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UW-Madison ECON 101 - Midterm Examination

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Midterm Exam #1; Page 1 of 10 Economics 101 Professor Wallace Midterm #1, Version #1 October 12th, 2005. DO NOT BEGIN WORKING UNTIL YOU ARE TOLD TO DO SO. READ THESE INSTRUCTIONS FIRST. You have 75 minutes to complete the exam, which consists of 35 multiple-choice questions. Each question is worth the same number of points, so manage your time wisely. Please answer the questions on your scantron sheet with a #2 pencil. Be sure to fill in the scantron sheet carefully and accurately. How to fill in the scantron sheet: 1. Fill in the bubbles on your sheet with your last name, first name, and middle initial. 2. Fill in the bubbles so we know your student identification number. 3. Fill in the bubbles under "Special Codes" spaces ABC so we know the discussion section number for which you are officially registered. Discussion sections are listed below: 4. Finally, after filling in your section code, please put the exam version in the “Special Codes” spaces. You will end up with a 4-digit “Special Codes” number – a three digit section number followed by a one digit exam version number. Jonathan Hore John Morrow Dan Wei 371 R 8:50 357 F 11:00 358 F 12:05 372 R 12:05 359 F 12:05 363 F 2:25 361 W 9:55 365 F 3:30 362 F 2:25 366 M 8:50 Greg Whitten Jason Wu 356 F 11:00 360 W 9:55 364 F 3:30 369 M 11:00 367 M 8:50 370 M 12:05 368 M 11:00 373 W 8:50 If you have a question during the exam, stay seated and please raise your hand. All scantron sheets must be turned in as you leave the exam. If you finish early and want to leave, please bring your scantron to the front of the room as quietly as possible. We will post results on the website according to the last 4 digits of your ID. If there are duplicates in these last four digits, e-mail your TA who will have your score. The exam will be discussed in section next week. Relax. Stop, take a deep breath, and think carefully before you answer any questions. Good luck!Midterm Exam #1; Page 2 of 10 Answer these multiple choice questions on the scantron sheet, selecting the best answer. 1. The production possibilities frontier is the boundary between: A) Those combinations of goods and services that can be produced and those that can be consumed. B) Those resources that are limited and those that are unlimited. C) Those combinations of goods and services that can be produced and those that cannot. D) Those wants that are limited and those that are unlimited. E) All of the above 2. In the graph above, D1 represents a linear demand curve and S1 is a linear supply curve. Suppose the equation of D1 is P=10-2Q. What must the slope of S1 have to be for point A to be at a price of $4? A) 1 B) 2 C) 5/2 D) 3 E) There is not enough information. 3. If an increase in the price of good 1 increases the price of good 2 then: A) good 1 is an inferior good. B) good 1 and good 2 must be substitutes. C) the cross elasticity of demand is negative. D) the cross elasticity of demand is positive. E) none of the above are true.Midterm Exam #1; Page 3 of 10 4. Tickets to a rock concert sell for $20. At that price, however, the quantity demanded is substantially greater than is the number of tickets available. Therefore: A) For the last ticket sold, the marginal benefit is greater than $20. B) For the last ticket sold, the marginal benefit is less than $20. C) The concert’s organizers have instituted a price floor to create a shortage. D) Demand is perfectly inelastic. E) Demand is perfectly elastic. 5. Heather’s marginal benefit from renting DVDs is always the same. The slope of her demand curve: A) equals infinity. B) equals -1. C) equals 0. D) equals minus infinity. E) equals the inverse of her elasticity of demand. Use the following information to answer the next two questions: Say the market for widgets is given by: Qd = 12 – 3P Qs = 4 + P 6. What is the price elasticity of demand in equilibrium (in absolute value)? A) 9 B) 1/9 C) 2 D) 1/2 E) 1 7. If the government imposes a price floor of $3 in this market, there will be a _______ of _______ units. A) surplus, 7 B) surplus, 4 C) surplus, 1 D) shortage, 4 E) shortage, 7 8. Say the market for Tomatoes is in equilibrium. What will happen to the equilibrium price and quantity of tomatoes if a rare disease kills half of the crop? A) Price Increases, Quantity Increases. B) Price Increases, Quantity Decreases. C) Price Decreases, Quantity Increases. D) Price Decreases, Quantity Decreases. E) Price Decreases, Quantity could Increase or Decrease.Midterm Exam #1; Page 4 of 10 9. As output moves from point c to point b to point a along the PPF above, the opportunity cost of an extra million of Good Y: A) Rises. The opportunity cost of another million of Good X falls. B) Falls. The opportunity cost of another million of Good X also falls. C) Falls. The opportunity cost of another million of Good X rises. D) Rises. The opportunity cost of another million of Good X also rises. E) Remains constant, as does the opportunity cost of another million of Good X. Suppose that the demand curve for using a toll road is given by P = 12 – 2Q. Answer the following 2 questions: 10. If the government decides not to charge any toll, then the number of crossings will be: A) 12 B) 6 C) 2 D) 10 E) 24 11. If a toll of $6 is introduced (and enforced rigidly), what is the loss in consumer surplus? A) $6 B) $9 C) $18 D) $27 E) $36Midterm Exam #1; Page 5 of 10 Use the following demand and supply curves for widgets and answer the following 5 questions: Qd = 28 – 2P Qs = 4 + 4P 12. The equilibrium quantity and price is: A) $16 and 8 widgets. B) $12 and 4 widgets. C) $4 and 20 widgets. D) $8 and 12 widgets. E) $6 and 16 widgets. 13. What is consumer surplus in equilibrium? A) $200 B) $150 C) $100 D) $50 E) $0 14. Suppose that the government requires that all widget sellers pay a tax of $1.50 per widget. How much revenue will the government collect? A) $30 B) $27 C) $20 D) $18 E) None of the above. 15. What is the deadweight loss? A) $4 B) $3 C) $2.50 D) $2 E) $1.50 16. Suppose that, instead of taxing widgets, the government subsidizes their consumption. This means that the government pays consumers $1.50 for each widget they purchase. Using the original supply curve, what will be the change in consumer surplus from that of Question 13? A) It increases by $21. B) It increases by


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UW-Madison ECON 101 - Midterm Examination

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