midterm 1 - v3 - v3 Name_ UMID_ Chad Hogan First Exam...

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v3 Name___________________________ UMID___________________________ Chad Hogan Winter 2010 First Exam Economics 101 The University of Michigan NOTES: 1. For each question, a correct answer is worth 5 points, no answer is worth 1 point, and an incorrect answer is worth 0 points. 2. Given that the exam has 30 scored questions, the maximum possible score is 150. 3. Given that each question has 5 possible answers, a wild guess will earn 1 point on average, the same number of points earned by providing no answer. Guessing only gives you a better return than leaving the question unanswered if you can eliminate at least one answer (in which case a guess will earn more than 1 point on average). 4. The use of calculators, cell phones, personal digital audio players, or any other electronic devices will not be permitted during the exam. 5. Have your UMID with you at all times during the exam. 6. In order for your scantron to be correctly graded, you must fill in the version number of your exam (see the upper left corner of this page) on the scantron. 7. When you are done with the exam, you will turn in this page (with name and UMID filled in) along with your scantron. 8. Unless a question explicitly notes otherwise, assume that all supply and marginal cost curves slope upward and that all demand and marginal value curves slope downward.
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2 Cashew butter (a substitute for peanut butter) is often consumed by people with peanut butter allergies. Conditions in the cashew butter market are characterized by the marginal valuation and marginal opportunity cost curves given in the graph below. Use the information in the graph to answer the following two questions. 1. ___ A crafty lobbyist for the peanut butter industry begins to promote legislation requiring that cashews can only be grown using natural pesticides. Since these pesticides are expensive, the marginal opportunity cost of producing cashew butter would rise by $5 per jar at every level of potential production. If this legislation were introduced, what price would the consumer expect to observe? (a) $4 (b) $5 (c) $7 (d) $9 (e) $10 2. ___ The legislation proposed in the previous question is not enacted, and the equilibrium price of cashew butter stays at $5 per jar. However, a sudden increase in the number of people with peanut allergies causes the quantity demanded at every price to increase by 25 jars. Producer surplus will (a) increase by $20 (b) decrease by $60 (c) decrease by $75 (d) increase by $80 (e) increase by $100
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3 3. ___ On a small tropical island, many men and women make their living by harvesting coconuts on the east side of the island and selling them in the villages on the west side of the island. When a tropical storm hits the island, it knocks coconuts from the trees, which lowers the cost of harvesting them. Unfortunately, it also destroys much of the wealth in the villages, and the
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This note was uploaded on 04/20/2010 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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midterm 1 - v3 - v3 Name_ UMID_ Chad Hogan First Exam...

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