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exam1 - Econ10-02 First Midterm Exam July 8 2002 Chi-Hung...

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Information for questions 1-3: John uses his cell phone to call his girlfriend from time to time. The following table is the total utility and marginal utility of John talking on the phone with his girlfriend. (Complete the table with missing values before answering the following questions) Minutes on the phone 0 1 2 3 4 5 6 7 8 Total utility 0 5 26 30 32 Marginal utility --- 7 8 3 -6 1. John starts to experience diminishing marginal utility when he talks the _____ minutes a) 2nd b) 4th c) 5th d) 7th e) 8th 2. If the cell phone company charges him \$3.50 per minute. John is going to talk on the phone for _____ minutes and his consumer surplus is _____. a) 5, 12.5 b) 6, 11 c) 4, 8.5 d) 7, 14 e) 3, 7 3. The cell phone company is now offering John a new plan, which allows him to talk for unlimited minutes for \$19.95. Is he going to switch to this new plan? What is the consumer surplus if he switches to this new plan? (If he decides not to switch the plan, he can still “enjoy” talking on the cell phone for 3.5 dollars per minute.) 1 Econ10-02 First Midterm Exam July 8, 2002 Chi-Hung Liao

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Information for questions 4-9: the following figure shows the market demand and supply for green peas. 4. If the market is competitive, the equilibrium price per ton of peas will be 5. If the government thinks the market equilibrium price is too high. One way to intervene the market is by setting a price _____ and there would be excess _____ in the market 6. Corns and peas are substitutes on the demand side only. Corns are sold on a competitive unregulated market where normal assumption about supply and demand holds. If the price of corns were to decrease then we would expect the demand of peas to _____ and supply of peas to _____ a) fall, fall b) fall, unchanged c) rise, rise d) rise, fall e) uncertain, rise 2 Econ10-02 First Midterm Exam July 8, 2002 Chi-Hung Liao
7. Given that corns and peas are substitutes, the cross elasticity of the demand for corns with respect to peas must be 8. At a price of \$30, the point price elasticity of demand for green peas is 9. If the price changes from \$45 to \$35, the arc elasticity of demand would be Information for questions 10-14: The following table is showing the number of Chinese factory workers and the number of Walmart T-shirt that can be produced. Factory workers (per week) 1 2 3 4 5 6 7 8 Total T- shirts produced (per week) 600 1300 2200 3000 3700 4100 4300 4300 Average physical product Marginal physical product

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exam1 - Econ10-02 First Midterm Exam July 8 2002 Chi-Hung...

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