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sample_final_micro_2008 - MICROECONOMICS PROFESSOR VASILIKI...

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M ICROECONOMICS P ROFESSOR V ASILIKI S KRETA S AMPLE M IDTERM Name + ID :__________________________________________ TAs Name: ___________________________________________ Instructions: The use of class notes, textbooks is not permitted. Please write legibly; you will receive credit for the parts of your work that are legible. Read the questions carefully and provide concise but justified an- swers. SHOW ALL YOUR WORK. Good Luck! PPart I:Short Answer Questions 1. MRS ( x for y ) = MRS is the slope of____________________________ 2. RTS ( L for K ) = RTS is the slope of_____________________________ 3. RPT ( x for y ) = RPT is the slope of_____________________________ 4. True or false, motivate. When nominal wage increase, workers are always better of. 5. True or false, motivate. The marginal rate of substitution is °in general °not constant along the indi/erence curve. 1 Microeconomics Spring 2008 Sample Final Exam April 22, 2008 1. Short Questions. 2. Long Questions. 1
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Short-answer questions for sample final (Microeconomics) 1. Using a diagram, show the implications for a consumer’s preferences of an indifference curve being convex. 2. Using indifference curve analysis, explain how we can determine whether two goods are complementary goods or substitute goods. 3. True, false, motivate. Price elasticity of demand is constant at all points along a linear demand curve. 4. Using a diagram, explain the relationship between average product and marginal product. 5. True, false, motivate. Labor productivity can increase if there are improvements in technology, even though any given production process exhibits diminishing returns to labor. 6. A firm faces the following total cost function: 80 4 ) ( 2 + = i i Q Q Q TC , where i Q is its output. Calculate average variable cost, fixed cost and marginal cost. 7. Using algebra to motivate your answer, explain the relationship between marginal product and marginal cost? 8. True, false, motivate. Stating that a firm is experiencing economies of scale is the same as stating that it is experiencing increasing returns to scale. 9. How can we measure the extent to which a firm enjoys economies of scope? 10. Using a diagram, show why a perfectly competitive firm will maximize profit by producing a level of output at which marginal revenue equals marginal cost. 11. The government wants to impose a tax on luxury yachts. Using a diagram, explain who is most likely to bear the burden of the tax (i.e. the buyer or the seller). 12. Suppose that the government imposes a $1.00 tax on tobacco. The current demand function is Q d = 200 – 60P and the current supply function is Q s = 60 + 40P. Calculate the price paid by the buyer (P b ), the price received by the seller (P s ) and the equilibrium quantity of tobacco (Q) after the tax has been imposed. 13. Explain what is meant by the Lerner index.
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14. Assume a monopolist faces a marginal cost of 7 and a price elasticity of demand for its product of -3.0. According to the ‘rule of thumb for pricing’, what price should the monopolist charge for its product?
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