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Unformatted text preview: Ecn 100 - Intermediate Microeconomic Theory University of California - Davis November 13, 2008 Professor John Parman Midterm 2 You have until 6pm to complete the exam, be certain to use your time wisely. For multiple choice questions, mark your answer on your scantron sheet. Choose only one answer for each multiple choice question; if more than one letter is chosen for a question it will be marked wrong. Write your answers for the short answer section directly on the exam. For the short answer questions, show your work clearly, place a box around final answers and be certain to label any graphs you draw. Final answers may be left as fractions. Non-graphing calculators may be used but they should not be necessary. Remember to put your name and ID number on both the exam (in the spaces provided below) and on the scantron sheet. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (60 points) 1. For a firm’s production technology, the marginal product of labor is increasing as the amount of labor used increases. When graphed with labor on the horizontal axis and output on the vertical axis, the production function will: (a) Have a positive slope. (b) Have a slope that increases as labor increases. (c) Have a slope that decreases as labor increases. (d) (a) and (b). (e) (a) and (c). 2. Suppose that cars and burgers are the only two goods we consume, we spend all of our money on cars and burgers and when income goes up our consumption of both cars and burgers goes up. If cars are a luxury good, then the income elasticity of demand for burgers must be: (a) Between- 1 and 0. (b) Less than- 1. (c) Between 0 and 1. (d) Greater than 1. 3. If the price elasticity of demand for newspapers is given by =- p 10- p where p is the price of newspapers, what price will maximize revenue? (a) 0. (b) 5. (c) 10. (d) 15. 2 Midterm 2 4. If a firm uses a constant returns to scale technology and has positive fixed costs, then profits will . (You can assume the prices of output and inputs remain constant.) (a) Increase when the levels of all inputs are doubled. (b) Decrease when the levels of all inputs are doubled. (c) Remain the same when the levels of all inputs are doubled. (d) Whether they increase or decrease will depend on the wage and rental rate of capital. 5. Suppose that the government proposes two taxes. One is a quantity tax on apples and the other is a value tax on apples. Analysts determine that both taxes will raise the same amount of tax revenue. What can we say for certain about the consumer surplus from apples?...
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This note was uploaded on 10/22/2010 for the course ECN 100 taught by Professor Parman during the Fall '08 term at UC Davis.
- Fall '08