中级微观经济学测试题

Intermediate Microeconomics Mid-term Test 2005 (A) Name: Student No.: Class:

Section 1 True or false.（20 points, 2 points each）

1. With quasi-linear preferences, the equivalent variation and the compensating variation in income due to a price increase of one good are the same.

2. If all prices double and income triples, then the budget line will become steeper.

3. A consumer who can borrow and lend at the same interest rate should prefer an endowment with a higher present value to an endowment with a lower present value, no matter how he plans to allocate consumption over the course of his life.

4. The marginal rate of substitution measures the distance between one indifference curve and the next one.

5. Fred has a Cobb-Douglas utility function with exponents that sum to 1. Sally consumes the same two goods, but the two goods are perfect substitutes for her. Despite these differences, Fred and Sally have the same price offer curves.

6. For a consumer who has an allowance to spend and no endowment of goods,

a decrease in the price of a Giffen good consumed makes him better off.

7. Alice's utility function is U(x, y)= x2y. Steve's utility function is U(x, y)= x2y + 2x. Alice and Steve have the same preferences since Steve's utility function is a monotonic transformation of Alice's.

8. Susan is a net borrower when the interest rate is 10% and a net saver when the interest rate is 20%. A decrease in the interest rate from 20% to 10% may make Susan worse off.

9. If someone has a Cobb-Douglas utility function and no income from any source other than labor earnings, then an increase in wages will not change the amount that person chooses to work.

10. If two assets have the same expected rate of return but different variances, a risk-averse investor should always choose the one with the smaller variance, no matter what other assets she holds.

Section 2 Single Choice. (80points, 4 points each)

11. When the prices were ($5, $1), Vanessa chose the bundle (x, y)= (6, 3). Now

at the new prices, (p x, p y), she chooses the bundle (x, y)= (5, 7). For

Vanessa's behavior to be consistent with the weak axiom of revealed

preference, it must be that

A. 4p y < p x.

B. p x < 4py.

C. 5p y < p x.

D. p y= 5p x.

E. None of the above.

12. Henry's utility function is x2 + 16xw + 64w2, where x is his consumption of

x and w is his consumption of w.

A. Henry's preferences are strictly non-convex.

B. Henry's indifference curves are straight lines.

C. Henry has a bliss point.

D. Henry's indifference curves are hyperbolas.

E. None of the above.

13. In a certain kingdom, the demand function for rye bread was q = 381 - 3p

and the supply function was q = 5 + 7p, where p is the price in peso and q is loaves of bread. The king made it illegal to sell rye bread for a price above

32 peso per loaf. To avoid shortages, he agreed to pay bakers enough of a

subsidy for each loaf of bread so as to make supply equal demand. How

much would the subsidy per loaf have to be?

A. 21 peso

B. 14 peso

C. 8 peso

D. 5.6 peso

E. None of the above.

14. If there are only two goods, if more of good 1 is always preferred to less,

and if less of good 2 is always preferred to more, then indifference curves

A. slope downward.

B. slope upward.

C. may cross.

D. could take the form of ellipses.

E. None of the above.