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Unformatted text preview: Economics 50 Stanford University Spring Quarter 2009 Page 1 of 11 Name: TA: Midterm Exam April 30, 2009 Part I (Questions 1 through 4; 50 points total) Write your name and your TAs name ( Nadeem Karmali, Annika Todd, Takuro Yamashita, or Xiaoling Zhou), and sign the statement on the cover of Parts I and II of the exam. Pace yourself carefully, and provide clear, concise answers lengthy explanations are not necessary! Write all of your answers in the space provided. If you need extra room, please use the back of each sheet. You can work on Parts I and II in any order. If you must make any additional assumptions in order to answer a question, please state what those assumptions are. At least one member of the Econ 50 staff will be available outside the classroom at all times. We usually cannot answer questions, but please notify us if you feel youve found a mistake in the exam or if you observe a classmate engaging in suspicious behavior. At the end of the exam, turn in Part I and Part II in the boxes provided. Your numerical answers should be as precise as possible. If youre pressed for time, dont worry about simplifying your answers perfectly. Make sure you show your work. You will have a total of 110 minutes to complete this exam. The exam is worth a total of 100 points, so you should allocate approximately one minute per point. Remember that no calculators, notes, books, headphones, or visible cell phones are allowed. Good luck! The answers written on these pages are entirely my own. I attest that in taking this exam, I am fully complying with all provisions of Stanfords Fundamental Standard and Honor Code. Signature: Do not open this exam until it is time to begin. Economics 50 Stanford University Spring Quarter 2009 Page 2 of 11 Question 1: If the curve fits [8 points] You are given the following information: The price elasticity of demand for cigarettes at current prices is -0.5. The current price of cigarettes is $.05 per cigarette. Cigarettes are being purchased at a rate of 10,000 per year. Find the equation of a linear demand curve that fits this information, and sketch that demand curve in a well-labeled diagram. Show your work. Question 2: Who bears the burden? [4 points] The U.S. government decides to enact a $9 excise tax on each bottle of vodka sold. If, at current prices, the price elasticity of demand for vodka is -0.4 and the price elasticity of supply is 0.8, what will be the effect of the excise tax on the price paid by consumers who purchase vodka? Be as precise as you can....
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- Spring '07