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OCT28.2006.C02test - ECMC02 Term Test Professor Gordon...

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ECMC02 Term Test – October 28, 2006 Time: 1 hour and 50 minutes Professor Gordon Cleveland ________________________________ ____________________ Your name(Print clearly and underline your last name) Your student number This exam consists of multiple choice questions and short answer questions. There are 25 multiple choice questions, each worth 3 marks, which are to be answered on the front sheet of this exam in the space provided. There are two short answer questions that are worth a total of 25 marks. Your exam consists of 12 pages (counting this first page). Please count your exam's pages immediately and report any problems. FILL IN YOUR NAME NOW. 1. _______ 6. _______ 11. ________ 16. _______ 21. ________ 2. _______ 7. _______ 12. ________ 17. _______ 22. ________ 3. _______ 8. _______ 13. ________ 18. ________ 23. _______ 4. _______ 9. _______ 14. ________ 19. ________ 24. _______ 5. _______ 10. _______15. ________ 20. ________ 25. _______
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2 PART I - 25 Multiple ChoiceQuestions - 75 marks 1-5. Tarraana has a taxicab industry which charges a certain price per ride (no matter how long the ride is). The current demand for taxi rides is given by P = 50 - .015Q with P representing the price of a taxi ride in dollars and Q representing the daily quantity of taxicab rides. The supply of taxi rides depends on how many cabs are on the road, and how hard each driver works. Supply is given by P = 10 + .005Q. The questions below refer to this taxi industry in Tarraana. This information can be used in answering questions 1-5. 1. If there is no government intervention in this perfectly competitive taxi business, what will be the daily amount of consumer surplus generated for consumers? A) $2500B) $5000 C) $7500 D) $10,000 E) $12,500 F) $15,000 G) +$17,500 H) +$22,500 I) +$30,000 J) +$32,500 K) +$40,000 L) +$42,500 M) +$50,000 N) +$55,000 O) +$60,000 P) +$65,000 Q) +$70,000 R) +$80,000 S) +$90,000 T) +$100,000 U) +$110,000 V) +$120,000 W) +$130,000 X) +$140,000 Y) +$150,000 Z) none of the above 2. If there is no government intervention, what is the daily amount of producer surplus? 3. Now, imagine that the mayor of Tarraana, David Muller, decidesto support the taxi drivers because they are claiming that the price is not high enough to cover their costs. The mayor plans to do so by establishing a limit on the number of taxis and the number of rides. There will be a limit of 20 taxis in the city and each one will only be allowed to run a maximum of 50 rides per day. If this quota is successfully implemented, how much will the new level of producer surplus be each day?
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