dec 2006 - UBC Commerce FRE 295 FINAL EXAM NAME STUDENT...

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1 UBC Commerce/ FRE 295 FINAL EXAM December 15, 2006 NAME:_______________________________ STUDENT NUMBER ___________________ SECTION: _____________________________ PROFESSOR’S NAME: _____________________ Instructions: This exam will be marked out of 100. You will have 2 hours to do the exam. There are two parts to this exam. Part I is true-false questions. Answer all of these questions. Part II consists of five long-answer questions. Only FOUR of these must be chosen. For all parts, provide your answers in the space provided or indicate clearly where the answer is continued on the back of the page. This final has 18 pages. The last page is blank. Check now to make sure you have all pages and make sure your name, section, and student number are provided above. This is a closed-book exam. You may not use books or notes. You may use a calculator. GRADES True/False Questions 1 – 10: ________ / 40 Long Answers: Part II (answer only 4 of 5) 11. ________ / 15 12. ________ / 15 13. ________ / 15 14. ________ / 15 15. ________ / 15 TOTAL ________ / 100 Section 101 MW 1:00 pm Ratna Shrestha Section 102 MW 4:00 pm James Vercammen Section 103 Tu-Th 8:30 pm Veikko Thiele Section 104 Tu-Th 10:00 am Kate Foreman Section 105 Tu-Th 11:30 pm Kate Foreman Section 106 Tu-Th 2:30 pm Ratna Shrestha Section 107 Tu-Th 4 :00 pm Ratna Shrestha E A G E R K E E N E R.C O M
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2 PART I TRUE-FALSE QUESTIONS: Mark each question as true or false, by putting an “X” in the appropriate box. There is one mark for each true-false question. 1. A competitive rental-housing market in Vancouver has a demand curve given by Q D = 45 – P, where Q = number of units of housing and P = rent per month in dollars. The supply is fixed at Q S = 20. True False The price elasticity of supply at the equilibrium price is zero . Demand is elastic at the equilibrium point, and thus a small increase in the price will necessarily result in higher total expenditures by renters. If renters receive a subsidy of $5 per unit of Q, then the equilibrium price will increase by $5 and the net price paid by renters remains unchanged. A rental subsidy in this market always creates a dead-weight loss . 2. Great Corporation (GC) is a cost minimizing firm with a production technology given by Q = K L, where K = capital units and L = labor hours. The prevailing market wage rate is w = $5/hour and rental rate of capital is r = $10/unit. True False GC’s production technology exhibits constant returns to scale. GC should use twice as much labour as capital to minimize the cost of production. In this production function, labor and capital are perfect substitutes. If capital is fixed at 10 units, GC must use 5 units of labor to produce 50 units of output, regardless of the prevailing market prices of capital and labor. E A G E R K E E N E R.C O M
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3 3. George is one of the many sellers of flowers in Vancouver’s perfectly competitive flower market. George’s cost function is: C(Q) = 27 + 3Q 2 where Q = number of bouquets of flowers. Assume that it is possible to sell a fraction of a bouquet of flowers.
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