midterm - (l. n JLJU” ki Name: Economics 100B...

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Unformatted text preview: (l. n JLJU” ki Name: Economics 100B Microeconomics Fall 2007 James Rauch MIDTERM EXAM This exam is worth 160 points. Do all three problems. You will sometimes need to solve the early parts of a problem in order to solve the later parts. If you cannot solve the early parts, you can still get partial credit by indicating how you would solve the later parts. (40 points) 1. Consider a perfectly competitive industry consisting of identical firms, each with technology (production function) q = L”, where L is labor units. The wage rate is $10 per unit, and each firm has a long-term lease of $4,000. Demand for industry output is given by Q = 80,000 - 50p, where p = price. a. Find the short run supply function for an individual firm, that is, find q as a function of p. b. If there are 1000 firms in the short run, find the market supply function and the short run equilibrium p, Q, and q. c. Find the long run equilibrium q, and the long run equilibrium p and Q. (9 :MC. l3 C. 2.. r.— C wL + #000 :‘l .. Qc\1+L{OOO ML: '3 @ 2 Name: C~ ‘0 (On? {an} {:Wms arc/«HI 0d” min AC (it/o f-"sf‘ljrA/ MMAC, occwj ul’ure, MC‘AQ ML‘QOCI (proa far? A\, 5 (Oil-f Lfogo @ ‘: {01 4 L—foo% (f 101w; [0‘1 Hwoo m1: #000 1:20 1 ‘1 = +00 Q= 80,000«s’o.+oo ‘\ 30 - b ‘= $0,000 3 Name: (80 points) 2. Suppose that after the latest fires in San Diego County many rural homeowners decide to install sprinkler systems. Demand for sprinkler systems is given by Q = 10,000 - 50P, where Q is the quantity of sprinkler systems and P is the price per system. Sprinkler system supply is perfectly competitive. Each sprinkler system costs two hours of labor and five meters of PVC pipe. (I admit these are pretty small systems.) The wage is $25 per hour. PV is the price of a meter of PVC pipe. a. Suppose PV = $10. Solve for P and Q. b. Now San Diego County takes advantage of the opportunity to raise revenue by imposing a tax of $30 per sprinkler system. Solve for Q, for the price PD paid by homeowners, and for the price PS received by suppliers. 0. Using your answers to parts a and b, describe the incidence of the per unit tax: what percentages of the tax are paid by homeowners and suppliers? (1. Using your answers to parts a and b, find the tax revenue collected, the consumer surplus lost (if any), the producer surplus lost (if any), and the deadweight loss (if any). (It might be useful to remember that the area of a triangle equals one—half times the height times the base.) e. Now suppose PV = 0.002Q. Solve for P and Q. f. Again, San Diego County takes advantage of the opportunity to raise revenue by imposing a tax of $30 per sprinkler system. Solve for Q, for the price PD paid by homeowners, and for the price PS received by suppliers. g. Using your answers to parts e and f, describe the incidence of the per unit tax. h. Using your answers to parts e and f, find the tax revenue collected, the consumer surplus lost (if any), the producer surplus lost (if any), and the deadweight loss (if any). i. Compare your answers to parts c and g, and provide the economic intuition for any difference. j. Compare your answers to parts (1 and h, and provide the economic intuition for any difference. 4 Name: (I?) (JumL‘Ov-In{f) ) Suy 1’ liir’ [7‘] 00/6 (L Ox‘K {(uQ/‘ue, '1 t ‘— 3’ 5/00 c “MT/00° (0/?)umL/ JJ'PVLAJ [03+ = Lina/.4): m Mm “43k,” (lbw-\an Lian/2. :1 CLL’I3K in P011. 'X Q + LAO/~31. FKIUL x (jut/1ij . 30. {5/00 (3/ I14”) 500 (é飀L/t/\LL 5LT‘A’LM C's/“Jqu Jul/flu) [Mr Mi 'hx 12/5” (QUL/‘utl.\ / @e- V” Qw’rbpv "‘ 2w*5“0.002<l* §O+0.0IQ 5‘ Q: (000“ 50(g°*'0'93 "= 7500-2572 /.§Q='7§OO Q=§2fi0 (Hg/00 Noh +La+ +14 Joluh‘aa 1’) 44¢ Jame u; Pant 0k, 5 Name: / j ISQ= £3000 Q= #00 D: 304‘7‘0 -= I20 (5 V ® Homeow-«Lf} {It} 1/?! Auff’atfj F09 1/3’, (3 ® fax rtvanu‘z— : %000' 3O @ 9’1”? ‘/ Co/Uumlr Ju/fvlu) /33+ 5‘» ' V t _ “‘ V/DLHLL’ Maw/'9‘“) [03+ 3 51°00 [0+ 210‘ luOO @ Amway» my if?» @ x ‘ 15am) i. In fur} L) Plokuur) «fay Zqo [gamut Jujjjylj (‘2 faxPuH7 dun-IL. la PM 3, JUN!) w M) ‘H'woA Vifklbjrlj quJ‘hC J19 Junzllirj you) jomf cl “Fax” 3. 1L!» $tMLdHDL‘l ’05) (a) 1519‘ Jmane‘r [A ’0 TIM) is jgccauue, Jun?!) i) (a!) L’GHPL J9 Hg +k>§ Lid) 2(1) (M?eb{» (9-4 anAhfi +ffifl-JfllL‘LLA4‘ ‘ 6 Name: (40 points) 3. Consider a country that exports corn, taking the world price of corn as given. In other words, at the world price the country supplies more com than it demands. Domestic corn supply is perfectly competitive and the supply curve is upward-sloping. Domestic demand for corn is downward—sloping. a. Show the gains from trade in corn in a diagram, that is, show the increase in the sum of consumer and producer surplus that results from exporting corn at the world price compared to the equilibrium where domestic supply equals domestic demand. Now suppose the government provides a per unit subsidy s to corn exports. This raises the price received by domestic farmers and paid by domestic consumers by s. b. In a new diagram, show the change in producer surplus, change in consumer surplus, and the sum of the two changes. c. In a third diagram, show the subsidy expenditure by the government, and the deadweight loss to society (if any). (This cannot be shown in the part b diagram without getting too messy.) _ flat/DJ Fro," +0, it 5 // Tim W ‘r—---~—--~u—-~~’-i r D L a “I J Wu if J.” u fl 5 \ "A ((9 (\uur )M/lliu) l . a CO?“ AW (ntfcflnl 7 Name: ...
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midterm - (l. n JLJU” ki Name: Economics 100B...

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