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Unformatted text preview: VERSION 1 1 M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y Class Test #1 Thursday, 16 February, 2006 90 minutes PRINT your family name / initial and record your student ID number in the spaces provided below. FAMILY NAME / INITIAL S O L U T I O N S STUDENT ID # This test consists of 17 multiple This test consists of 17 multiplechoice choice questions, and three problems requiring questions, and three problems requiring full solutions. full solutions. Multiplechoice questions are worth 4 points each. There are no penalties for incorrect answers. The problems are worth a total of 32 points. MULTIPLECHOICE QUESTIONS Circle the correct answer on this test paper and record it on the computer answer sheet. Use the information below to answer questions 1 to 3. The demand function for graphite pencils is given by [ Q = 5000  10 000 P ], in which Q is the quantity demanded in units and P is the price per pencil in dollars. The selling price is $0.30/pencil. 1. The elasticity at P=$0.30/pencil is: A) 1.5 B) 1.5 C) infinity D) + infinity E) 2.5 2. The elasticity at P=0 is: A) 5000 B) 10 000 C) 0 D) 5000 E) infinity dQ/dP = 10 000 At P=0.30, Q = 5000 10 000 (0.30) = 2000 E D =  (10 000) / (2000 / 0.30) = 1.5 dQ/dP = 10 000 At P=0, Q = 5000 10 000 (0.0) = 5000 E D =  (10 000) / (5000 / 0) = 10 000 / = 0 VERSION 1 2 3. What would be the total producer income if the market equilibrium was at P=$0.24/pencil? A) $624 B) $2400 C) $2600 D) $5000 E) None of the choices given above 4. In comparing an ordinary annuity and an annuity due, which of the following is true? A) The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due. B) The future value of an annuity due is always greater than the future value of an other wise identical ordinary annuity. C) All things being equal, one would prefer to receive an ordinary annuity rather than an annuity due. D) The future value of an annuity due is always less than the future value of an otherwise identical ordinary annuity, since one less payment is received with an annuity due. Use the information below to answer questions 5 and 6. A firm earning 17 percent per year on its investments will receive the stream of monetary flows shown below. Year Amount ($) 1 3000 2 6000 3 9000 5. The future value at the end of year 3 of the monetary flows received at the end of each year is: A) $20 127 B) $20 724 C) $23 548 D) $23 350 6. The future value at the end of year 3 of the monetary flows received at the beginning of each year is: A) $20 127 B) $20 724 C) $23 548 D) $23 350 7. Chris is planning for her son's college education to begin five years from today. She esti mates that tuition fees, books and living expenses will amount to $5000 per year over a fouryear degree. How much must Chris deposit today, at an annual interest rate of 8 per cent, for her son to be able to withdraw $5000 at the beginning...
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This note was uploaded on 11/22/2010 for the course MIME MIME 310 taught by Professor Jassim during the Winter '09 term at McGill.
 Winter '09
 Jassim

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