Mid1W10 - Name: _ First Midterm Examination Economics 101...

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Version 1 Page 1 Name: __________________________ First Midterm Examination Economics 101 February 10, 2010 This exam has 33 questions. Unless a question explicitly says otherwise, assume that all demand curves slope downward and all supply curves slope upward, and there are no externalities. True/False. Mark box A for True and box B for False. Each correct answer adds 2 points to your score. Each blank answer gives you 1 point. 1. Along a linear demand curve, total expenditure is constant. 2. Consumer surplus is defined to be the difference between the price and the marginal cost for all of the units consumed. 3. In a competitive equilibrium, productive efficiency implies that firms produce only units for which the marginal cost is less than or equal to the market price. 4. An increase in supply shifts the corresponding supply curve up. 5. An increase in firms' marginal costs causes a decrease in the corresponding market supply curve. 6. A price-taking producer in a competitive market will have higher producer surplus when a subsidy causes the price consumers pay for the good to decrease.
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Version 1 Page 2 7. If a tax is used to correct for a negative externality, there is a corresponding increase in consumer surplus. 8. When the demand for a good is perfectly inelastic, a new subsidy will result in a reduction in the price consumers pay for the good. 9. In the case of a straight-line PPF, the per-unit opportunity cost of both goods is constant. 10. If a good is inferior, that means an increase in its price causes a decrease in the demand for it.
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Version 1 Page 3 Multiple Choice. Mark the box corresponding to the best answer. Each correct answer adds 5 points to your score. Each blank answer gives you 1 point. 11. If the quantity of stereo systems produced and consumed is increased from five to the efficient quantity, then total economic surplus ________ by ________. 25 20 51 0 S D P (hundreds of dollars) 4 6 2 0 15 1 3 5 7 Quantity of Stereo Systems A) increases; $7,500 B) decreases; $5,000 C) increases; $2,500 D) increases; $10,500 E) decreases; $1,250
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Version 1 Page 4 12. In the competitive market for late night burgers, there are two buyers, Harold and Kumar, and one price-taking seller. The marginal benefit and marginal cost schedules for late night burgers are given below: Number of Burgers Harold’s Marginal Benefit Kumar’s Marginal Benefit Seller’s Marginal Cost 1 8 12 1 2 6 10 4 3 5 8 4 4 5 5 5 5 4 1 6 6 2 1 8 What are the equilibrium price and quantity in this market? A) P = $4, Q = 3 B) P = $5, Q = 4 C) P = $6, Q = 5 D) P = $6, Q = 4 E) P = $5, Q = 6
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Version 1 Page 5 13. The market supply curve for slices of chocolate cake is shown in the graph below. Which of the following marginal cost schedules are consistent with this supply curve? Quantity Sue’s Marginal Cost Carrie’s Marginal Cost Mary’s Marginal Cost 112 4 224 5 356 7 Quantity Sue’s Marginal Cost Carrie’s Marginal Cost 11 2 22 4 34 5 45 7 Quantity Sue’s Marginal Cost Carrie’s Marginal Cost Mary’s Marginal Cost 4 223 5 345 7 I II III P ($) Quantity 1 2 3 4 5 17 456 23 S A) III only B) I and II only C) II and III only D) I only E) II only
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Version 1 Page 6 14. Which of the following graphs illustrates an increase of 600 in demand for the product
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This note was uploaded on 01/24/2012 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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Mid1W10 - Name: _ First Midterm Examination Economics 101...

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