UCLA STATS 100C - Midterm_1_2011_Solution (6 pages)

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UCLA Economics 11 Fall 2011 Professor Mazzocco MIDTERM 1 Version 1 NAME ID TA Part I Multiple Choice Questions Multiple Choice Questions 1 3 points Which of the following is NOT an axiom required for a utility function to represent preference a b c d Continuity Completeness Homogeneity Transitivity 2 3 points If the prices of all goods increase by the same proportion as income the quantity demanded of good x will a b c d decrease increase remain unchanged change in a way that cannot be determined from the information given 3 3 points An individual consumes only two commodities X and Y He spends all his income on these two commodities if X is a Giffen good then 1 X must be an inferior good 2 When the price of X changes the income effect dominates the substitution effect 3 It is possible that Y is an inferior good Which of the following is correct a b c d 1 2 2 3 1 3 1 2 3 4 3 points A consumer consumes 2 goods X and Y Suppose that her optimal consumption bundle is X 1 Y 2 when Px 1 Py 2 and I 5 Now Px increases to 2 other things constant and her optimal consumption bundle becomes X 0 5 Y 1 Then the total price effect for X is a 0 5 b 0 5 c 1 d Uncertain there is not enough information 5 3 points Suppose that at current consumption levels an individual s marginal utility of consuming an extra pizza is 10 whereas the marginal utility of consuming an extra beer is 1 Then the MRS of beer for pizza that is the number of pizzas the individual is willing to give up to get one more beer is a b c d 5 2 1 2 1 10 6 3 points Which of the following utility functions best represents the idea that two goods x and y are complements U x y xy a b U x y x y U x y x y c d U x y min x y 7 3 points John is shopping for fruits in a grocery store which sells two kinds of fruits X Y He only cares about the amount of fruits he eat which of the following function best represents his preference a U X Y X Y b U X Y X Y c U X Y X Y d U X Y min X Y 8 4 points Charlie has a utility function U X Y XY the price of apples pX is 1 and the price of bananas pY is 2 If Charlie s income is 200 how many units of bananas Y would he consume if he chose the bundle that maximized his utility subject to his budget constraint a 25 b 50 c 10 d 100 e 150 9 4 points If Anita s utility function over goods X Y and Z is