Economics
REVIEW: MIDTERM #2
MICROECONOMIC PRINCIPLES-1102, section #11
Professor Ardy Lynn Wurtzel
SEAEINNSruEB
1.
Please use Sarah's Utility chart below to determine what combination of Clothing and
Shoes would maximize her utility (find her consumer eq uilibrium)-10pts.
[1lzt: Complete the charl's (1) MU/$ column, the (2) TU (Clothing & Shoes) column and the
(3) Income Spent column. This will allow you to solve for consumer equilibrium.]
Price (per unit): S1O.0O
MU (cr)/s
SARAH'STOTAL
INEOME
P-rjeE@_Ss.00
AVlttLAEl.E: $50 lncome Spent
a
ru (cr)
MU (cr)
0
0
0
10
260
5
L
50
50
8
248
10
2
90
40
6
225
20
L22
32
4
183
24
4
150
2a
2
L23
4a
5
L76
26
0
0
0
TU (CL+S)
a
ru
(s)
MU (s)
MU (s)/s
(A) Which combination of clothing and shoes maximizes Sarah's utility? How did you arrive at this answer? ln other words, what criteria must be met in order for her utility to be maximized ?
lEjtut. T\ere are three: (1) Deals with Total and (3) Deals with her Income Spent.]
Utility, (2) Deals with MU/$ of
each good
(B)Supposethereisa@!!g',allelseremainsunchangedand for Sarah, clothing and shoes are substitutes.
(1) How does the quantity demanded of clothing chan ge? lEjUt: law ofdemandl
(2) How does the D-curve for shoes react? lUiut: lavt of demand]
(C) Suppose instead that Sarah experiences a
r@,
and all else remains
unchanged.
(1) How does more income affect the D-curve for clothing? lincrease/decrease?l
(2) How does more income affect the D-curve for shoes? lincrease/decrease?l
Page 1 of 5
REVIEW MIDTERM #2
MICROECONOMIC PRINCIPLES-I102, section #11
ProfessorArdy Lynn Wurtzel
3.
The following question refers
to Chapter 18's analysis of the Iabor market, Please answer the following by labeling the applicable graphs and explaining where/if needed. (20pts)
(A) Please use the graph below to show the competitive equilibrium in the labor market
(1) No Union
Exists.
30
-s(r)
25
20
-D(r)=vMP(r)
15
3 10
5
o
50
100
1s0
MICROECONOMIC PRINCIPLES-1102, section #11
Professor Ardy Lynn Wurtzel
SEAEINNSruEB
1.
Please use Sarah's Utility chart below to determine what combination of Clothing and
Shoes would maximize her utility (find her consumer eq uilibrium)-10pts.
[1lzt: Complete the charl's (1) MU/$ column, the (2) TU (Clothing & Shoes) column and the
(3) Income Spent column. This will allow you to solve for consumer equilibrium.]
Price (per unit): S1O.0O
MU (cr)/s
SARAH'STOTAL
INEOME
P-rjeE@_Ss.00
AVlttLAEl.E: $50 lncome Spent
a
ru (cr)
MU (cr)
0
0
0
10
260
5
L
50
50
8
248
10
2
90
40
6
225
20
L22
32
4
183
24
4
150
2a
2
L23
4a
5
L76
26
0
0
0
TU (CL+S)
a
ru
(s)
MU (s)
MU (s)/s
(A) Which combination of clothing and shoes maximizes Sarah's utility? How did you arrive at this answer? ln other words, what criteria must be met in order for her utility to be maximized ?
lEjtut. T\ere are three: (1) Deals with Total and (3) Deals with her Income Spent.]
Utility, (2) Deals with MU/$ of
each good
(B)Supposethereisa@!!g',allelseremainsunchangedand for Sarah, clothing and shoes are substitutes.
(1) How does the quantity demanded of clothing chan ge? lEjUt: law ofdemandl
(2) How does the D-curve for shoes react? lUiut: lavt of demand]
(C) Suppose instead that Sarah experiences a
r@,
and all else remains
unchanged.
(1) How does more income affect the D-curve for clothing? lincrease/decrease?l
(2) How does more income affect the D-curve for shoes? lincrease/decrease?l
Page 1 of 5
REVIEW MIDTERM #2
MICROECONOMIC PRINCIPLES-I102, section #11
ProfessorArdy Lynn Wurtzel
3.
The following question refers
to Chapter 18's analysis of the Iabor market, Please answer the following by labeling the applicable graphs and explaining where/if needed. (20pts)
(A) Please use the graph below to show the competitive equilibrium in the labor market
(1) No Union
Exists.
30
-s(r)
25
20
-D(r)=vMP(r)
15
3 10
5
o
50
100
1s0