Econ 101 UCLA Winter 2007
Name: ___________________________________Version A
Midterm II, Wednesday February 28
PRINT CLEARLY
 This exam consists of 25 multiple choice questions (50 points) and 5 short answer/graphical questions (50 points)
 Clearly mark your answers to the multiple choice questions on the form provided
and
on this exam.
 Clearly write answers to the five short answer/graphical questions on this exam.
 Students may use an ordinary calculator (but nothing that can access the internet).
Part I.
25 Multiple Choice – mark the best answer on your scantron form
1.
When a profitmaximizing monopolist sells output in two distinct markets, which of the following is true?
a)
Price will be lower in the market for which there are fewer substitute goods.
b)
Price will be higher in the market in which demand is unitelastic.
c)
Price will be lower in the more elastic market.
d)
Price will be equal in each market, as long as there is a constant marginal cost.
2) The deadweight loss of from a single price monopolist is the result of
a) the cost of a monopolist creating excess capacity to deter entry of potential competitors.
b) the lower quality of a monopolists product compared to with competition
c) the inefficiently low quantity supplied to the market
d) the inefficiently high quantity supplied to the market
3) The Nicholson text considers a firm with total cost: TC = g(q) + z with firm demand q
d
= q(p,z) where z represents the
dollar amount spent on advertising and presents the formula:
p
q
z
q
e
e
pq
z
,
,

=
Which of the following statements is true?
a) The formula above only holds if the elasticity of demand is in the range:  ∞ < e
q,p
< 1
b) If elasticity of demand is greater, firms will spend more on adverting
c) If the elasticity of demand with respect to advertising spending is smaller, the firm will spend more on advertising.
d) As total revenue decreases, the dollar amount spent on advertising will increase.
4) The Nicholson text mentions the Herfindahl Index of market concentration,
∑
∑
=
=
2
2
pq
pq
H
i
i
α
.
What is the
value of this index for an industry with three firms, one with half of market sales and the other two with one quarter of
market sales each?
a) .375
b) .25
c) .50
d) 1.0
5) In the model of monopolistic competition:
a) each firm’s demand curve shifts leftward (and/or downward) if other firms which make similar products lower their
prices.
b) each firm makes economic profit in the long run
c) each firm faces a horizontal demand curve
d) the product is assumed to be homogenous, or nondifferentiated.
6. In a zero sum game
a. what one player wins, the other loses.
b. the sum of each player’s winnings if the game is played many times must be zero.
c. the game is fair—each person has an equal chance of winning.
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 Winter '08
 Serra
 Game Theory, Supply And Demand, marginal revenue product, a. b. c., real wage levels

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