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Mid1W10 - Name First Midterm Examination Economics 101 This...

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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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