Download Final Exam Partial Solution - Intermediate Microeconomics Theory | ECON 306 and more Exams Microeconomics in PDF only on Docsity! vl Name Spring 1994 /«A Final Exam ECON 306 1. T A consumer with convex preferences will always select the bundle that sets his indifference curve tangent to the budget line. 2. T If someone has a utility function U=:2min{x,y}, then x and y are perfect complements for that person. 3. F When economists consider the cardinal utility of various goods, they are only concerned with how a consumer would rank the goods. 4. F Ndidi strictly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A. These preferences can be represented by a utility function. 5. F If the interest rate is 10%, then an asset that returns $1 a year forever is worth $1/1.1. 6. T If a consumer considers two goods perfect substitutes, and the prices of the two goods are different, then the consumer will chose a boundry optimum. 7. F If the inflation rate doubles and the nominal interest rate remains constant, the real interest rate will be halved. 8. T If everybody has the same information, then a well-functioning meirket for assets would, in equilibrium, leave no opportunities for arbitrage. 9. T If the r«jal interest rate is positive, then a unit of future consumption can be had for the sacrifice of less than one unit of current consumption. 10. F The real interest rate is the interest rate that one receives net of brokerage costs or fees imposed by financial intermediaries. Page f 2 11. B The Marginal Rate of Substitution for the utility function, u(x,y) = 3x2 + 2y3 that passes through the point (x,y) = (4,1) is (a) -1 (b) -4 (c) -1/4 (d) -3/2 (e) none of the above 12. B The equation u(x,y) = Inx + y is an example of a (a) Cobb-Douglas utility function (b) Quasilinear utility function (c) Perfect Substitutes utility function. (d) Perfect Compliments utility function (e) Cardinal utility function 13. C Tomoko has preferences represented by the utility function U(x,y)=20x+5y. She consumes 20 units of good x and 4 units of good y. If her consumption of good x is lowered to 13, how many units of y must she have in order to be exactly as well off as before? (a) 37 units of good y (b) 22 units of good y (c) 32 units of good y (d) 4 units of good y (e) None of the above 14. E A consumer's utility function is U(x,y) = x + 54y - 2y2. Her income is 163. If the price of x is 1 and the price of y is 38, how many units of good x will the consumer demand? (a) 10 (b) 14 (c) 15 (d) 0 (e) 11 15. B If a consumer views a unit of consumption in period 1 as a perfect substitute (one-for-one) for a unit of consumption in period 2 and if the real interest rate is positive, the consumer will: (a) consume only in, period 1. (b) consume only in period 2. (c) consume equal amounts in each period. (d) consume more in period 1 than in period 2 if income elasticity exceeds 1, else would consume more in period 2 than in period 1. (e) equalize expenditures but not consumption in the two periods.
