Economics 1 - Fall 2004 - Train - Midterm 1 Answers

Economics 1 - Fall 2004 - Train - Midterm 1 Answers -...

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1 Department of Economics Professor Kenneth Train University of California, Berkeley Spring Semester 2004 ECONOMICS 1 FIRST MIDTERM EXAMINATION In class, March 1 INSTRUCTIONS 1. Please fill in the information below: Your Name: _____________________________________________________ Your SID #: _____________________________________________________ GSI’s Name: _____________________________________________________ Section Number (Days/Time): _____________________________________________ 2. The exam ends at 10:55 a.m. 3. If you finish early, please remain in your seat so that you do not disturb others. 4. When time is called, stop writing and pass your exam to the aisle. Please stay in your seat until all of the exams are collected. 5. There are a total of 100 points, 5 questions, and 6 pages (including this cover sheet). Points for each question are in parentheses. 6. Answer the questions in the space provided. (NO BLUE BOOKS). If you need extra room to answer questions, use the backs of the page. 7. Calculators are not permitted. Do not turn the page until you are told to begin the exam. SUGGESTED ANSWERS
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2 The graph above depicts the supply and demand for Cigarettes. The government is thinking about placing an extra $1 excise tax on cigarettes as a way of collecting money from cigarette producers to pay for rising health care costs. Who will actually pay MOST of this new tax – producers or smokers? Show your answer on the graph. We can think of this new tax as shifting up the supply curve by $1. (As we can see from the graph, price rises by less than $1) The area labeled A shows consumer tax burden. The area labeled B shows the producer tax burden.
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Economics 1 - Fall 2004 - Train - Midterm 1 Answers -...

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