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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2. A company selling baseball caps has the following MR and MC: q 1 2 3 4 5 MR 10 9 8 7 6 MC 2 3 4 7 8 Using this information, we may assume the company: I. produces in a perfectly competitive market II. produces with a technology exhibiting diminishing marginal productivity a. only I b. only II c. Both I and II d. Neither I nor II 3. Using the information from the question above, how many baseball caps will this firm sell? a. 3 b. 4 c. 5 d. The answer depends on the price 4. When average variable cost is increasing, which of the following must be true a. average total cost must be increasing b. average fixed cost must be increasing c. marginal cost must be above the average variable cost d. all of the above e. a and c f. a and b
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5. Assume Corn & Company produces corn, and the market for corn is perfectly competitive. The price of corn is $8. TC = 2 + 2q 2 and MC = 4q. Which of the following is true? a. They will produce two units of corn b. There will be entry into this industry in the long-run c. $8 is greater than the minimum of the ATC curve d. All of the above are true 6. A perfectly price discriminating monopoly is a. inefficient because there is no consumer surplus.
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This note was uploaded on 01/14/2012 for the course ECON 101 taught by Professor Profeessor during the Spring '11 term at Aachen University of Applied Sciences.

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

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