Question

1. Megan has $50 in their budget. Given the following graph what's the MRS at her optimal consumption bundle?

Fruit 10+ 5+ 1 2 Veggies

2. The demand curve for airplanes is: Qc=15,000 - .2Pc - 800Pg where Qc is the quantity of airplanes, Pc is the price of airplanes and Pg is the price of gasoline. By what quantity does the demand for airplanes change if the price of gasoline goes down by $.50?

a) 400

b) 800

  c) -400

d) -800

e) Can’t be determined

3. A person has a Cobb Douglas utility function for two goods X and Y. If the price of a X increases and the budget stays the same, the utility maximizing person:

a) Will consume less of Y

b) Will only consume Y

c) Will consume less of both goods

d) Will have lower utility

e) Can’t be determined

4. What happens in the long run if the government limits entry into a market that was perfectly competitive?

a) The supply curve will shift to the right

b) The supply curve is upward sloping

c) The supply curve is flat

d) Firms earn zero profit

e) Can’t be determined

Answer 1

Quest! MRS eat optimal consumption bundle is equal to the slope of Budget line rence MRS= 5 down Quesa by of price of gasoline goes $ 0.so doc - 800 -0.50) alg Hoo Quesh move & los option ® is correct of price of x Increases, due to substitution offort he will consume ofx, due to Income effect consume less of both. Hence option © option ③ is Conect of y is correct Questh