{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

222_Exam_1_Solutions

This preview shows pages 1–3. Sign up to view the full content.

S S’ P D D’ Q ECON 222 Spring 2009 Professor Boyle Midterm Exam #1 Please read each question carefully. Keep in mind the point values for each problem and allocate your time accordingly. In order to receive full credit, you must show work for all your answers. You have 50 minutes to complete this test. Good luck! 1. (8 points) A study in Peru shows that toddlers who were breast-fed longer were more likely to be underweight or malnourished. Some medical researchers claim that this shows that longer breast-feeding leads to poor health outcomes. What is the problem with their conclusion? What is an alternative explanation for the study’s findings? These medical researchers are mistakenly assuming that correlation must imply causation. It is possible that mothers in the study who breast-fed longer were also poorer and continued breast feeding because of an inability to afford nutritious food. Poverty, and not breast feeding, may therefore be the cause of the malnourishment observed in toddlers in this study. 2. Suppose that the demand for outpatient visits in a particular community is described by and the equilibrium price is \$40. a. (8 points) What is the price elasticity of demand at the equilibrium point? 1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
b. (8 points) More physicians move into the area, causing an increase in supply. Based on your answer in part (a), by how much (in percentage terms) will Q D change if the supply shock causes a 50% drop in P? Note that a 1% drop in P causes a .25% increase in Q D . Therefore, a 50% drop in P causes a 50*.25=12.5% increase in Q D . c. (8 points) How does the supplier-induced demand hypothesis predict that physicians will respond to the revenues lost from the supply shock in part (b)? Sketch a graph and explain very briefly (1 sentence).
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern