MT 1 - Mortimer ECON 100A: ECONOMIC ANALYSIS - MICRO...

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Mortimer 1 ECON 100A: ECONOMIC ANALYSIS - MICRO Department of Economics University of California, Berkeley Fall 2009 Midterm Exam 1 10/08/09 GENERAL INSTRUCTIONS: Write your name, student ID, and your official GSI’s name below. Write down all your answers in the space provided on the exam and make sure to label your graphs for full credit. No calculators are allowed. You have 80 minutes (11:10-12:30) to complete the exam. Make sure to allocate your time efficiently. There are two parts: Part I (five T/F questions) and Part II (one multipart question). I suggest you spend approximately 50 minutes on Part I and 30 minutes on II. There is a total of 100 points. Name: Student ID: Official GSI:
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Mortimer 2 PART I: TRUE OR FALSE AND EXPLAIN (a total of 60 pts) Choose 5 of the following 6 questions. You need to mark clearly which five you are choosing. For each, decide whether it is true or false, and explain the reasoning behind your answer in a few sentences. You can use a diagram to clarify your points. No credit will be given if you omit an explanation or your explanation is wrong. [60 pts] 1. Suppose that Jack’s demand curve for iTune music is given by: Qd = 40 2P, and that the market price for an iTune music is $1. Then, Jack’s consumer surplus from iTune music is $722. [12 pts] FALSE Jack’s consumer surplus is $361. 2P = 40- Qd → P=20 – ½ Qd If P = 1, Qd = 40-2 = 38 CS = 38 x 19 x ½ =361 2. The denominator in the Paasche Index overstates the income required to achieve the level of utility that is obtained from the current year bundle at the base year prices. [12 pts] TRUE The denominator of the Paasche Index is the income required to purchase the current year bundle (Y) at the base year prices (I’’) instead of the income required to purchase a bundle (X) that provides the current level of utility (I’)
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MT 1 - Mortimer ECON 100A: ECONOMIC ANALYSIS - MICRO...

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