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Unformatted text preview: Ecn 100 - Intermediate Microeconomic Theory University of California - Davis September 9, 2009 Instructor: John Parman Final Exam You have until 1:50pm to complete this exam. Be certain to put your name, id number and section on both the exam and your scantron sheet and fill in test form A on the scantron. Answer all multiple choice questions on your scantron sheet. Choose the single best answer for each question; if you fill in multiple answers for a question you will be marked wrong. Answer the long answer questions directly on the exam. You must show your work for full credit. Answers may be left as fractions. Please place a box around final answers when appropriate. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (60 points) 1. A firm with smooth, convex isoquants and a diminishing technical rate of substitution is currently minimizing costs by using 10 units of capital and 10 units of labor. If the rental rate of capital increases and the firm wants to keep producing the same amount of output, it will: (a) Switch to using more than 10 units of labor and more than 10 units of capital. (b) Switch to using less than 10 units of labor and more than 10 units of capital. (c) Switch to using more than 10 units of labor and less than 10 units of capital. (d) Switch to using less than 10 units of labor and less than 10 units of capital. 2. Bundles on the same indifference curve: (a) Will give a consumer the same level of utility but may cost different amounts. (b) Will cost a consumer the same amount but may give the consumer different levels of utility. (c) Will be preferred to bundles lying above the indifference curve if preferences are mono- tonic. (d) None of the above. 3. If average variable costs are rising as output increases, which of the following must be true? (a) Average costs are rising as output increases. (b) Marginal costs are above average costs. (c) Marginal costs are above average variable costs. (d) Average costs are falling as output increases. 4. The demand curve for an ordinary good: (a) Will be upward sloping. (b) Will be downward sloping. (c) Will be downward sloping only if the good is normal. (d) Will be downward sloping only if the good is inferior. 2 Final Exam 5. Suppose the government forces a monopoly to produce at the efficient quantity but lets them set whatever price they want. Which of the following is definitely true? (a) The monopoly will earn zero profits. (b) The monopoly will still earn positive profits. (c) The monopoly will earn negative profits. (d) Total surplus will be maximized. 6. New health benefits are discovered for cranberry juice, shifting the demand curve for cranberry juice to the right. If the market for cranberry juice is perfectly competitive, then in the short run and in the long run . (Assume all firms have identical, upward sloping marginal cost curves.) (a) The price of cranberry juice will rise; the number of firms will increase and price will return to its original level.return to its original level....
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