midterm_2sols_final

Midterm_2sols_final - 1 Massachusetts Institute of Technology Department of Economics 14.01 Principles of Microeconomics Midterm Exam#2 Tuesday

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Massachusetts Institute of Technology Department of Economics 14.01 Principles of Microeconomics Midterm Exam #2 Tuesday April 10th, 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 21 sheets (16 pages + 4 blank pages for scratch work). 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. R01: F10 (Tim Watts) R02: F11 (Tim Watts) R03: F12 (Jessica Cohen) R04: F1 (Tim Watts) R05: F1 (Jessica Cohen) R06: F2 (Jessica Cohen) R07: F1 (Hongliang Zhang) S01: MWF9 (Maisy Wong) S02: MWF10 (Maisy Wong) S03: MWF10 (Daniel Gottlieb) S05: MWF11 (Daniel Gottlieb) S06: MWF12 (Rongzhu Ke) S07: MWF2 (Chia-Hui Chen) S09: MWF3 (Chia-Hui Chen) DO NOT WRITE IN THE AREA BELOW: Question 1 ___/20 Question 2 ___/20 Question 3 ___ /30 Question 4 ___ /30 Total ___ /100
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 1. True/False: ( TOTAL: 20 points ) Explain whether each of the following statements is True or False, and provide an explanation. (Note: You will not get points for a correct answer without an explanation.) a. ( 5 points ) To reduce accidents related to the over-consumption of alcohol, the government decided to tax alcohol purchases. Everyone buying alcohol will have to pay a tax of $1 per liter of alcohol bought. Alcohol producers should not worry at all because consumers are paying the tax. False. In general the tax burden will be shared by consumers and producers. The proportion of the burden born by producers depends on the price elasticities of demand and supply. Only in the special cases of perfectly inelastic demand or perfectly elastic supply will the producers be unaffected by the tax. Otherwise, the tax will decrease producer surplus.
Background image of page 2
3 b. ( 5 points ) Suppose we have a pure exchange economy with 2 traders (Mary and Jane) and 2 goods (Pepsi and Coke). The economy has a total of 5 cans of Pepsi and 10 cans of Coke. Suppose Mary starts at an initial endowment with 5 cans of Pepsi and 10 cans of Coke while Jane starts with no Pepsi and no Coke. This initial allocation is not Pareto optimal because Jane has nothing. False.
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

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.

Page1 / 16

Midterm_2sols_final - 1 Massachusetts Institute of Technology Department of Economics 14.01 Principles of Microeconomics Midterm Exam#2 Tuesday

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online