# Midterm 2 Sample 3 Answers - PRINCIPLES OF MICROECONOMICS...

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PRINCIPLES OF MICROECONOMICS Midterm Exam #2, Sample #3 Duration: 2 Hours Non-programmable calculators only Answer all questions on this test paper INSTRUCTIONS: This examination consists of TWO PARTS for a total of 100 marks Part I 5 analytic/graphical questions for a total of 46% Part II 2 multiple choice questions worth 2 marks each for a total of 4%. 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 -

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Principles of Microeconomics: Midterm #2, Sample #3 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 quantity if price decreases by 6% when price elasticity of demand is – 0.75 (0.75 in absolute value)? (1 mark) 1 mark = -4.5% from something like –0.75 = %ChangeD/6% (don’t worry about positive) b) What is the point elasticity of demand for Movie Tickets if an incease in Price from \$10/ticket to \$12.50/ticket decreases Quantity demanded from 18,000 to 12,000 tickets per night? (2 marks)? 1 mark: correct set up of either the numerator or denominator of equation = -33.3%/25% or something like (12,000 – 18,000))/18,000/(12.50 – 10)/10 1 mark: correct answer = - 1.33 (or 1.33) c) What is the arc elasticity of demand for Movie Tickets if an incease in Price from \$10/ticket to \$12.50/ticket decreases Quantity demanded from 18,000 to 12,000 tickets per night? (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+40% /-22.2% or (12,000 – 18,000))/15,000/(12.50 – 10)/11.25 1 mark: = -1.8 (or 1.8) d) Suppose that the typical consumer’s demand function for gasoline is P = 3.70 – 0.05q. What is point elasticity at P = 1.20? (2 marks) 1 mark: Q = 50 from (3.7 – 1.2)/0.05 1 mark: elasticity = - 0.48 from something like -1/0.05 * 1.20/50 (Don’t worry about the negative) e) Suppose that the total sales fall by \$50,000 when Price increases from \$6 to \$7. Is this
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## This note was uploaded on 09/30/2011 for the course ECON 1000 taught by Professor Paschakis during the Spring '08 term at York University.

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Midterm 2 Sample 3 Answers - PRINCIPLES OF MICROECONOMICS...

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