Midterm 1 60 minutes Econ 1101 Principles of Microeconomics October 6 2014 Exam Form A Name Student ID number Signature Teaching Assistant Section The answer form the bubble sheet and this question form will both be collected at the end of the exam Fill in the information above and then on the answer form please write the following information NAME X 500 username email without umn edu Identification Number Section recitation number Form A in box marked Form Version Fill in the corresponding bubbles Sign your name on back of answer form You will be awarded 1 5 bonus points for filling the correct name x500 ID and form number on the answer form There are 33 questions All questions are multiple choice Each question has a single answer Select the best answer for each question and fill in the corresponding bubble on the answer sheet Use a Number 2 pencil to fill in your answer You are not permitted to use calculators or to open books or notes 1 1 For question 1 please fill in a on your bubble sheet as this is exam form A We are using this question to verify the exam form a Form A The following four questions consider the market for ethanol For each of the following situations determine what happens to the equilibrium quantity Qethanol and equilibrium price Pethanol of ethanol 2 The price of corn decreases Corn is an input in the production of ethanol a Qethanol and Pethanol b Qethanol and Pethanol c Qethanol and Pethanol d Qethanol and Pethanol 3 The price of crude oil decreases a Qethanol and Pethanol b Qethanol and Pethanol c Qethanol and Pethanol d Qethanol and Pethanol 4 Two things happen i the price of corn decreases ii the price of crude oil decreases a Qethanol and we can t tell what happens to Pethanol b Qethanol and we can t tell what happens to Pethanol c Pethanol and we can t tell what happens to Qethanol d Pethanol and we can t tell what happens to Qethanol 5 Consider the widget industry Suppose the price of an complement increases and as a consequence PWidget decreases while Qwidget remains unchanged Which of the following statements about the widget market must be true a Demand is perfectly elastic b Supply is perfectly elastic c Demand is perfectly inelastic d Supply is perfectly inelastic e none of the above 6 In an industry 1 demand is unit elastic i e the elasticity of demand equals one and 2 supply is unit elastic i e the elasticity of supply equals one Suppose a tax is imposed on the industry Which statement is true a Sellers bear the entire burden of the tax b Buyers bear the entire burden of the tax c Buyers and sellers each bear some of the burden of the tax d There is insufficient information to answer the question 2 Reservation Prices and Costs in Econland for a Widget Name of D Reservation Cost to Name of Person price for one make S widget one widget Person dollars dollars D1 9 1 S1 D2 8 2 S2 D3 7 3 S3 D4 6 4 S4 D5 5 5 S5 D6 4 6 S6 D7 3 7 S7 D8 2 8 S8 D9 1 9 S9 D10 0 10 S10 7 The table above provides reservation prices and costs for the inhabitants of Econland Suppose we have an allocation where S9 produces a widget and S2 does not produce a widget This is not Pareto efficient because a S9 can give 10 to S2 and S2 can make the widget instead of S9 and both are better off b S9 can give 1 to S2 and S2 can make the widget instead of S9 and both are better off c S9 can give 1 99 to S2 and S2 can make the widget instead of S9 and both are better off d S9 can give 2 01 to S2 and S2 can make the widget instead of S9 and both are better off e None of the above 8 Suppose we have an allocation where S1 S2 S3 S4 S5 produce a widget and D1 D2 D3 D4 D5 consume a widget a This is not Pareto efficient because we can have S9 sell to D1 for 9 S8 sell to D2 for 8 S7 sell to D3 for 7 and so on up to S1 sell to D9 for 1 and this will maximize output b This is not Pareto efficient because S8 can sell a widget to D8 for 8 and both are better off c This is not Pareto efficient because S5 should outsource production to S10 d This is not Pareto efficient because the condition for efficient allocation of consumption is not satisfied e None of the above 9 True of False In any Pareto efficient allocation producer surplus must equal consumer surplus a True b False 3 10 9 8 7 6 5 4 3 2 1 0 S D 0 1 2 3 4 5 6 7 8 9 10 Quantity The above diagram gives information about demand and supply for widgets in Econland 10 True of False In the unregulated market equilibrium excess demand must be zero a True b False 11 Suppose the market is currently unregulated Consumer surplus equals a 5 b 10 5 c 12 5 d 16 e 25 12 Suppose the government offers a subsidy of 6 per widget The equilibrium quantity with the subsidy is a 2 b 6 c 7 d 8 e 10 13 The total government expenditure on a program with a 6 subsidy is a 12 b 36 c 48 d 60 e 80 4 14 The change in total surplus deadweight loss of the 6 subsidy program compared to the unregulated market equals a 1 b 2 c 4 d 8 e 9 15 Suppose instead of the subsidy there is a price ceiling of 2 Excess demand in the market equals a 0 b 2 c 4 d 6 e 8 16 Suppose when the price ceiling is 2 that rationing is perfectly inefficient Consumer surplus equals a 1 b 2 c 4 d 10 e 14 17 Suppose instead of a price ceiling there is a price floor of 2 Consumer surplus equals a 0 b 4 c 12 5 d 25 e 32 18 Finally suppose instead of all the policies listed above there is a cap and trade policy that caps the total amount of quota at 4 units The equilibrium price of one unit of quota at the quota exchange equals a 1 b 2 c 3 d 4 e 5 5 19 Which statement is true about government intervention in the dairy industry in Canada a There is a government subsidy for milk b There is a price ceiling on milk c There is a tax on milk that is rebated back to farmers d There is a cap and trade program for milk e None of the above 20 Consider the following conditions that may or may not apply about a market 1 There are no externalities in …