Mathematical Economics
Exam Answer Key
Course Introduction
Mathematical Economics is a course that explores how mathematical methods are applied to analyze and solve economic problems. Students learn to use tools such as calculus, linear algebra, and optimization techniques to model economic theories and analyze decision-making in areas like consumer behavior, market equilibrium, production, and game theory. Emphasis is placed on formulating clear mathematical representations of economic concepts and using logical reasoning to derive and interpret key results, preparing students for advanced studies in economics and quantitative research.
Recommended Textbook
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson
Available Study Resources on Quizplus
17 Chapters
558 Verified Questions
558 Flashcards
Source URL: https://quizplus.com/study-set/404
Page 2
Chapter 1: Economic Models
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/7056
Sample Questions
Q1) The solution to the simultaneous equations \(5 X - Y = 10\) and \(10 x + Y = 35\) is
A) \(X = 15\) , \(Y = 0\) .
B) \(X = 3\) , \(Y = 5\) .
C) \(X = 5\) , \(Y = 3\) .
D)None of the above.
Answer: B
Q2) Graphically,the solution to a system of two independent linear equations is usually A)the average of the slopes.
B)the average of the intercepts.
C)a single point.
D)None of the above.
Answer: C
Q3) The X-intercept of \(Y = 4 X + 12\) is A)-3.
B)3. C)-1/3
D)12.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Utility and Choice
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7057
Sample Questions
Q1) If the price of X falls,the budget constraint
A)shifts outward in a parallel fashion.
B)shifts inward in a parallel fashion.
C)rotates outward about the X-intercept.
D)rotates outward about the Y-intercept.
Answer: D
Q2) If bundles of goods A and B lie on the same indifference curve,one can assume the individual
A)prefers bundle A to bundle B.
B)prefers bundle B to bundle A.
C)enjoys bundle A and B equally.
D)bundle A contains the same goods as bundle B.
Answer: C
Q3) Indifference curves
A)are nonintersecting.
B)are contour lines of a utility function.
C)are negatively sloped.
D)All of the above.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Demand Curves
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/7058
Sample Questions
Q1) If the income elasticity of demand is 0.5,the good is A)a luxury.
B)a normal good (but not a luxury).
C)an inferior good.
D)a Giffen good.
Answer: B
Q2) In Homogenia everyone is the same.Demand for apples is \(\mathrm { P } = \mathrm { A } - \mathrm { Bq }\) for each of its 1 million citizens.Market demand for apples in Homogenia is given by the equation
A) \(P = 1,000,000 A - 1,000,000 B Q\)
B) \(P = 1,000,000 A - B Q / 1,000,000\)
C) \(P = A - 1,000,000 B Q\)
D) \(P = A - B Q / 1,000,000\)
Answer: D
Q3) If good X is a normal good and its price rises,then quantity demanded
A)may or may not fall.
B)will always fall.
C)will always rise.
D)will remain unchanged.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Uncertainty
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/7059
Sample Questions
Q1) An individual will never buy complete insurance if
A)he or she is risk averse.
B)he or she is a risk taker.
C)insurance premiums are fair.
D)under any circumstances.
Q2) Continuing with the same family from the preceding question,what is the greatest (integer)number of vacation days the family would be willing to give up in order to guarantee a healthy vacation?
A)1
B)2
C)3
D)4
Q3) Continuing with the same vacation-insurance company from the preceding question,what vacation-day price(s)would be acceptable to both the family and the insurance company?
A)2 only
B)3 only
C)2 or 3
D)4
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Game Theory
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/7060
Sample Questions
Q1) Two games that differ only in the timing of moves-one simultaneous,the other sequential move-can sometimes have completely different subgame-perfect equilibria. Why?
A)The second mover to choose non-credible threats.
B)The first mover can choose an action that it would deviate from if its action were secret.
C)Subgame-perfect equilibrium cannot be applied to simultaneous games.
D)All of the above.
Q2) A subgame-perfect equilibrium is a Nash equilibrium that A)cannot persist through several periods.
B)involves only credible threats.
C)consists only of dominant strategies.
D)is unique.
Q3) The beauty of Nash's equilibrium concept is that
A)all games have one.
B)all games have no more than one.
C)all games have a rich set to choose from.
D)it is a Pareto optimum.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Production
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/7061
Sample Questions
Q1) If,as a result of doubling all its inputs,a firm can more than double its output,the firm's production function exhibits
A)constant returns to scale.
B)increasing returns to scale.
C)decreasing returns to scale.
D)increasing marginal productivity to at least one input.
Q2) If Q = K<sup>2</sup>L<sup>2</sup> the MP<sub>L</sub> is A)constant
B)diminishing
C)increasing
Q3) If Q = K<sup>1/2</sup>L<sup>1/2</sup> the MP<sub>K</sub> is A)constant
B)diminishing
C)increasing
Q4) Suppose Q = K<sup>a</sup>L<sup>b</sup>,if a + b > 1 the isoquants will be A)upward sloping.
