Econ 410, Fall 2007Lauren RaymerPractice MidtermName___________________________________ PID___________________________________Choose the one alternative that best completes the statement or answers the question.1)Which of the following is a positive statement?1)A)Because many adults cannot afford to go to college, tax credits for tuition should beintroduced.B)The President of the United States ought to be elected by a direct vote of the American peoplerather than the Electoral College.C)A fundamental assumption of the economic theory of consumer behavior is that consumersalways prefer having more of any good to having less of it.D)all of the above.E)none of the above.2)In a perfectly competitive market:2)A)No single buyer or seller can significantly affect the market price.B)There are a few buyers.C)There is a cartel.D)There is a single seller.3)Which of the following features are relevant for determining the extent of a market?3)A)Its geographical boundaries.B)Technological innovations that would reduce the cost of production.C)The range of products to be included in it.D)Both A and BE)Both A and C4)Which of the following will NOT cause a shift in the supply of gasoline?4)A)An improvement in oil refining technology.B)A decrease in the price of crude oil.C)An increase in the wage rate of refinery workers.D)A decrease in the price of gasoline.5)You are analyzing the demand for good X. Which of the following will result in a shift to the rightof the demand curve for X?5)A)An increase in the price of a good that is a substitute for X.B)A decrease in the price of X.C)An increase in the price of a good that is a complement to good X.D)all of the above.6)The crossprice elasticity between a pair of complementary goods will be6)A)negative.B)positive or zero depending upon the strength of the relationship.C)positive.D)zero.1Practice Midterm7)Which of the following statements about the diagram below is true?7)A)Demand is infinitely elastic.B)Demand is completely inelastic.C)Demand becomes more elastic the lower the price.D)Demand becomes more inelastic the lower the price.8)In the long run, new firms can enter an industry and so the supply elasticity tends to be8)A)more elastic than in the shortrun.B)perfectly inelastic.C)perfectly elastic.D)less elastic than in the shortrun.9)The endpoints (horizontal and vertical intercepts) of the budget line:9)A)indicate the highest level of satisfaction the consumer can achieve.B)represent the quantity of each good that could be purchased if all of the budget were allocatedto that good.C)measure the rate at which a consumer is willing to trade one good for another.D)measure its slope.E)measure the rate at which one good can be substituted for another.10)Which of the following is true at each point along a price consumption curve?10)A)All income is spent, but utility is not maximized.B)Utility is maximized, and all income is spent.C)The level of utility is constant.D)Utility is maximized but income is not all spent.11)Use the following two statements in answering this question:I. All Giffen goods are inferior goods.II. All inferior goods are Giffen goods.11)A)I and II are true.B)I is false, and II true.C)I and II are false.D)I is true, and II is false.12)Which of the following is true concerning the substitution effect of a decrease in price?12)A)It will lead to an increase in consumption only for an inferior good.B)It will lead to an increase in consumption only for a Giffen good.C)It always will lead to an increase in consumption.D)It will lead to an increase in consumption only for a normal good.2Practice Midterm13)The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility bypurchasing lemonade and popcorn, his marginal rate of substitution will be:13)A)1/2 lemonade for each popcorn.B)1 lemonades for each popcorn.C)2 lemonades for each popcorn.D)indeterminate unless more information on Fred's marginal utilities is provided.14)When a person consumes two goods (A and B), that person's utility is maximized when the budgetis allocated such that:14)A)the marginal utility of A equals the marginal utility of B.B)the ratio of the marginal utility of A to the price of A equals the ratio of the marginal utility ofB to the price of B.C)the ratio of total utility of A to the price of A equals the ratio of the marginal utility of B to theprice of A.D)the marginal utility of A times the price of A equals the marginal utility of B times the price ofB15)Which of the following is true regarding income along a price consumption curve?15)A)Income is decreasing.B)Income is increasing.C)The level of income depends on the level of utility.D)Income is constant.16)Use the following two statements in answering this question:I. For all Giffen goods the substitution effect is larger than theincome effect.II. For all inferior goods the substitution effect is larger than theincome effect.16)A)I is true, and II is false.B)I and II are true.C)I and II are false.D)I is false, and II is true.3Practice MidtermAlvin's preferences for good X and good Y are shown in the diagram below.Figure 3.117)Refer to Figure 3.1. Which of the following is true concerning Alvin's marginal rate of substitution?17)A)It is zero.B)It is positive.C)It is constant.D)It is diminishing.18)Based on Figure 3.1, it can be inferred that:18)A)Alvin will never purchase any of good Y.B)Alvin does not consider good X as "good."C)Alvin regards good X and good Y as perfect complements.D)Alvin regards good X and good Y as perfect substitutes.E)none of the above.4Practice MidtermAlvin's preferences for good X and good Y are shown in the diagram below.Figure 3.219)Refer to Figure 3.2. Which assumption concerning preferences do Alvin's indifference curvesviolate?19)A)Diminishing marginal rates of substitution.B)Transitivity of preferences.C)More is preferred to less.D)Completeness.E)Both A and C.20)Based on Figure 3.2, it can be inferred that:20)A)Alvin will never purchase any of good Y.B)Alvin does not consider good X as "good."C)Alvin regards good X and good Y as perfect substitutes.D)Alvin regards good X and good Y as perfect complements.E)none of the above.Scenario 1:The demand for books is: Qd= 120 - PThe supply of books is: Qs= 5P21)Refer to Scenario 1. What is the equilibrium price of books?21)A)20B)5C)15D)10E)none of the above22)Refer to Scenario 1. If the government sets P = $25, which of the following is true?22)A)There is a shortage, but it is impossible to