ECON 251 EXAM 2 BANAN QUESTIONS & ANSWERS
The idea of a positive externality is that there are ____ that buyers or sellers are not
factoring into their decision-making.
a. external benefits
b. external costs
c. internal benefits
d. internal costs - Answers -a. external benefits
If demand increases, which of the following is true?
a. Consumer surplus increases
b. Producer surplus increases
c. Neither a nor b
d. Both a and b - Answers -d. Both a and b
Consumer surplus can be thought of as the
a. utility that a buyer gets from a good or service
b. costs of producing a good or service that buyers want to purchase.
c. value that a seller gets from a good or service.
d. value a buyer gets from a good or service that the buyer does not pay for.
e. profits earned from selling to consumers. - Answers -d. value a buyer gets from a
good or service that the buyer does not pay for.
Which of the following best describes the thinking behind the Coase theorem?
a. A theory of collective action that describes eight principles of management of
common resources.
b. Capital abundant countries export capital intensive goods and labor abundant
countries export labor intensive goods
c. If transaction costs are low enough, the number of agents are small, and property
rights are well established, private parties can negotiate to solve externalities.
d. A consumer will buy a unique amount of each item of a good to minimize the price for
obtaining a certain level of utility. - Answers -c. If transaction costs are low enough, the
number of agents are small, andproperty rights are well established, private parties can
negotiate to solve externalities.
Recall that a "bundle" is a combination of two (or more) quantities of goods. Max prefers
bundle X to bundle Y and he prefers bundle Y to bundle Z and he prefers bundle Z to X.
Which property of utility has Max violated?
a. Completeness
b. Ordered
c. Transitive
d. Diminishing marginal utility - Answers -c. Transitive
, [Graph 1, pg 2]
What combination is optimal for this consumer on the initial budget constraint (BC1)?
a. A
b. B
c. C
d. D - Answers -c. C
[Graph 1, pg 2]
This agent is indifferent between consuming bundles
a. B and C
b. C and D
c. B and A
d. A and C - Answers -c. B and A
[Graph 1, pg 2]
If this agent has income of $100, what is the initial price of a grapefruit?
a. $20
b. $5
c. $2
d. $1
e. $4 - Answers -b. $5
[Graph 1, pg 2]
What changed to cause the budget constraint to shift from BC1 to BC2?
a. The price of toast increased.
b. The price of toast decreased.
c. The price of grapefruit increased.
d. The price of grapefruit decreased.
e. Income decreased. - Answers -c. The price of grapefruit increased.
[Graph 1, pg 2]
At point B, the marginal rate of substitution is
a. equal to P_grapefuit/Pt_oast
b. none of the above
c. equal to the price of grapefruit
d. greater than P_grapefuit/P_toast - Answers -a. equal to P_grapefuit/Pt_oast
Theo is consuming 20 packs of Pokemon cards and 20 packs of yugioh cards, and he is
getting 100 units of utility from the 20th pack of Pokemon cards and 100 units of utility
from the last pack of yugioh cards. The price of a pack of Pokemon cards is $5 and the
price of a pack of yugioh cards is $10.
Which of the following statements is true based on this information?
a. This is an optimal combination because he is getting the same utility from the last of
each card purchased
The idea of a positive externality is that there are ____ that buyers or sellers are not
factoring into their decision-making.
a. external benefits
b. external costs
c. internal benefits
d. internal costs - Answers -a. external benefits
If demand increases, which of the following is true?
a. Consumer surplus increases
b. Producer surplus increases
c. Neither a nor b
d. Both a and b - Answers -d. Both a and b
Consumer surplus can be thought of as the
a. utility that a buyer gets from a good or service
b. costs of producing a good or service that buyers want to purchase.
c. value that a seller gets from a good or service.
d. value a buyer gets from a good or service that the buyer does not pay for.
e. profits earned from selling to consumers. - Answers -d. value a buyer gets from a
good or service that the buyer does not pay for.
Which of the following best describes the thinking behind the Coase theorem?
a. A theory of collective action that describes eight principles of management of
common resources.
b. Capital abundant countries export capital intensive goods and labor abundant
countries export labor intensive goods
c. If transaction costs are low enough, the number of agents are small, and property
rights are well established, private parties can negotiate to solve externalities.
d. A consumer will buy a unique amount of each item of a good to minimize the price for
obtaining a certain level of utility. - Answers -c. If transaction costs are low enough, the
number of agents are small, andproperty rights are well established, private parties can
negotiate to solve externalities.
Recall that a "bundle" is a combination of two (or more) quantities of goods. Max prefers
bundle X to bundle Y and he prefers bundle Y to bundle Z and he prefers bundle Z to X.
Which property of utility has Max violated?
a. Completeness
b. Ordered
c. Transitive
d. Diminishing marginal utility - Answers -c. Transitive
, [Graph 1, pg 2]
What combination is optimal for this consumer on the initial budget constraint (BC1)?
a. A
b. B
c. C
d. D - Answers -c. C
[Graph 1, pg 2]
This agent is indifferent between consuming bundles
a. B and C
b. C and D
c. B and A
d. A and C - Answers -c. B and A
[Graph 1, pg 2]
If this agent has income of $100, what is the initial price of a grapefruit?
a. $20
b. $5
c. $2
d. $1
e. $4 - Answers -b. $5
[Graph 1, pg 2]
What changed to cause the budget constraint to shift from BC1 to BC2?
a. The price of toast increased.
b. The price of toast decreased.
c. The price of grapefruit increased.
d. The price of grapefruit decreased.
e. Income decreased. - Answers -c. The price of grapefruit increased.
[Graph 1, pg 2]
At point B, the marginal rate of substitution is
a. equal to P_grapefuit/Pt_oast
b. none of the above
c. equal to the price of grapefruit
d. greater than P_grapefuit/P_toast - Answers -a. equal to P_grapefuit/Pt_oast
Theo is consuming 20 packs of Pokemon cards and 20 packs of yugioh cards, and he is
getting 100 units of utility from the 20th pack of Pokemon cards and 100 units of utility
from the last pack of yugioh cards. The price of a pack of Pokemon cards is $5 and the
price of a pack of yugioh cards is $10.
Which of the following statements is true based on this information?
a. This is an optimal combination because he is getting the same utility from the last of
each card purchased