B)progressively closer together at higher quantities.
C)progressively further apart at higher quantities.
D)equally spaced.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Costs
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/7062
Sample Questions
Q1) Suppose a production function is q = K<sup>1/2</sup>L<sup>1/3</sup> and in the short run capital (K)is fixed at 100. If the wage is $10 and the rental rate on capital is $20,the short run marginal cost is
A)1000 + q<sup>3</sup>
B) \(\frac { 3 q ^ { 2 } } { 100 }\)
C)q<sup>3</sup>
D)2q<sup>3</sup>
Q2) In the short run,
A)all inputs are fixed.
B)all inputs are variable.
C)some inputs are fixed.
D)no production occurs.
Q3) The shape of a firm's long-run average cost curve is determined by
A)the degree to which each input encounters diminishing marginal productivity.
B)the underlying nature of the firm's production function when all inputs are able to be varied.
C)how much the firm decides to produce.
D)the way in which the firm's expansion path reacts to changes in the rental rate on capital.
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Profit Maximization and Supply
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/7063
Sample Questions
Q1) Suppose a farmer is a price taker in soybeans with cost functions given by ?
TC = .1q<sup>2</sup> + 2q + 100
MC = .2q + 2
Suppose the farmer has to purchase a license for $50 per period in order to stay in business. In this case,its marginal cost function is
A)still MC = .2q + 2
B)MC = .2q + 50
C)MC = .2q + 52
D)MC = 50
Q2) If price is equal to short-run average variable cost,this price is known as
A)the break-even price.
B)the profit-maximizing price.
C)the shutdown price.
D)the revenue-maximizing price.
Q3) In order to maximize profits,a firm that can sell all it wants without affecting price should produce
A)where average variable costs are minimized.
B)where marginal cost is equal to average variable costs.
C)where marginal cost is equal to price.
D)where marginal cost is a minimum.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Perfect Competition in a Single Market
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/7064
Sample Questions
Q1) Suppose demand for a good is Q<sub>D</sub>= 100 - P and supply is Q<sub>S</sub> = -20 + P.What is the value consumers place on the amount of the good they consume?
A)60
B)2400
C)2800
D)3200
Q2) Suppose demand for a good is Q<sub>D</sub> = 100 - P and supply is Q<sub>S</sub> = -20 + P.What is the amount consumers pay producers?
A)60
B)2400
C)3600
D)6400
Q3) "Missing markets" result from A)high transactions costs of such markets.
B)strict price controls.
C)the inability of producers to gain economies of scale.
D)foreign countries dominating a domestic market for a product.
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: General Equilibrium and Welfare
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7065
Sample Questions
Q1) Suppose country A has a production possibilities frontier such that \(4 x
^ { 2 } = 500\) and country B has a production possibilities frontier such that \(x
+
2
+ 4 y ^ { 2 } = 500\) and consumers in each country view x and y as perfect substitutes.Country B will produce
A)only x (= \(\sqrt { 500 }\)
) and trade for y.
B)only y (= \(\sqrt { 125 }\) ) and trade for x.
C)both x (= 20) and y (= 5) and trade x to get y.
D)both x (= 20) and y (= 5) and trade y to get x.
Q2) Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the man is more selfish than the woman
UM = CM<sup>2/3</sup> UW<sup>1/3</sup>
UW = CW<sup>1/2</sup> UM<sup>1/2</sup>
They will maximize the joint happiness (UM + UW)where
A)CM = 100; CW = 0
B)CW = 100; CM = 100
C)50 < CM < 100; 0 < CW < 50
D)50 < CW < 100; 0 < CM < 50
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Monopoly
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7066
Sample Questions
Q1) Possible benefits of a monopoly include which of the following (choose all that apply)?
A)a savings of fixed costs because only one firm supplies quantity demanded.
B)greater opportunities for research due to long-run positive economic profits.
C)government regulation is more effective because the firm is "too big to fail."
D)goods and services are provided at a lower price than under perfect competition because of a monopoly's decreasing average cost curve.
Q2) A monopoly's economic profits are represented by
A)[price minus marginal cost] times number of units sold.
B)[price minus average cost] times number of units sold.
C)[marginal revenue minus price] times number of units sold.
D)[marginal cost minus price] times number of units sold.
Q3) A monopolist has total cost TC = .1Q<sup>2</sup> - 2Q + 100 and marginal cost MC = .2Q - 2. Market demand is Q = 86 - P,implying that the firm's marginal revenue is MR = 86 - 2Q. Its profit-maximizing output is
A)92
B)46
C)40
D)20
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Imperfect Competition
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7067
Sample Questions
Q1) In the cartel model
A)firms believe that price increases result in a very elastic demand,while price decreases result in an inelastic demand for their products.
B)each firm acts as a price taker.
C)one dominant firm takes the reactions of all other firms into account in its output and pricing decisions.
D)firms coordinate their decisions to act as a multiplant monopoly.
