Practice midterm2

Practice midterm2 - fn, II 101A Midterm Economics 27...

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' fn,o*' Economics 101A - Midterm II There are 3 parts. Each should take about 27 minutes' part I: True/False Uncertain Answer all 3 questions, using diagrams and equations to prove your answer, 1. The Social security system is financed by a proportional earnings tax: for an individual with hourly wage w who woiks H hours (per year), iotal taxes paid are twH (where t is the tax rate)' A 10 percent increase in the tax rate will lead to a less than 10 percent in total tax revenues' A 1'n Cv {c'1 f- 2. A monopolist sells to two markets: in market 1 there is a constant elasticity of demand et<- 1; in market 2 thereis a constant elasticity of demand ez< -L The monopolist charges a higher price in the market with the "more elastic" demand (i.e., the one with a more negative value of e)' 3. Consumers have preferences ovet2 goods, x and y' of the form U(x,Y):x+log(Y). Suppose irritidfy p-1;i und each consumer
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