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Ecn 100  Intermediate Microeconomic Theory
University of California  Davis
August 26, 2009
Instructor: John Parman
Midterm 2
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. If the market demand curve is downward sloping and the market supply curve is upward
sloping, a quantity tax placed on producers will:
(a) Increase the price paid by consumers by the amount of the tax.
(b) Increase the price received by producers by the amount of the tax.
(c) Increase the price paid by consumers by an amount less than the tax.
(d) Increase the price received by producers by an amount less than the tax.
2. Suppose a ﬁrm produces chairs using an increasing returns to scale technology for which wood
is the only input. Suppose it takes 10 units of wood to produce 10 chairs. It will take:
(a) 40 units of wood to produce 40 chairs.
(b) More than 40 units of wood to produce 40 chairs.
(c) Fewer than 40 units of wood to produce 40 chairs.
(d) None of the above.
3. Suppose that the demand curve for toys is linear and downward sloping. At the current price,
the price elasticity of demand for toys is

2. If toystores raise their prices by a small amount:
(a) The number of toys sold will increase and revenues will increase.
(b) The number of toys sold will decrease and revenues will increase.
(c) The number of toys sold will decrease and revenues will decrease.
(d) The number of toys sold will increase and revenues will decrease.
4. When the price of apples increases, demand for bananas decreases. When the price of apples
goes up, which of the following statements is deﬁnitely true?
(a) The substitution and income eﬀects for bananas have opposite signs.
(b) The substitution and income eﬀects for bananas have the same signs.
(c) The magnitude of the substitution eﬀect is larger than the magnitude of the income
eﬀect for bananas.
(d) The magnitudes of the sbustitution and income eﬀects for bananas are equal.
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Midterm 2
5. Milk is the only input used to make butter and buttermaking technology exhibits constant
returns to scale. If 30 cups of milk produce 2 pounds of butter, how many pounds of butter
will 45 cups of milk make?
(a) 5 pounds.
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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
 PARMAN

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