02 Jun Question ECO 2144C (Microeconomic Theory I) Midterm Exam
Question
ECO 2144C (Microeconomic Theory I) Midterm Exam 2
MULTIPLE CHOICE. (50 points – 2 points per question)
Circle the letter of the choice that best completes the statement or answers the question. If you
need to change your answer, very clearly cross out your previous answer, and circle and put an arrow identifying the correct answer. If the distinction between your old and new answers is not clear, no points will be awarded.
1. Jeong’s uncompensated demand for pizza is given by Q = 30 – 2p. Jeong’s marginal willingness to pay function is
A) -2.
B) 30-2p. C) 30-2Q. D) 15-.5Q.
2. Sandy’s current consumer surplus for candy is $20. Candy is a normal good for her. When her income increases and the price of candy remains unchanged, her consumer surplus will
A) decrease. B) increase.
C) remain the same.
D) Not enough information.
3. Compensating variation for an increase in the price of a good is
A) the change in utility resulting from the increase in price.
B) the change in consumer surplus resulting from a price increase.
C) the maximum amount of money a consumer would pay to avoid the price increase.
D) the minimum amount of money a consumer would accept to voluntarily accept the price increase.
4. Compensation variation and equivalent variation will be closer to each other when
A) the budget share is greater. B) the income effect is greater.
C) the income elasticity is smaller. D) the income elasticity is greater.
5. A quota will reduce consumer welfare when
A) the quota is greater than the amount purchased without the quota. B) the quota is on a good with high income elasticity.
C) the quota is less than the amount purchased without the quota. D) Quotas always reduce consumer welfare.
6. If a person supplies more hours of labour in response to a wage increase, then
A) the income effect equals the substitution effect.
B) the substitution effect is greater than the income effect. C) the person is not maximizing utility.
D) the income effect is greater than the substitution effect.
7. A backward-bending labour supply curve could possibly imply which of the following cases?
A) Leisure is a normal good. B) Leisure is an inferior good.
C) Leisure is a normal good at low wages and inferior at high wages. D) None of the above.
8. If workers are in the backward-bending section of their labour supply curves, then an increase in the income tax rate will
A) decrease tax revenue and increase the number of hours worked. B) decrease tax revenue and decrease the number of hours worked. C) increase tax revenue and decrease the number of hours worked. D) increase tax revenue and increase the number of hours worked.
9. Homer’s Donut Shoppe has the production function, q = 10L + 20L2 – 5L3. The marginal product of labour is
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