practiceMIDTERMsol

practiceMIDTERMsol - K Name: A/l JLJ flf‘ 2? Economics...

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Unformatted text preview: K Name: A/l JLJ flf‘ 2? Economics 100B Microeconomics Winter 2006 James Ranch 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. (60 points) 1. Consider a perfectly competitive industry consisting ofidentical firms, each with technology (production function) q = 2L, where L is labor hours. Demand for industry output is given by Q = M/2p, where M = consumer income and p = price. i" 21. Find the total cost function for an individual firm, given a wage rate of $20 per houn (G b.’ Solve for the equilibrium price and quantity transacted given M 2 $20,000. 5c, Suppose M increases to $80,000. What is the new equilibrium price and quantity transacted? Now suppose the wage rate depends on total industry output Q: w = Q/50. {0 d. Solve for the industry supply curve. lOe. Solve for the equilibrium price and quantity transacted given M = $20,000. I; f. Suppose M increases to $80,000 What is the new equilibrium price and quantity transacted? IQg. Compute the wage rate in part e and the wage rate in part f. Use your results to explain why the increase in consumer income from $20,000 to $80,000 has a different impact on price in part f than in part c. 2 Name: c Q= 06 ‘0 O 0 O \ )J o u ,3: O O O "U H 0 Ad Tc: W61/22. ML: w/z Fa Mg 2 w/l w: Q/§O :> V: QED: Q/,OO (7% «~— 8) l S_ @,D‘ 6,. c2 400? a; ' M/z’o /O,ooO//v 5 (’3 Q Q" 4:> wot“ #200047 P“ “>0 F110 Q) Q: /ooo@ P ’00? ‘ BOIOOO/W Wmoo/r P1"— ‘foo 9:20 C“) Q = 1000 ® (000 $ 3. 1A): N: M53120 l7ar+Q@ w“— : $70 Var} It go In Ear? F Way. {IJU from $10 JV” $‘7L03 lat-nae, MC. @(UC! ("Tb/7‘ +9 120‘ 1" PAF+ C. (Amy, J15?) CnnJfi/‘fl 1/,(A(L. Ill/2C, .S‘th (Unj‘f’gfl‘t 4 N ame: (50 points) 2. Consider a country that imports sugar, taking the world price of sugar as given. Domestic sugar supply is perfectly competitive and the supply curve is upward-sloping. Domestic demand for sugar is downward—sloping. To encourage healthy eating habits, the government is considering either a per unit tarifft on sugar imports or a per unit tax t on all sugar sales. Show that the government raises more tax revenue and creates a smaller deadweight loss with the consumer tax, and give the intuition for why the deadweight loss is smaller. [5a. Illustrate the impact of the tariff in a diagram. Show the tax revenue and the deadweight loss. [Sb [n a separate diagram, illustrate the impact of the consumer (sales) tax. Show the tax revenue and the deadweight loss. 10c. Explain why, in your answer to part b, the price ofsugar paid by consumers rises by the full amount of the tax — that is, explain why the incidence of the tax falls entirely on consumers. According to your diagrams, which policy is better from the point of view of society as a whole? Why? (luau/cu)“ L35) 5 Name: C. TL: (,OuAHj FLU 4'ka LOW“ [7/41 ‘3‘; 1‘43“; “U JvJL/x) 5° (+5 ‘HX cums} aLkd In c‘erk/ tub/J) /S\ («JD/.l (“fut {fir J“3“’ {5 FL" P(tr(7 Q‘AJ‘h‘L‘ +1.3: Jl'Ajfka) +LL lqofIZnA‘H’ IV”; ‘9?) f) +144. war” (ufJC ‘F‘r qua'r.> c}, TLL A|¢ljfaml JLlouJ ‘Hfiki' 4(‘(lw(:)L+ LJJ U )A/Jt/ UML “‘1‘; {nu—11hr) )9 flag inn/.4; u \nbeL ("cf Jaudrj TLL Im‘hxu'hon wh‘J +LM+ +14» Kant: +ka FK'CL Jam‘IJPC ‘9/04““r‘) (AA CLKer an; Cola/c) +L&,.., +.D V/OJHLL @ 4+ um mm +» hwy, LO WL‘.(_,L‘ {J Jer (“JD/’1 [714“. 6 Name: (50 points) 3. Consider an economy populated by a representative consumer _with preferences over apples and bananas given by U(A,B) = AB2 and endowment (A,B) = (5,40). 11921. Find relative demand AD/BD as a function of relative price pA/p”, and find pA/pB that equates relative demand to relative supply. Show your answer in a diagram. In equilibrium, how many bananas does the consumer need to buy one apple? (0b. N ow suppose the government imposes a consumer tax of one banana per apple, and rebates all of the tax revenue to the consumer. Use your diagram from part a to show that the price of apples received by “producers” (sellers) falls by the full amount of the tax, so that apple sellers receive one less banana per apple than before. How many bananas does the government collect as tax revenue? 15c. Find the value of consumer income in terms of bananas before the tax and after the tax. Be sure to show all sources of income. 5 d. In this economy there are no producer profits, so the change in social welfare from the per unit tax equals the change in consumer welfare. Since the consumer buys the same number of apples and bananas before and after the tax, her welfare is unchanged. Why is there no deadweight loss from the tax? 0- mas: ‘5 l: Mh3=._lif‘_ :>§=f: lAb 2A 7'3 M ‘93 (5) TLL (onJvLMLf ruck) L+ baht/«1.1 ‘f‘o Lu? L’s/1L arr/it, 7 Name: 7—1-1L SSJL/mh‘f (9 d‘l 0"" Landmk ya"- ayq'g J3”. I) t g baaa/m 1, (GALA-Mir 3L1"; (n(owk jL/la j afléow.flq(n~l~r @ 0:1} +kK {bit/nu. [(94+(l j '60 (/4 rum/H’ I; ' ' 5 ‘ ‘ M J€// CZ) ) 5- Q/IJ’tJ Ar 2 Adlai/Ml) CKLLL (IGULK/IMk/‘F ((L4+(1 5 Lima/nah Inca/"c = L7LO + I; +5160 Lana/M), (1, 77mm (J Ao QLUJNUJH )cJJ l7C.Cd“{JL -(>L<_ Ju/JJI] @ CW’UL {CW “Wu! (HIULNC 11“ Lana/NJ) (“J fzrfIdv/7 (nu/Uf’l‘c. ...
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This test prep was uploaded on 04/07/2008 for the course ECON 100B taught by Professor Rauch during the Fall '07 term at UCSD.

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practiceMIDTERMsol - K Name: A/l JLJ flf‘ 2? Economics...

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