YOUR NAME: _
YOUR TAs NAME:_
the answer sheet for the MC provided on the last page of the exam.
1) Alice says that the present value of $700 to be received one year from today if the interest rate is 6 percent is less than
the present value of $700 to be
7. The market for apples is perfectly competitive and is in long-run equilibrium. The
price of fertilizer, a variable input used in apple growing, rises. Which of the following is
true of the price of apples?
a.
b.
c.
d.
In the short run prices will rise,
Answers:
1. d
2. a
3. b
4. e
5. c
6. a
7. b
8. c
9. c
10. c
11. d
This is still Part I: Please answer in blue book 1.
Q1. (30 points) Please show your work!
Changing tastes will effect employment in any particular sector. This question analyzes
the impact
he correct? Should the firm reduce the price of the ticket? Explain why or why
not.
c. When the 76ers play against the Boston Celtics demand for the games is high.
P=210-Q which implies MR=210-2Q. What price should the firm set for these
tickets? How many
Relate to MRP=MP*p: 1 point
Rotation of Demand: 2 point
(Note: a simple shift of the demand curve without relating it to the output
market gets zero points, though the students will still earn points for subsequent
parts)
e. Answer:
Wages and employment w
Moran, a vegan herself, points out that there is another input used in the dairy industry
and it is cows milk. She states that taking the milk from the cows is distressing for both
cows and calves. If more people follow Clintons path she hopes fewer cows
Answer key:
1. b
2. c
3. d
4. a
5. b
6. a
7. c
8. a
9. b
10. b
11. a
12. b
13. d
14. b
15. a
16. d
Part II: Short Answer Questions:
Please use a separate Blue Book to answer each of the 3 questions.
Q1. (20 points)
Ann and Bob live together in an apartmen
Q3. (10 points)
A small town has two residents Tim and Janet. The town is considering building a public
(open) park that costs $520 to build. Tim values the park at $500 and Janet values the
park at $100.
a. Is it efficient to construct this park? Explain
Final Exam Answer Key
Instructions:
This is a 120-minute examination.
Write all answers in the blue books provided. Show all work. Use diagrams where
appropriate and label all diagrams carefully.
Write your name and your Recitation Instructor's name in ev
7. The Environmental Protection Agency (EPA) has warned Company X that if it
produces more than the optimal quantity of air pollution, then it will get shut down.
Company X has a marginal cost function MC=15Q and demand P=$300. Every unit
Company X produc
installed. This would end up clogging bandwidth and slowing the connection
speeds for Davies residents. What type of good does Councilwoman Ashley
claim Davies Wi-fi will be? What is the problem with Weston residents use of
Davies Wi-fi?
Please ignore thi
Midterm 2
Answer Key March 23, 2011
Instructions:
This is a 60-minute examination.
Write all answers in the blue books provided. Show all work. Use diagrams where
appropriate and label all diagrams carefully.
Write your name and your Recitation Instructor
U shaped ATC and AVC:1
ATC above AVC:1
The distance between the two curves decreasing as q increases:1
MC intersects ATC and AVC at their minimums:1 each (2 total)
For long run eqbm P, MC, ATC all intersect at the same point:3
b. Answers:
Ideally a side-b
6. Given the following information for a perfectly competitive firm, what is true about
the quantity produced by the firm?
TVC = q2 + 9q
TFC = 50
MC = 2q + 9
P
= 19
a.
b.
c.
d.
The firm will produce zero units.
The firm will produce at MR = MC in both the
The following three questions refer to the graph below, which depicts several budget
lines for leisure and income. The individual is initially on budget line ab and consuming
at point e. The wage rate then increases.
Income
c
a
e
L0
b
d
Leisure
12. After
Mr. Potato is a small farmer in Idaho. The graph below depicts his marginal cost and
average total cost curves (per ton) of growing potatoes. Use this graph to answer
questions 7 & 8.
7. If Mr. Potato faces a price of $8 a ton, how many potatoes will he c
Final May 5th
2006
Instructions:
This is a 120-minute examination.
Write all answers in the blue books provided. Show all work. Use diagrams where
appropriate and label all diagrams carefully.
Write your name and your Recitation Instructor's name in ev
MR = 40 2Q.
(a) What is the equilibrium price and quantity for lemonade on a given night in
Abyssinia? What are Fiumes profits?
ANSWER: Setting MR = MC yields Q = 10, and then the demand curve yields P =
30. Fiume makes a profit of TR TC = 300 300 = $0.
P
1 set up
1 answer
Now, assume that the world price of garlic if $16 a box and that with imports this will
push down the US price to a similar amount.
e. What will the effect of the imports be on the market for pickers? What will happen to
employment, unem
f) Suggest a tax or a subsidy to Anns violin lessons that would induce her to
demand the socially optimal number of hours per week.
A tax of $10 per lesson would internalize the negative externality and achieve
efficiency.
3 points. 1 for tax + 1 for $10
For the supply of labor to be upward sloping, the substitution effect of higher wages
must be greater than income effect of wages on leisure, which is a normal good.
(If leisure is inferior supply is upward sloping too, but that is a strange assumption)
P
We know that Q = 100, so we can plug into demand to get Pd = 15 and into supply to
get Ps = 20;
Government Expenditure = 5*100=500;
Positive Externality (not asked for, but needed below): 5*100=500
CS = 250;
PS = 1,000;
TS = CS+PS+Ext-GE=1,250.
No DWL.
Po
Midterm 2
Instructions:
This is a 60-minute examination.
Write all answers in the blue books provided. Show all work. Use diagrams where
appropriate and label all diagrams carefully.
Write your name and your Recitation Instructor's name in every blue book
Final Exam December 12th,
2012
Instructions:
This is a 120-minute examination.
Write all answers in the blue books provided. Show all work. Use diagrams
where appropriate and label all diagrams carefully.
Write your name and your Recitation Instructor's n
5. Manufacturers of fishhooks, which are produced in a perfectly competitive market, use
machinery and labor as inputs. The market starts off in a long run equilibrium. Then the
price of machinery increases. We would expect:
I.
II.
III.
IV.
a.
b.
c.
d.
e.
Answer Key:
1. c
2.a
3.d
4.e
5.a
6.c
7.b
8.d
9.a
10.f
11.e
12.c
13.a
14.c
This is still Part I. Please answer in blue book 1.
Q1. (11 points)
In 1852, the US Army Corps of Engineers century decided to build levees, artificially
constructed walls, to regul
10. Which of the following statements are true?
I.
II.
III.
a.
b.
c.
d.
e.
f.
Every Nash Equilibrium outcome is Pareto Efficient.
Every Pareto Efficient outcome is a Nash equilibrium outcome.
If a pair of strategies (S1,S2) is a Nash equilibrium, then Pla
10. The market for pancake chefs is characterized by the following equations:
DL: w = 1000 2L
SL: w = 0.5L
The minimum wage in this market is equal to the current equilibrium wage.
What is the minimum wage?
a.
b.
c.
d.
Wmin=100
Wmin=200
Wmin=400
None of t
5. Alice and her friends, the Mad Hatter and the March Hare, produce tea cups and hats
with their labor and some raw materials.
If they produce only hats, then they can produce 15 in a day, and if they produce only
tea cups, then they can produce 20 in a
Set up: 1
Answer: 1
g. Answers:
The DWL at Q=1000 would have been (1000-500)*500/2=125,000
Giving this money to Nick is efficient as it does not reduce the size of the pie but is
rather just a re-allocation of it, giving Nick a nice big chunk.
I am inclin