1 Economics 101 Name _____________________________ Fall 2011 TA Name __________________________ 11/22/11 Discussion Section #_________________ First Midterm Student ID # _______________________ Version 1 DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SO READ THESE INSTRUCTIONS FIRST You have 75 minutes to complete the exam. The exam consists of 33 multiple choice questions. Each question is worth 3 points. You will receive an additional 1 point for filling in the scantron sheet and exam booklet completely and accurately for a total of 100 points. - Answer all questions on the scantron sheet with a #2 pencil - Pick the best answer for each question. If there is an error on the exam or you do not understand something, make a note on your exam booklet and the issue will be addressed AFTER the examination is complete. No questions regarding the exam can be addressed while the exam is being administered. - When you are finished, please get up quietly and bring your scantron sheet and this exam booklet to the place indicated by the instructors. NO CELL PHONES, CALCUATORS, OR FORMULA SHEETS ARE ALLOWED How to fill in the scantron sheet: 1. Print your last name, first name, and middle initial in the spaces marked "Last Name," "First Name," and "MI." Fill in the corresponding bubbles below. 2. Print your student ID number in the space marked "Identification Number." Fill in the bubbles. 3. Write the number of the discussion section you’ve been attending under "Special Codes" spaces ABC, and fill in the bubbles. You can find the discussion numbers below on this page. 4. Write the version number of your exam booklet under "Special Codes" space D, and fill in the bubble. The version number is on the top of this page. Discussion sections are as follows: Patricia Abbott Irina Merkurieva Nelson Ramirez Rondan Dis 332 Fr 08:50 Dis 330 Th 03:30 Dis 336 Fr 11:00 Dis 335 Fr 01:20 Dis 333 Th 04:35 Dis 339 Fr 12:05 Dis 337 Fr 02:25 Dis 342 Fr 09:55 Dis 338 Fr 12:05 Dis 346 Fr 08:50 Kegon Tan Ryan Veiga Dis 334 Fr 01:20 Dis 331 Th 03:30 Dis 340 Fr 02:25 Dis 343 Fr 11:00 Dis 341 Fr 04:35 Dis 345 Fr 09:55 Dis 347 Fr 08:502 Work Sheet3 I, __________________________________, agree to neither give nor receive any help on this exam from other students. Furthermore, I understand that use of a calculator is an academic misconduct violation on this exam. Signed ____________________________________4 QUESTIONS 1. A firm has increased all inputs used in the production of its product by 50%. As a result, the firm’s output has doubled. From this information we can conclude that the firm’s production function exhibits: a. Increasing returns to scale. b. Decreasing returns to scale. c. Decreasing marginal returns. d. Increasing marginal returns. 2. If Peter’s marginal rate of substitution of x for y is given by MRSxy = 5 at his optimum consumption bundle, and if the price of x is $2, then what is the price of y? a. $0.40 b. $2.50 c. $5.00 d. $10.00 e. $12.40 3. The farmers in a small rural town face a perfectly elastic demand curve. In equilibrium, 10 units are sold. After the government imposes a $2 tax, the producer tax incidence is $12. Given this information, what must the slope of the supply curve be? a. 1/12 b. 1/10 c. 5/6 d. 1/5 e. 1/2 Next→5 4. Derek’s indifference curves for good x and good y are bowed toward the origin. Which of the following statements might have been said by Derek in regard to goods x and y? a. “I don’t care how much y I have when I make decisions about how much x to buy.” b. “Good x and y don’t mix very well. I’d rather just have more of one or the other.” c. “I like x every bit as much as I like y. I’m happy either way!” d. “The more y I have, the less I like x.” e. “It’s boring to have too much of one or the other. I like variety.” Use the following information to answer the next TWO (2) questions. Deirdre’s Soap Company has a total cost curve for producing Q bars of soap given by the equation TC=2+Q+(1/2)Q2. Her marginal cost is given by MC=1+Q. 5. If Deirdre is producing 4 bars of soap, what is her total VARIABLE cost? a. $5 b. $20 c. $14 d. $4 e. $12 6. Given the initial information, if the market price is $4 per bar of soap, what will be Deirdre’s profit? a. $2.50 b. $12.00 c. $9.50 d. $4.50 e. $9.00 Next→6 7. Researchers worry that the consumer price index may not measure inflation accurately. Which of the following situations will NOT lead to inaccuracy in the calculation of the consumer price index? a. Marshall’s (a clothing store) frequently discounts items in the store. b. The internet has made it much easier to research prices and to purchase goods quickly. c. Many goods today are made with higher quality, compared to their counterparts 20 years ago. d. Computers have become immensely popular in the past 30 years. 8. Bob’s indifference curves between good x and good y are shown below where U is the symbol for the level of utility Bob gets from a particular indifference curve. Suppose Bob’s budget is $40, and both good x and good y cost $8. Given this information and the graph below, what will be Bob’s highest attainable utility? (Hint: you will need to carefully draw something on the graph. Choose the answer that seems most reasonable given what you drew.) a. 1 b. 2 c. 3 d. 4 e. 5 Next→7 9. Consider the effect of an excise tax on the following markets. In which market would you expect the consumer tax incidence to be relatively low? a. The market for cigarettes: consumers are addicted to cigarettes and have a hard time cutting back or quitting. b. The market for rented apartments in a small, poor town: people are too poor to buy or build new housing, and they can’t afford to commute from another community that might have cheaper rental units. c. The market for beef: most people like chicken and fish, too. d. The market for insulin-dependent diabetics: diabetics need insulin! Use the following information to answer the next TWO (2) questions. Ruth needs new clothes. At the original price of $10 for a shirt, Ruth will buy 4 shirts. Unfortunately for Ruth , the price of shirts has risen to an extreme $20 for a shirt!
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