This preview shows pages 1–3. Sign up to view the full content.
PRINCIPLES OF MICROECONOMICS
Midterm Exam #2: Sample
#2 Answers
Duration: 2 Hours
Nonprogrammable calculators only
Answer all questions on this test paper
INSTRUCTIONS:
This examination consists of TWO PARTS for a total of 100 marks
Part I
4 analytic/graphical questions for a total of 40%
Part II 5 multiple choice questions
worth 2 marks each for a total of 10%.
Wrong answers will not be
deducted from right in grading Part II.
All questions are to be answered in the spaces provided in this question paper booklet
Do not remove any pages or add any pages.
No additional paper is supplied.
The blank backs of pages may be used for rough work.
Show your work where applicable.
YOU MUST USE PEN INSTEAD OF PENCIL TO BE ELIGIBLE FOR REMARKING
Print your name and student number clearly on the front of the exam and on any loose pages.
Student Name: _______________________________________________________
(Family Name)
(Given Name)
Student Number
: ___________________________________
There are 6 pages
to the exam.
 1/6 
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentPrinciples of Economics: Midterm Test #2, Sample
#2 Answers
Part I
Place your answers (and work where necessary) in the space provided.
Clearly label all axes, curves, and points.
1.
Elasticity (10 marks)
a) What is the percentage change in price if quantity demanded decreases by
12% when price
elasticity of demand is – 1.25 (1.25 in absolute value)? (1 mark)
1 mark:
% change P= +9.6% from something like 1.25 = 12/%changeP (don’t worry about
positive)
b) What is the point elasticity of demand for Shimp if an incease in Price from $2.50/kilo to
$2.70/kilo decreases Quantity demanded from 5,200 kilos to 4,550 kilos? (2 marks)?
1 mark: correct set up of either
the
numerator or denominator of equation
= 12.5%/8% or something like (52004550)/5200/(2.502.70)/2.50
1 mark: correct answer =  1.5625 (or 1.5625)
c) What is the arc elasticity of demand for Shrimp if a decrease in Price from $2.70/kilo to
$2.10/kilo increases Quantity demanded from 4,550 kilos to 5,450 kilos? (2 marks)?
1 mark: set up either numerator or denominator of equation correctly, i.e., understand that it is a ratio
of change to average
= something like+18% /25%
or (4,5505,450)/5,000/(2.70 – 2.10)/2.40
1 mark: = 0.72 (or 0.72)
d) Suppose that the typical consumer’s demand function for gasoline was
P = 2.4 – 0.006q.
What is point elasticity at P = 0.90? (2 marks)
1 mark: Q = 250 from (2.4 – 0.9)/0.006
1 mark: elasticity = 1/0.006 * 0.9/250 = 0.6
e) Suppose that P = 0.90 when P = 2.4 – 0.006q as in part c). If you wanted to increase total revenue
(total sales) for this commodity, would you decrease, increase
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '08
 paschakis
 Microeconomics

Click to edit the document details