test1_solns - Department of Economics University of Toronto...

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Page 1 of 9 Department of Economics Prof. Gustavo Indart University of Toronto June 5, 2009 ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 1 LAST NAME FIRST NAME STUDENT NUMBER Check your section of the course : L0201 (T/R from 2:00 to 4:00 PM) L5101 (T/R from 6:00 to 8:00 PM) INSTRUCTIONS : 1. The total time for this test is 1 hour and 50 minutes. 2. Aids allowed: a simple calculator. 3. Write with pen instead of pencil. DO NOT WRITE IN THIS SPACE Part I /40 Part II 1. /10 2. /10 3. /9 4. /9 5. /12 6. /10 TOTAL /100 SOLUTIONS
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Page 2 of 9 PART I (40 marks) Instructions : Multiple choice questions are to be answered using a black pencil or a black or blue ball- point pen on the separate SCANTRON sheet being supplied. Be sure to fill in your name and student number on the SCANTRON sheet! Write you class section on the SCANTRON sheet — either L0201 or L5101 — where it says “DO NOT WRITE IN THIS SPACE.” Each question is worth 2.5 marks. No deductions will be made for incorrect answers. Write your answers to the multiple choice questions ALSO in the table below. You may use this question booklet for rough work, and then transfer your answers to each multiple choice question to the table AND onto the separate SCANTRON sheet. Your answers must be on the SCANTRON sheet. In case of a disagreement, the answer to be marked is the one on the SCANTRON sheet. 1 2 3 4 5 6 7 8 A E D B B B E E C 9 10 11 12 13 14 15 16 B A B A A D D E 1 2 3 4 5 6 7 8 B E E D D E A E E 9 10 11 12 13 14 15 16 C B C C B C D E 1 2 3 4 5 6 7 8 C E C C C A D E D 9 10 11 12 13 14 15 16 D C A D C A B A
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Page 3 of 9 PART II (60 marks) Instructions : Answer all questions in the space provided. Question 1 (10 marks) Richard’s weekly demand for playing tennis is given by the following table: Price per hour (for each player) of court time 5 4 3 2 1 0 Hours of tennis demanded per week 0 1 2 3 4 5 a) The only tennis courts available are at The Annex Tennis Club where each player is charged $2 per hour (independently of whether the player uses the court for the whole hour or not). How much tennis does Richard play per week? (1 mark) What is, in money terms, his weekly consumer surplus from playing tennis? Briefly explain . (3 marks) i) If P = 2, then Q = 3 ii) Consumer surplus is the difference between the maximum price the consumer is willing to pay for each hour of court time and the price he is actually paying. Richard’s weekly consumer surplus for the first hour is $4 – $2 = $2, for the second hour is $3 – $2 = $1, and for the third hour is $2 – $2 = $0. Therefore, his total weekly consumer surplus is $3. b) The Annex Tennis Club is considering a pricing scheme whereby individuals still pay $2 per hour of court time, but in addition they must also pay a mandatory membership fee. What is the largest fee The Annex Tennis Club could charge for a weekly membership without losing Richard as a customer? Briefly explain . (3 marks) The membership fee will reduce Richard’s consumer surplus. Therefore, the maximum
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This note was uploaded on 06/09/2010 for the course ECO ECO100 taught by Professor Inheart during the Spring '09 term at University of Toronto.

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test1_solns - Department of Economics University of Toronto...

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