test1_june14 - Department of Economics University of...

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Page 1 of 15 Department of Economics Prof. Gustavo Indart University of Toronto June 14, 2007 ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 1 LAST NAME FIRST NAME STUDENT NUMBER SECTION (“Morning” or “Evening”): INSTRUCTIONS : 1. The total time for this test is 1 hour and 50 minutes. 2. This exam consists of three parts. 4. Aids allowed: a simple calculator. 5. Write with pen instead of pencil. DO NOT WRITE IN THIS SPACE Part I 1. /5 2. /5 3. /5 4. /5 5. /5 6. /5 Part II 1. /6 2. /8 3. /16 Part III /20 TOTAL /80
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Page 2 of 15 PART I (30 marks) Instructions : Indicate your position regarding the following statements and explain your answers in the space provided (if space is not sufficient, continue on the back of the previous page). Each question is worth 5 (five) marks. 1. Mohammed has waited in line to buy tickets for a long time, but is not sure if he wants to wait much longer. Statement: Jacob, Mohammed’s friend, advises Mohammed that since leaving will result in his wasting the time already spent (“you have already waited for so long”), he should not leave. Position: Do you agree with Jacob’s advice? Indicate, with reasons, whether you agree or disagree with Jacob’s view.
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Page 3 of 15 2. When the price of apples is $0.75 a piece, Yvonne doesn’t buy any. However, when the price of apples drops to $0.50 a piece she eats one apple a day, and when it drops to $0.40 a piece she eats two apples a day. Statement: Natalia, an ECO100 student, concludes that Yvonne’s consumer surplus is $0.45 when the price of apples is $0.40 a piece. Position: Do you agree with Natalia’s conclusion? Indicate, with reasons, whether you agree or disagree with Natalia’s view. [Note: Assume that Yvonne does not partially eat an apple, i.e., she only eats two whole apples, one whole apple, or none at all.]
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Page 4 of 15 3. Zijian spends all his disposable income on books [x-axis product] and CDs [y-axis product]. Zijian has negative income elasticity for books and his substitution effect for books is stronger than her income effect. Statement: Evangelos, Zijian’s friend, believes that when the price of books rises Zijian will maximize his level of consumer satisfaction by purchasing more books and therefore Zijian’s demand curve for books has a positive slope. Position: Do you agree with Evangelos’s view? Use a proper diagram to analyze this situation and indicate, with reasons, whether you agree or disagree with Evangelos.
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Page 5 of 15 4. Oranges are produced with a fixed factor (land) and a variable factor (labour). Statement: Ronaldo – a former ECO100 student – states with authority that when the average product of labour is increasing, the marginal product of labour must also be increasing in the orange industry. Position:
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test1_june14 - Department of Economics University of...

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