PastMidterm_Answers

PastMidterm_Answers - University of California Irvine ECON...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
University of California, Irvine ECON 100A – Intermediate Economics I Fall 2008 Midterm Course Examination – SUGGESTED ANSWERS Exam 1 Name and ID#: __________________________________________________________ Rules: Closed notes and books, open minds. Non-programmable calculators are allowed. You have 80 minutes, use time wisely (applies beyond this exam). Make your own mistakes (i.e., do not copy neighbors’). There are five questions, each worth 20 percent of the total grade. 1. Some time ago, toll on the Golden Gate Bridge in San Francisco went up from $4 to $5. Before the toll increase took effect, some city council members feared that this hike will lead to lower toll revenues. Evaluate whether those council members were right if traffic fell by 5 percent following the toll hike. Explain, using the concept of demand elasticity. Elasticity of demand is %changeQ/%changeP = -.05/.25 = -.2, so demand is inelastic and raising the price will increase revenue. The council was wrong. Completely Correct: 20 Minor Mistakes: -2 No work shown: -6 No explanation: -6 Completely wrong: -12 Blank: 0
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2. Joe the Restaurant Owner has to decide whether to cook little or a lot of soup before the level of demand is known. The following table provides the profit the owner will receive, depending on how much soup is cooked and the level of demand: Low demand High demand Little soup 100 100 A lot of soup 20 200 a. If both high-demand and low-demand states are equally likely, what will be the choice of a risk-neutral owner (i.e., will he cook little or a lot of soup)? b.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/02/2011 for the course ECON 100A taught by Professor Safarzadeh during the Winter '09 term at UC Irvine.

Page1 / 6

PastMidterm_Answers - University of California Irvine ECON...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online