econ50s08finalexam

econ50s08finalexam - Economics 50 Stanford University...

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Economics 50 Stanford University Spring Quarter 2008 Page 1 of 17 Name: TA: Final Exam June 6, 2008 Part I (Questions 1 through 3; 50 points total) Write your name and your TA’s name ( Itai Ater, Molly Goldstein, Pedro Miranda, Eduardo Perez, or Betsy Walls), and sign the statement on the cover of Parts I, II, and III 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, II, and III 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 you’ve 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, Part II, and Part III in the boxes provided. Your numerical answers should be as precise as possible. If you’re pressed for time, don’t worry about simplifying your answers perfectly. Make sure you show your work. You will have a total of 180 minutes to complete this exam. The exam is worth a total of 150 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 Stanford’s Fundamental Standard and Honor Code.” Signature: Do not open this exam until it is time to begin.
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Economics 50 Stanford University Spring Quarter 2008 Page 2 of 17 Question 1: Some stretching exercises, to begin [10 points] a) Compute the (own-)price elasticity of demand for X, where X D =I/(P X +3P Y ). Show your work. [2 points] b) Compute the output elasticity of total costs, where TC=40+20w 1/2 r 1/2 Q. Show your work. [2 points] c) Compute the wage elasticity of labor demand, where L=P 2 /4w 2 . Show your work. [2 points] d) Compute the elasticity of substitution, for F(L,K)=L 1/4 + 4K 1/4 . Show your work. [4 points]
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Economics 50 Stanford University Spring Quarter 2008 Page 3 of 17 Question 2: Will the skulls decompose? [20 points] Indiana’s preferences over whips (X) and hats (Y) are summarized by the utility function U(x,y) = x + 4 ln y. Indiana has an income of $ I ; he can purchase whips and hats at the market prices P X and P Y , respectively. a) Derive expressions for Indiana’s utility-maximizing demands for whips and hats, X D (P X , P Y , I) and Y D (P X , P Y , I), for the case where his decision is an “interior solution” (i.e. to simplify, you can ignore the possibility of a corner solution). Be precise, and show your work. [6 points] b) How many whips and hats will Indiana purchase if I=$60, P X =$4, and P
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econ50s08finalexam - Economics 50 Stanford University...

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