Al Azhar University- GazaFaculty of Economics and Management ScienceCourse name: Introduction to Microeconomics

Midterm examination for Fall semester 2007- 2008

Note: Please answer the questions on the same page.

Q1: True or false? (7 points)

1- Economics can be defined as the efficient use of scarce resources. ( + )

2- Consumer's choices are eliminated by his/ her budget constraint. ( + )

3- Entrepreneurship and human capital are both subdivisions of Labor. غ(

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(4- The optimal point may not change when the income increase as it already lies on the

highest indifference curve.( _ )

5- The study of individual markets and consumers' behavior maybe defined as Microeconomics.

( + )

6- Slope of a line equals the Marginal Rate of Substitution (MRS). غ (

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(7- Market supply curve is usually derived by summing up the supply of all individuals in

the market.( + )

Q2: Choose the most accurate answer: (8 points)

1 -In the opposite graph, S curve will shift to S' for which of the following reasons:

a) an increase in the price of the good.b) a new innovation of production techniques.c) the government applying new taxes on this product.++++d) Increased consumer demand for this good.

2 -If A is a prefect substitute for B, and C is a complement for ONLY A, then which of the following best describes the likely result of a rise in the price of A?a) Increase in the demand for B, and decrease in the demand for C.b) Increase in the supply for B, and increase in the demand for C.c) Decrease in the demand for B, and increase in the demand for C.d) Decrease in the supply for B, and increase in the supply of C.e) No change in the demand for B, and decrease in the demand for C.

3 -Jane spends an hour studying instead of working at her part- time job which pays $5/hour. The opportunity cost to her studying is:a) the improvement in her grades.b) the difference between the time she would have spent working and the time she spent studying.

c) the $5 she would have earned if she worked for another hour instead of studying++++++++++.d) zero, since she values studying more than working.

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Al Azhar University- GazaFaculty of Economics and Management ScienceCourse name: Introduction to Microeconomics

Midterm examination for Fall semester 2007- 2008

4 -A market consists of 4 buyers and 2 sellers. Each of the buyers has a demand given by this relation: Qd = 10 - P. Each seller has a supply given by this relation Qs = 2 + P. The equilibrium price in the market is:

a) $4+++++++++b) $6c) $7d) $8

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Q3) (10 points) The following table represents a consumer's utility earned from eating cheese- burger and drinking Pepsi :

Marginal Utility of pints of Pepsi

Total Utility of pints of Pepsi

Number of pints of Pepsi

Marginal Utility of Cheese

Burger

Total Utility of Cheese- burger

Number of Cheese- burgers

___00___00

8___1___201

6___2___362

4___312___3

___2048___4

___2054___5

a) Complete the missing cells.b) If the price of a cheeseburger is $2 and the price of a pint of Pepsi is $1, and you have only $6 to spend on those two goods (and you have to spend all of it), what is the utility- maximizing combination of cheeseburger and Pepsi?

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