Midterm1answers 2009 - Department of Economics University...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Page 1 of 10 Department of Economics Professor Kenneth Train University of California, Berkeley Fall 2009 ECONOMICS 1 FIRST MIDTERM EXAMINATION October 5, 2009 INSTRUCTIONS 1. Please fill in the information below: Student’s Name: _____________________________________ SID #: ____________________________________________ GSI’s Name: ________________________________________ Section Number (Day/Time):___________________________ 2. This exam starts at 12:08 pm and ends at 12:58pm. 3. If you finish early, please remain in your seat so that you do not disturb others. 4. When time is called, please stop writing and pass your exam to the aisle. Please stay in your seats until all the exams are collected. 5. There is a total of 100 points, 6 questions, and 12 pages (including this cover sheet) points for each question are in parenthesis. 6. NO BLUE BOOKS NEEDED . Please answer the questions in the space provided. If you need extra room to answer the questions, use the backs of the pages. 7. Calculators are not permitted. 8. Good Luck!!! DO NOT TURN THE PAGE UNTIL YOU ARE TOLD TO BEGIN THE EXAM
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Page 2 of 10 Question 1: TRUE, FALSE, UNCERTAIN. (20 points) For each question explain whether the statement is false, true or uncertain. Your grade is determined by your explanation; an answer without an explanation receives no credit. Use graphs when needed to complement your answer. a) (5 points) Consider a perfectly competitive market in stage 2 equilibrium. If the government places a $1 per unit excise tax on the good, then the equilibrium price of the good paid by consumers will increase by the exactly $1. TRUE. In stage 2 equilibrium for a competitive industry, P=minAC. The $1 tax raises the AC curve of each firm by $1, which means that the minAC rises by $1. The new equilbrium price therefore rises by exactly $1. The graph below shows the result. Alternative answer: The Supply curve for a competitive industry in stage 2 is flat. The tax raises the supply curve by exactly the amount of tax, and so the new equilibrium is exactly $1 higher than before the tax. AC AC+$1 q P Typical Firm
Background image of page 2
Page 3 of 10 b) (5 points) The MRT=1 between two goods, X and Y. The price of X is $20 per unit and the price of Y is $10 per unit. From a social perspective, we should increase production of Y and decrease production of X. FALSE. We should do the opposite: increase production of X and decrease
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

Midterm1answers 2009 - Department of Economics University...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online