Answers To Last Year's 1st Midterm, 2007

Answers To Last Year's 1st Midterm, 2007 - Version A...

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ANSWERS TO FIRST MIDTERM EXAM, ECONOMICS 5, FALL 2006—D. RICHARDS NAME: _________________________________________________ DATE ______________________ Questions 1-4 (7 points each): Use the diagram below describing the 2004 market for personal digital assistants (PDA’s) such as those made by Palm, Hewlett-Packard, Casio, Handspring and Sony to answer Question 1-4. The quantity axis is units per year. $1000 Supply 0 1,000,000 1. At the current equilibrium price, the demand for PDA’s is: a. inelastic ANSWER b. elastic c. unitary elastic d. undefined 2. Use of a PDA requires software. While some software comes pre-installed on the PDA, customers can buy additional software, e.g., Adobe Photo Shop, to run on the PDA for a price. If the supply of such software increases such that the price of add-on software falls then the PDA market should, in equilibrium, experience: a. a decline in both price and quantity ANSWER b. a rise in both price and quantity c. a decline in price but a rise in quantity d. a rise in price but a decline in quantity 3. Starting from the current equilibrium, a unit $10 per unit tax on PDA’s will: a. lower total consumer expenditures on PDA’s ANSWER b. raise the price consumers pay for PDA’s to $180 c. lower the price producers receive for PDA’s to $160 d. raise total consumer expenditures on PDA’s 4.
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Answers To Last Year's 1st Midterm, 2007 - Version A...

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