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

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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.
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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