S07 1st MIDTERM EXAM 3(2)

# S07 1st MIDTERM EXAM 3(2) - FIRST MIDTERM EXAMINATION...

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FIRST MIDTERM EXAMINATION Spring 2007 (2 hours, 100 points) Circle the name of your instructor: NAME: __________________________________________________________ PLEDGE:_________________________________________________________ __________________________________________________________________ __________________________________________________________________ PART I: MULTIPLE CHOICE (3 pts each; 15 points in total) 1. Which of the following will lead to a shift in the demand for Hummer SUVs? I. A decrease in oil prices II. USA’s invasion of Iran III. An increase in the price of Hummers IV. An increase in the price of leather used to cover Hummers’ seats. (a) I and III (b) II and IV (c) I and IV (d) I and II (e) III only 2. If the supply of a good is perfectly elastic, then the burden of a one-dollar specific tax imposed on sellers 1

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3. On the right is given Bart’s monthly demand for candy when his allowance is \$50 a month. Assume that Bart’s income elasticity of demand for candy is unitary along his demand curve. Which of the following diagrams shows the shift in his demand curve if his allowance is raised to \$55 a month? 4. If the (inverse) supply of good X is given by the equation P = 10 + 2Q, then price has to increase by \$___ for the quantity supplied to increase by 2 units. 5. Gisele has been going to the supermarket every week in the last year. The price of cheesecakes has been increasing over the year, and she kept buying one cheesecake every time she did her shopping. The price elasticity of Gisele’s weekly demand for cheesecakes is 2
PART II: TRUE OR FALSE, EXPLAIN (4 points each ; 16 points in total) Indicate whether the following statements are true or false, by circling the appropriate response. You will not receive full credit without an explanation, even though your answer is correct. 1. [TRUE / FALSE] The following graph shows the foreign and domestic supply curves and the domestic demand curve for oil.

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