Econ 410 Fall 2007 Lauren Raymer Practice Final Name PID Choose the one alternative that best completes the statement or answers the question 1 A vertical demand curve is A completely inelastic C highly but not completely inelastic B infinitely elastic D highly but not infinitely elastic 2 Which of the following represents the price elasticity of demand Q P Q P Q P A B C P P Q P Q Q 1 2 D Q P P Q 3 Gary Franklin is a movie critic He invented the Franklin Scale with which he rates movies from 1 to 10 10 being best When asked about his scale Mr Franklin explained that it is a subjective measure of movie quality A movie with a ranking of 10 is not necessarily 10 times better than a movie with a ranking of 1 but it is better A movie with a ranking of 5 is better than a movie with a ranking of 1 but is not as good a movie with a ranking of 10 That s all it really tells you Based on Mr Franklin s description his scale is A cardinal but not ordinal B ordinal but not cardinal C an objective standard to judge movies D neither cardinal nor ordinal 3 4 Which of the following is true about the indifference curve where one commodity such as pollution is bad A It is horizontal B It is vertical C It has a negative slope D It has a positive slope 4 5 If indifference curves are concave to the origin which assumption on preferences is violated A Transitivity of preferences B Diminishing marginal rates of substitution C More is preferred to less D Completeness 5 6 Consider the following three market baskets 6 A B C Food 15 13 14 Clothing 18 19 17 If baskets B and C are on the same indifference curve and if preferences satisfy all four of the usual assumptions then A A is preferred to C B A is preferred to B C both A and B answer choices are correct D none of the above 1 7 A consumer has 100 per day to spend on product A which has a unit price of 7 and product B which has a unit price of 15 What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis A 7 100 B 15 7 C 7 15 D 7 15 7 8 An individual consumes only two goods X and Y Which of the following expressions represents the utility maximizing market basket A MRSxy Px Py B MRSxy is at a maximum C Px Py money income D MRSxy money income E all of the above 8 9 If a consumer must spend her entire income on some combination of two commodities and chooses to spend it all on just one of the commodities then A the other commodity must have zero marginal utility B the two commodities must be perfect substitutes C the other commodity generates less utility per dollar spent on the good D the other commodity is an economic bad 9 10 An individual demand curve can be derived from the curve A income consumption B price consumption C price income D income substitution E Engel curve 10 11 The income consumption curve A shows the utility maximizing quantity of some good on the horizontal axis as a function of income on the vertical axis B illustrates the combinations of incomes needed with various levels of consumption of a good C is another name for income demand curve D illustrates the utility maximizing combinations of goods associated with every income level 11 12 If an Engel curve has a positive slope A as the price of the good on the horizontal axis increases more of both goods in consumed B as the price of the good on the vertical axis increases more of the good on the horizontal axis is consumed C the good on the horizontal axis is normal D both goods are normal 12 13 Which of the following describes the Giffen good case When the price of the good A rises the income effect is opposite to and greater than the substitution effect and consumption falls B falls the income effect is in the opposite direction to the substitution effect and consumption falls C falls the income effect is in the same direction as the substitution effect and consumption rises D falls the income effect is in opposite direction to the substitution effect and consumption rises E Both A and D are correct 13 2 14 When a good is price inelastic consumer expenditures on the good A do not change when price increases B are not related to price elasticity of demand C increase when price increases D decrease when price increases 14 15 When the price of wood which is an input in the production of furniture falls the consumer surplus associated with the consumption of furniture A decreases B increases C does not change D could be any of the above 15 16 The bandwagon effect corresponds best to which of the following A external economy B negative network externality C positive network externality D snob effect 16 17 The concept of a risk premium applies to a person that is A risk neutral B risk averse C risk loving 17 D all of these 18 John Brown s utility of income function is U log I 1 where I represents income From this information you can say that A John Brown is risk averse B John Brown is risk loving C John Brown is risk neutral D we need more information before we can determine John Brown s preference for risk 18 19 Which of the following is NOT an example of consumer behavior consistent with the standard assumptions of microeconomic theory A When demand increases all else being equal consumers expect price to rise B A concern for fairness can influence purchasing patterns C Snow shovels and snow plows are substitute goods D After a snowstorm the demand for snow shovels increases E none of the above 19 20 What is a reference point A the point from which an individual makes a consumption decision B the value of a good on the black market C the minimum price that an individual would sell a good that she currently owns D a subjective valuation of a good E none of the above 20 3 Consider the following information about job opportunities for new college graduates in Megalopolis Major Accounting Economics English Poli Sci Mathematics Table 5 1 Probability of Receiving an Average Salary Offer In One Offer Year 95 25 000 90 30 000 70 24 000 60 18 000 1 00 21 000 21 Refer to Table 5 1 Ranked highest to lowest in expected income the majors are A English economics mathematics accounting political science B economics accounting mathematics English political science C accounting English mathematics political science economics D economics accounting English mathematics political science E mathematics English political science accounting economics 21 22 A …
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