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MidtermExamAK - Economics 3203 Midterm Exam 2004 ANSWER KEY...

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Economics 3203 Midterm Exam 2004 ANSWER KEY Professor Sarah Hamersma Multiple Choice (5 points each) 1. d 2. a 3. d 4. b 5. c 6. b 7. a Problems 1. (7 points) The hypothesis that having more children will decrease employment probability should result in a negative coefficient on number of children; it does, but the estimate is not statistically significant (t = 1.5) so even though the sign is right, we do not have 95% confidence that the effect is negative. The hypothesis that additional schooling will increase employment probability should result in a positive coefficient on years of post-high-school schooling; it does, and the estimate is statistically significant with a t-value of 3, so we are 95% confident that the effect of schooling is in fact positive. 2. (12 points) Consumption (8*10 + 16*14) = $304 $240 $ 90 15 16 24 Hours of Leisure Under this plan, Jim would work (circle one) more/less/the same amount/ can’t determine . His consumption level would be (circle one) higher /lower/the same/can’t determine.
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3. (16 points) a. Set MRP = ME L to find the profit-maximizing decision for the firm. MRP = ME L MP L * MR = ME L Note that the price of popcorn is fixed at $1.50 – the firm does not control it. This means the firm is not a monopoly, so the marginal revenue of selling a bag of popcorn is just the price, $1.50.
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