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Midterm 2 - Winter 2006

# Midterm 2 - Winter 2006 - VERSION 1 MIME 310 ENGINEERING...

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VERSION 1 1 M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y E C O N O M Y Class Test #1 – Thursday, 16 February, 2006 – 90 minutes PRINT your family name / initial and record your student ID number in the spaces provided below. FAMILY NAME / INITIAL S O L U T I O N S STUDENT ID # This test consists of 17 multiple This test consists of 17 multiple-choice choice questions, and three problems requiring questions, and three problems requiring full solutions. full solutions. Multiple-choice questions are worth 4 points each. There are no penalties for incorrect answers. The problems are worth a total of 32 points. MULTIPLE-CHOICE QUESTIONS Circle the correct answer on this test paper and record it on the computer answer sheet. Use the information below to answer questions 1 to 3. The demand function for graphite pencils is given by [ Q = 5000 - 10 000 P ], in which Q is the quantity demanded in units and P is the price per pencil in dollars. The selling price is \$0.30/pencil. 1. The elasticity at P=\$0.30/pencil is: A) –1.5 B) 1.5 C) – infinity D) + infinity E) – 2.5 2. The elasticity at P=0 is: dQ/dP = -10 000 At P=0.30, Q = 5000 – 10 000 (0.30) = 2000 E D = - (-10 000) / (2000 / 0.30) = 1.5 dQ/dP = -10 000 At P=0, Q = 5000 – 10 000 (0.0) = 5000 E D = - (-10 000) / (5000 / 0) = 10 000 / = 0

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