Q2) Consider the same market for nonalcoholic beer as in the previous question. How many "units" of beer will Cudweiser produce?
A)667
B)1,667
C)2,333
D)3,000
Q3) In the long run,in the model of monopolistic competition,for a typical firm,price is
A)above average cost but equal to marginal cost.
B)above marginal cost but equal to average cost.
C)above marginal cost.
D)equal to marginal cost and equal to or greater than average cost.
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Pricing in Input Markets
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/7068
Sample Questions
Q1) Suppose the market for labor is perfectly competitive and the demand for labor is \(L = 100 - 10 w\) and market supply is \(L = - 20 + 10 w\) .If a minimum wage is imposed at w = 8,the deadweight loss of the imposition of the minimum wage is A)10
B)20
C)30
D)40
Q2) A firm's demand for labor is known as a "derived demand" because
A)the firm gains utility from hiring more labor.
B)the amount of labor hired depends upon how much output the firm can sell.
C)the wage rate paid to workers is derived from the market for labor.
D)it is derived from the demand for capital.
Q3) If a firm is a monopsonistic hirer of labor,
A)its marginal expense for labor is greater than the market wage.
B)its marginal expense for labor is equal to the market wage.
C)its marginal expense for labor is less than the market wage.
D)it is a price taker in the labor market.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Capital and Time
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/7069
Sample Questions
Q1) An increase in the corporate profits tax will most likely lead to
A)a decrease in the rental rate of capital in the corporate sector.
B)no change in the rental rate of capital in the corporate sector.
C)no change in the rental rate of capital in the non-corporate sector.
D)an increase in the rental rate of capital in the corporate sector.
Q2) For a given interest rate,r,which of the following expressions is smallest?
A)1 + r.
B)(1 + r/2)2.
C)(1 + r/12)12
D)(1 + r/365)365.
Q3) Draw a two period budget line where the borrow/lending rate of interest,r,allows consumers to choose consumption in each of the two periods.C<sub>1</sub> and C<sub>2</sub> given their anticipated income on two periods,Y<sub>1 </sub>and Y<sub>2</sub>.The slope is
A)r
B)-r
C)1 + r
D)-(1 + r)
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Asymmetric Information
Available Study Resources on Quizplus for this Chatper
28 Verified Questions
28 Flashcards
Source URL: https://quizplus.com/quiz/7070
Sample Questions
Q1) A risk-averse manager is hired to run a firm for shareholders. If the manager's effort can be observed and specified in a contract,which would be the best employment contract?
A)a high-powered incentive contract to elicit the most effort.
B)a fixed salary paid as long as the required effort is undertaken.
C)a proportion of profits paid as long as the required effort is undertaken.
D)a wage well in excess of his or her outside opportunity.
Q2) Which is a distortion (a loss of social surplus)associated with a monopolist's inability to observe consumer types when constructing a nonlinear pricing scheme?
A)The monopolist must expend more resources on market research.
B)All bundles involve inefficiently low quantities.
C)Some but not all bundles involve inefficiently low quantities.
D)Quantities aren't distorted,but prices extract too much consumer surplus.
Q3) Adverse selection in competitive insurance markets harms
A)high-risk individuals.
B)low risk individuals.
C)owners of competitive insurance companies.
D)everyone.
To view all questions and flashcards with answers, click on the resource link above.
17
Chapter 16: Externalities and Public Goods
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/7071
Sample Questions
Q1) Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q<sub>D</sub> = 1000 - 100P and Q<sub>S</sub> = -100 + 100P.The market equilibrium quantity is
A)400
B)450
C)500
D)550
Q2) The "free-rider problem" of public goods refers to A)individuals' refusal to pay taxes.
B)individuals' attempts to hide their preferences for collective goods and to avoid paying for them.
C)individuals' overuse of collective goods.
D)the inelasticity of individuals' demands for public goods.
Q3) In the case of a negative externality,the social marginal cost will
A)exceed the private marginal cost.
B)be equal to private marginal cost.
C)fall short of private marginal cost.
D)bear no significant relation to private marginal cost.
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Behavioral Economics
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/7072
Sample Questions
Q1) Return to the case of Jan,the hyperbolic discounter from the previous question. What values of B and C will lead her to be consistent with a plan to undertake the action?
A)C < B < 2C.
B)B < C.
C)B > 2C.
D)B < C < 2B.
Q2) When psychologists refer to the "Paradox of Choice",what do they mean?
A)More choices may lead people to avoid the decision all together.
B)More choices always make people at least as well off (related to the option value principle).
C)Risk-averse people sometimes prefer risk because of the thrill it provides.
D)If two people with free will make simultaneous decisions,these may sometimes conflict.
Q3) What are the main differences between neoclassical economics and behavioral economics?
A)Neoclassical economics is mainly theoretical.
B)Behavioral economics does not take as given that decision makers are rational.
C)Neoclassical economics assumes that decision makers are fully informed.
D)All of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 19