will be straight lines with a slope of -1.
C) will be straight lines with a slope of +1/2.
D) will be right angles whose corners occur on a ray from the origin with a slope of +2.
E) none of the above
7) An individual consumes only two goods, X and Y. Which of the following expressions
represents the utility maximizing market basket?
A) MRSxy is at a maximum.
B) Px/Py = money income.
C) MRSxy = money income.
D) MRSxy = Px/Py.
E) all of the above
8) Assume that beer is a normal good. If the price of beer rises, then the substitution effect
results in the person buying __________ of the good and the income effect results in the person
A) more, more
B) more, less
C) less, more
D) less, less
9) The bandwagon effect corresponds best to which of the following?
A) Snob effect
B) External economy
C) Negative network externality
D) Positive network externality
10) If an Engel curve has a positive slope
A) both goods are normal.
B) the good on the horizontal axis is normal
C) as the price of the good on the horizontal axis increases, more of both goods in consumed.
D) as the price of the good on the vertical axis increases, more of the good on the horizontal axis

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11. SUPPOSE QXD = 10,000 - 2 PX + 3 PY - 4.5M , WHERE PX = \$100, PY = \$50, AND M =
\$2,000. WHAT IS THE OWN-PRICE ELASTICITY OF DEMAND?
A. -2.34
B. -0.78
C. -0.21
D. -1.21
12. SUPPOSE TOTAL BENEFITS AND TOTAL COSTS ARE GIVEN BY B(Y) = 100Y -
8Y2 AND C(Y) = 10Y2. THEN MARGINAL COSTS ARE:
A. 20Y2
B. 40
C. 5Y
D. 20Y
13. THE OWN-PRICE ELASTICITY OF DEMAND FOR APPLES IS -1.2. IF THE PRICE OF
APPLES FALLS BY 5%, WHAT WILL HAPPEN TO THE QUANTITY OF APPLES
DEMANDED?
A. IT WILL INCREASE 5%
B. IT WILL FALL 4.3%
C. IT WILL INCREASE 4.2%
D.IT WILL INCREASE 6%
14. SUPPOSE TOTAL BENEFITS AND TOTAL COSTS ARE GIVEN BY B(Y) = 100Y -
8Y2 AND C(Y) = 10Y2. THEN MARGINAL BENEFITS ARE:
A) 100-16Y.
B) 100Y-8Y2.
C) 50-4Y.
D) 200Y-10Y.
15. IF THE CROSS-PRICE ELASTICITY BETWEEN GOOD A & B IS NEGATIVE, WE
KNOW THE GOODS ARE:
A. INFERIOR GOODS
B.COMPLEMENTS
C. INELASTIC
D. SUBSTITUTES
16. SUPPOSE THE DEMAND FOR GOOD X IS GIVEN BY QDX= 10 -2 PX + PY + M. THE
PRICE OF GOOD X IS \$1, THE PRICE OF GOOD Y IS \$10, AND INCOME IS \$100. GIVEN
THESE PRICES AND INCOME, HOW MUCH OF GOOD X WILL BE PURCHASED?
A) 115.