Exam2_Fall2007_Solution

Exam2_Fall2007_Solution - Page 1 of 9 Massachusetts...

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Page 1 of 9 Massachusetts Institute of Technology Department of Economics 14.01 Principles of Microeconomics Exam 2 Tuesday, November 6th, 2007 Last Name (Please print): ______________ First Name: __________________ MIT ID Number: __________________ Instructions. Please read carefully. The exam has a total of 100 points. Answers should be as concise as possible. This is a closed book exam. You are not allowed to use notes, equation sheets, books or any other aids. You are not allowed to use calculators. You must write your answers in the space provided between questions. DO NOT attach additional sheets of paper. This exam consists of (18) sheets (13 pages + 5 blank pages for scratch work). 0. Circle Your Section/Recitation (1 point): Please circle the section or recitation which you are attending below. The marked exam will be returned to you, in the section or recitation that you indicate. You will loose 1 point if you leave it unselected. S01: MWF9 (Peter Schnabl) R01: F10 (Rongzhu Ke) S02: MWF10 (Chia-Hui Chen) R02: F11 (Rongzhu Ke) S03: MWF11 (Chia-Hui Chen) R03: F2 (Rongzhu Ke) S04: MWF1 (Monica Martinez-Bravo) R04: F12 (Marco Migueis) R05: F1 (Marco Migueis) R06: F2 (Marco Migueis) DO NOT WRITE IN THE AREA BELOW: Question 1 __/20 Question 2 __/15 Question 3 __/10 Question 4 __/24 Question 5 __/15 Question 6 __/15 Question 0 _/1 Total __/100
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Page 2 of 9 1. True/False Questions ( TOTAL: 20 points ) : In this section, write whether each statement is True or False. Please fully explain your answer, using a diagram if appropriate. No credit will be given for an answer without an explanation. (a) ( 5 points ) As long as the marginal cost of production is greater than the average variable cost, then the average variable cost is increasing. True. By the definition of the average variable cost, we can find that as long as , . (b) ( 5 points ) In a perfectly competitive market with constant long run marginal cost, the consumer will bear all the taxation burden. True. This is because the supply curve is a flat line, no matter what the demand is, supply is inelastic. (c) ( 5 points ) In a perfectly competitive market, firms take the market price as a given, which implies that the market demand is infinitely elastic. False. In a competitive market, firms are assumed to be very small, therefore they are
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This note was uploaded on 04/20/2010 for the course ECON 14.01 taught by Professor Pindyck during the Spring '08 term at MIT.

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Exam2_Fall2007_Solution - Page 1 of 9 Massachusetts...

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