Midterm1Answers.S2008

Midterm1Answers.S2008 - 1 Econ 10011 Principles of...

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1 Econ 10011 Principles of Microeconomics Midterm 1, Spring 2008 NAME: ___Answer Key ______________________________ DO NOT OPEN THIS TEST FOR ANY REASON UNTIL INSTRUCTED TO BEGIN. Instructions: 1. As soon as the instruction to begin the test is given, please check that you have 10 numbered pages. 2. You will have 120 minutes to complete this exam. No exceptions. Do not spend too much time on any one problem. 3. You may use a pen or pencil and a non-programmable, non-graphing calculator. No PDAs, cell phones, or any other electronic communication devices may be used for any reason during the exam. 4. You must show all of your work for any problems requiring calculations. Answers without supporting work will receive zero credit. 5. Be concise. None of the questions require long explanations. 6. Do not use the strategy of writing everything you know in the hope that something will be correct. Incorrect information included in an answer will be penalized. 7. It is an Honor Code violation to give or receive assistance of any form on this exam. If you are aware that someone is cheating on this exam and do not report it, then you are providing assistance to that person. Question 1 (15 minutes) ______ (20 points) Question 2 (30 minutes) ______ (40 points) Question 3 (15 minutes) ______ (15 points) Question 4 (15 minutes) ______ (20 points) Total (75 minutes) ______ (95 points)
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2 1. (15 minutes/20 points)Define each of the following concepts. Do not use formulas. You must tell me what each of the concepts means in words. a. Production Possibility Frontier – The combinations of goods an economy can produce efficiently. b. Buyer reservation value – The highest price a buyer is willing to pay for an additional unit of a good. c. Quantity demanded – The quantity of a good consumers are willing to buy at a specific price. d. Substitute goods – Two goods are substitutes if a change in the price of one good causes demand for the other good to change in the same direction. e. Market equilibrium – A price at which the quantity demanded equals the quantity supplied. f. Producer surplus – The gains from trade that accrue to sellers. g. Deadweight loss – The lost gains from trade associated with a market inefficiency. h. Excise tax – A product tax that sellers have the legal responsibility to pay. i. Pareto efficiency – An allocation is Pareto efficient if there exists no other allocation that makes some better off and no one worse off. j. Revenue test – A test that relates the change in revenue from a change in price to the product’s price elasticity of demand. If demand is elastic, revenue is decreasing in price. If demand is inelastic, revenue is increasing in price.
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3 2. (30 minutes/40 points) Short answer questions. a. (5 points) State the First Welfare Theorem.
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Midterm1Answers.S2008 - 1 Econ 10011 Principles of...

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