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The instructions and questions for a microeconomics quiz given at drake university during the spring 1997 semester. The quiz covers topics such as budget constraints, utility functions, and the relationship between different goods in consumption. Students were required to solve problems related to calculating budget lines, intercepts, slopes, and the marginal rate of substitution.
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Intermediate Microeconomic Analysis Signature: (Econ 173) Printed name: Drake University, Spring 1997 William M. Boal ID number:
INSTRUCTIONS: This quiz is closed-book, closed-notes, but calculators are permitted. Only answers in the boxes will be graded, so feel free to use margins and back for scratch work. Point values for each question are noted in brackets. Maximum total points are 100. (1) [budget constraint: 50 pts] Suppose income = $60, price of good #1 is $5, and price of good #2 is $6. a. Give the equation for the budget line. b. Compute the intercept on the axis for good #1. c. Compute the intercept on the axis for good #2. d. Compute the slope of the budget line, with good #1 on the vertical axis and good #2 on the horizontal axis. e. Which of the following bundles (if any) are affordable? Bundle A: q 1 = 5, q 2 = 5. Bundle B: q 1 = 6, q 2 = 6. Bundle C: q 1 = 5, q 2 = 6.
Examination Page 2 (2) [choice: 50 pts] Suppose a person with utility function has $40 in income to spend