Mid1W06 - Name February 15, 2006 First Midterm Examination...

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Name February 15, 2006 First Midterm Examination Economics 101 Unless a question explicitly says otherwise, assume that all supply curves slope upward and all demand curves slope downward. Mark box A for True and box B for False. Each correct answer adds 2 points to your score. Each blank answer gives you 1 point. 1. - A rightward shift in the demand curve for corn will result in an increase in the equilibrium quantity of corn that is smaller than the increase in demand. 2. - Suppose there is a quota in the US on steel. The U.S. government could generate revenue without changing the price of steel or quantity of steel sold by replacing the quota with a per-unit tax. 3. - Susie consumes both sushi and enchiladas. She spends all her income of $30 a week on these two foods. If sushi and enchiladas cost $5 each, then she must be consuming 3 units of each. 4- - All other things equal, a per-unit tax of $t will raise more government revenue from an industry with inelastic supply than from an industry with elastic supply. 5. - Osborne currently spends all of his money on Britney Spears CDs and Kevin Federline CDs. The price of a Britney CD is $10 and the price of a Kevin CD is $5. If Osbornels marginal utility from his last Britney CD is 20, and his marginal utility from purchasing each additional Kevin CD is 18, then Osborne should purchase more Kevin CDs. 6. - Suppose the price of lycra (an input used in swimsuit production) decreases, and the price of airline tickets to the Caribbean (a complement to swimsuits) also decreases. This will result in a price increase in the market for swimsuits.
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Page # 2 7. - If demand is perfectly inelastic, then the deadweight loss resulting from a per unit tax is greater than the deadweight loss if the demand curve is downward sloping. 8- - Suppose the government decides to impose a binding quota on tennis shoes. Then producer revenue from tennis shoes might increase. 9. - Two straight line demand curves which have the same slope must also have the same elasticity for any given level of quantity demanded. 10. - If an economy can produce more of one good without reducing production of the other goods, then the current production point is inefficient. Multiple Choice. Mark the box corresponding to the best answer. Each correct answer adds 5 points to your score. Each blank answer gives you 1 point.
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Page # 3 11. - Assume that the Michigan economy can produce two goods: rhubarb pies and corn muffins. The production possibilities frontier of the Michigan economy is shown in the graph below. Rhubarb Pies The opportunity cost of producing one more corn muffin between points A and B is -. (a) 3/2 of a corn muffin. (b) 20 rhubarb pies. (c) 2/3 of a rhubarb pie. (d) 1/20 of a rhubarb pie. (e) 30 corn muffins.
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Page # 4 - Tricia has an income of $20, which she can only spend on red pens and blue pens. She always receives 5 units of utility from consuming an additional red pen and 4 units of utility from consuming an additional blue pen. The price of a red pen is Pr, while the price of a blue pen is Pb. Which of the following MUST be true? (Assume you can't buy a
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This note was uploaded on 08/09/2008 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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Mid1W06 - Name February 15, 2006 First Midterm Examination...

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