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Econ101 Exam 2 Version 1 Economics 101 Professor Serrano-Pardial Midterm 2 November 14, 2007 Use the following graph to answer the next two questions. P Q S D P*=20 Q* Pd=28 S’ Unit Tax = 14 1. In the market depicted by the graph, an excise tax of \$14 has been levied on sellers. Before the tax, the equilibrium price was P*, and the after-tax price paid by consumers is Pd = 28. The tax effectively paid by sellers per unit is a) \$8 b) \$6 c) \$10 d) \$14 e) There is not enough information to determine it. 2. Suppose the tax decreases the quantity traded by 10 units, what is the dead weight loss from the tax? a) 140 b) 120 c) 84 d) 70 e) There is not enough information to determine it. 3. The rate at which a consumer must give up good x 1 to get one more x 2 ( or quantity of x 1 that he must give up in order to get one more unit of x 2 ) is equal to a) P 2 / P 1 . b) P 1 / P 2 . c) MU 2 / MU 1 . 1

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Econ101 Exam 2 Version 1 d) MU 1 / MU 2 . e) None of the above The following graph shows the market of cars. Use the graph to answer the following two questions. P Q S D P* 55 B D E C A F G 20 40 70 100 World Price World Price + Tariff 4. What is the government revenue from tariff? a) B + C b) B + C + D + E c) C+ D d) F + G e) C 5. Suppose the government wants to control trade with an import quota instead. What is the import quota equivalent to the tariff? a) 35 b) 20 c) 15 d) 80 e) 30 6. If John chooses a combination of books and CDs that is on his budget line. At this combination the marginal rate of substitution of books in place of CDs, which means MU(book)/MU(CD), is 0.5, the price of a book is \$9, and the price of CD is \$3, then John: a) is maximizing total utility. b) should consume more books and fewer CDs to maximize total utility. c) should consume fewer books and more CDs to maximize total utility. 2
Econ101 Exam 2 Version 1 d) may or may not be maximizing total utility. 3 7. false? re the tax. c) hat beer producers receive remains the same if the demand for beer is d) r-tax price that beer producers receive remains the same if the supply of beer is perfectly e) he equilibrium quantity of beer bought is not increased. 8. e price of coffee increases to \$4. What happens to the labor demand during the ed of labor decreases but the demand for labor curve does not shift. e) None of the above. 9. e increase, then ffect. n effect. utility. e) eisure is an inferior good. e) experiences books and CDs as perfect complements. An excise tax is levied on beer producers. Which of the following statements is

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## This note was uploaded on 04/14/2009 for the course ECON 101 taught by Professor Hansen during the Fall '07 term at Wisconsin.

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