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test2_dec02

# test2_dec02 - Department of Economics University of Toronto...

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Page 1 of 9 Department of Economics Prof. Gustavo Indart University of Toronto December 2, 2005 ECO 100Y – L0101 INTRODUCTION TO ECONOMICS Midterm Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS : 1. The total time for this test is 55 minutes. 2. Answer all questions in the space provided (if space is not sufficient, continue on the back of the previous page). 3. Aids allowed: a simple , non-programmable calculator. 4. Use pen instead of pencil . DO NOT WRITE IN THIS SPACE 1. /10 5. /13 2. /10 6. /12 3. /16 7. /9 4. /12 8. /18 TOTAL /100

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Page 2 of 9 Question 1 (10 marks) The diagram below illustrates a typical taxi driver’s individual supply curve (assume that each taxi ride is of the same distance). a) Suppose that the city sets the price of taxi rides at \$6 per ride. What is this typical taxi driver’s producer surplus? Explain . (5 marks) b) Suppose now that the city keeps the price of a taxi ride set at \$6, but decides to charge taxi drivers a “licensing fee.” What is the maximum licensing fee the city could charge to the typical taxi driver? Explain . (5 marks) Price of taxi ride Quantity of taxi rides \$8 \$4 40 80 S
Page 3 of 9 Question 2 (10 marks) For each of the following situations, draw a diagram containing two indifference curves that will represent the consumer’s preferences, and explain your answer. a) For Isabel, cars and tires are perfect complements, but in a ratio of 1:4; that is, for each car, Isabella wants exactly four tires. Be sure to label and number the axes of your diagram. Place tires on the horizontal axis. (5 marks)

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test2_dec02 - Department of Economics University of Toronto...

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