Micro Fall 2016 sample answers - Microeconomics(Fall 2016...

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Microeconomics (Fall 2016) Sample Midterm Answer Key Short‐answer questions 1. With a subsidy, the price received by the seller exceeds the price paid by the buyer, while quantity increases. 2. The marginal product of labor refers to the change in output that results from a change in labor input, while the average product of labor refers to output per unit of labor. 3. ED Q P P P Q = 100* 1 100 = 1. Price elasticity of demand is unitary elastic. 4. False. High school education is rival in consumption. Because other children get less attention as class sizes increase, there is a positive marginal cost of providing education to one more child. Likewise, charging tuition can exclude some children from enjoying education. High school public education is provided by local government because it generates positive externalities, not because it is a public good. 5. The number of apples someone is willing to give up for an additional banana.
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