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Unformatted text preview: ECMC02 Term Test – June 25, 2007 Time: 2 hours 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 20 multiple choice questions, each worth 3.5 marks, which are to be answered on the front sheet of this exam in the space provided. There are three short answer questions that are worth a total of 30 marks. They are to be answered on this exam paper in the space provided. Your exam consists of 13 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. _______ 2. _______ 7. _______ 12. ________ 17. _______ 3. _______ 8. _______ 13. ________ 18. ________ 4. _______ 9. _______ 14. ________ 19. ________ 5. _______ 10. _______ 15. ________ 20. ________ PART I - 20 Multiple Choice Questions - 70 marks 1-6. Halifax has a taxicab industry that charges a certain price per ride (no matter how long the ride is). The current demand for taxi rides is given by P = 100 - .03Q 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. In the short run, Supply is given by P = 20 + .01Q. This is a constant cost industry, and the minimum average cost for each firm is $40 per ride. The questions below refer to this taxi industry in Halifax. This information can be used in answering questions 1-6. 1. In short-run equilibrium, if there is no government intervention in this perfectly competitive taxi business, and taking into account both consumer surplus and producer surplus, what is the total gain to society from the operation of this business? A) $2500 B) $5000 C) $7500 D) $10,000 E) $12,500 F) $15,000 G) +$17,500 H) +$20,000 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. The short-run equilibrium price covers both the fixed and variable costs of this taxi business. Is producer surplus larger or smaller than the short run profits made by firms in this...
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This note was uploaded on 09/12/2011 for the course ECON 2 taught by Professor Cleveland during the Spring '07 term at University of Toronto- Toronto.
- Spring '07