Midterm2F2010aAnswersWeb - Econ 001 Midterm 2(Dr Stein...

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Econ 001: Midterm 2 (Dr. Stein) Answer Key November , 2010 Instructions: This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label all diagrams carefully. Write your name and your Recitation Instructor's name in every blue book that you use. This exam is given under the rules of Penn's Honor system. All blue books, blank or filled, must be handed in at the end of this exam. No blue books may be taken from the room. No calculators are allowed! The Midterm has 2 parts. Part 1 consists of 7 multiple-choice questions. Please write you answers in blue book 1. Part 2 consists of 2 short answer questions. Please use a separate blue book for each answer. Part I: Multiple Choice Questions (Best 7 out of 8: 4 points each/28 points total): Please answer all MC questions. Only the best 7 will count towards your grade. 1. We learn that between P=$1 and P=$2 the demand for chewing gum is perfectly inelastic. Which of the following statements must be true between these prices I. Chewing gum is an inferior good. II. The income effect is equal to the substitution effect. a. Only I. b. Only II. c. Both I and II. d. Neither I nor II.
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