Mid3F07 - v1 Name December 11, 2007 Third Midterm...

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v1 Name _ December 11, 2007 Third Midterm Examination Economics 101 This exam has 33 questions. Unless a question explicitly says otherwise, assume that all supply curves slope upward and demand downward. True/False. Mark box A for True box B False. Each correct answer adds 2 points to your score. blank gives you 1 point. 1. An individual's labor curve must if the substitution effect of an increase in her wage dominates income effect. 2. If a monopolist can expand production sell additional unit at a price $4, marginal cost producing is $5, then increases profit. 3. The revenue product tells how much extra revenue a firm earns by another output. 4. When for a good produced by a monopoly elastic total from sale as large possible. 5. In case of a negative externality, social equal private plus external cost.
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2 Page # 6. If one country can produce more lumber than another can, it has an absolute advantage in the production of lumber. 7. In case of a monopoly, a price control lower and at same time result increase profit-maximizing level production. 8. A monopoly that practices perfect discrimination maximizes profit by producing output where marginal revenue is equal to cost. 9. Demand for labor increases if good produces rises. 10. benefit abatement exceeds cost abatement, firms their reducing amount they pollute. Multiple Choice. Mark box corresponding best answer. Each correct answer adds 5 points your score. blank gives you 1 point.
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3 Page # 11. The Uruguay River flows through the small town of Fray Benitos, Uruguay. A paper mill emits pollution into River. Suppose that government imposes a limit on results in efficient level pollution. Given information summarized by graph, at this resulting deadweight loss is than what would result if firm were unregulated. $/ton 70 60 50 MBA I I I r I ---------.------- I I I I --------~---------~------. I I I I I I I I I I 40 ---------~---------I---------r------· I I I 1 I I I I I t 1 , I 30 --------~------ --~---------4---------r------- I I I J I I I I . I 20 -------~--------~---------~--- I I I I 1 J I I I _______ I ~ 1 L ~ 1 10 I 1 1 : ~ : , I 1 I I 1 I 1 I ----~---------~------. , I I I I I ~ I ~ I I ; : MeA I I o 10 25 55 70 Tons of Pollution (a) (b) (c) (d) (e) $1575 less $150 greater $75 $1475
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4 Page # 12. Consider firms A and B, whose marginal cost of abatement curves are shown in the graph below. If government issues 30 tradable pollution permits to firm A and 10 firm B, then will $ 700 600 500 400 300 200 100 I I I I I I I 4 , I I --~-----~----~-----~-----~----~----- l~CA(A) : : : : .,. . I 1 I I I I I I I I I I I I I I I I _~--~----- ----- -----~----~-----~-----~----~----- I I I I , I I I t.:ACA(Q) : : : : : : 'T' I I I I I I I I I I I I I ----j-----,----- -- --,----'-----T-----r----'----- I I I I I I I I I I I I I I I I I I I I I , I I I I I I I , I I ____ J L____ _ J 1 L J _ ~ I I I I I I I I I I I I I I I I I I I I I I I I I J I I I I I I I I I I ----~-----~-----~-----~- -- -----+-----~----~---_. I I I I I I I I I I I I j , I I I I I I I I I I I I I I I I I I I I I ----,-----~-----~-----l---- -----~----,----- --.-. I I I I I I I I I I I I I I , I ( I I I I I I I I I I I ____ J L .1 J. _ ~ ~ ~ I I I I I I I I I I I 'I I I I I I I I I I I I I I I I I I I I I I I Tons of O'-----'5--1. ..... 0--15'"-----2-l.0--2. ....5-. ..... l30'---3 ..... 5--'4"-O- Pollution (a) sell 15 firm B (b) buy 10 from (c) sell 5 (d) sell 10 (e) buy 5
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5 Page # 13. Suppose Comcast is the sole cable television provider in Ann Arbor. The graph below shows market for cable TV service Arbor. How much total consumer and producer surplus lost by having be a monopoly in this compared to producing efficient outcome?
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Mid3F07 - v1 Name December 11, 2007 Third Midterm...

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