UCLA STATS 100C - midterm1_practice_solution (4 pages)

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midterm1_practice_solution



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midterm1_practice_solution

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Pages:
4
School:
University of California, Los Angeles
Course:
Stats 100c - Linear Models

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UCLA Economics 11 Professor Mazzocco PRACTICE MIDTERM ANSWER KEY NAME ID TA Part 1 Multiple Choices 1 Indifference curves a are non intersecting b are contour lines of a utility function c are negatively sloped d all of the above 2 For an individual who consumes only two goods X and Y the opportunity cost of consuming one more unit of X in terms of how much Y must be given up is reflected by a the individual s marginal rate of substitution b the market prices of X and Y c the slope of the individual s indifference curve d none of the above 3 The slope of the budget constraint line is a the ratio of the prices px py b the negative of the ratio of the prices px py c the ratio of income divided by price of y I py d none of the above 4 If an individual s indifference curves are convex his or her MRS will a diminish as X is substituted for Y b increase as X is substituted for Y c be undefined except in special cases d always depend only on the ratio of X to Y 5 If utility is given by U X Y Min X 3Y then the bundle 3 2 provides the same utility as the bundle a 1 3 b 2 3 c 4 1 d 4 2 6 Suppose that an individual has a constant MRS of shoes for sneakers of 3 4 that is he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of shoes Then if sneakers and shoes are equally costly he or she will a buy only sneakers b buy only shoes c spend his or her income equally on sneakers and shoes d wear sneakers only 3 4 of the time 7 Suppose an individual s MRS of steak for beer is 2 1 That is at the current consumption choices he or she is willing to give up 2 beers to get an extra steak Suppose also that the price of a steak is 1 and a beer is 25 cents Then in order to increase utility the individual should a buy more steak and less beer b buy more beer and less steak c continue with current consumption plans 8 Suppose that at current consumption levels an individual s marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2 Then the MRS of soft drinks for hot dogs that is the number of hot dogs the individual is willing to give up to get one more soft drink is a 5 b 2 c 1 2 d 1 5 9 An increase in an individual s income without changing relative prices will a rotate the budget constraint about the X axis b shift the indifference curves outward c shift the budget constraint outward in a parallel



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