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U of M ECON 1101 - Midterm2_2014_formA

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1Midterm 2 60 minutes Econ 1101: Principles of Microeconomics November 10, 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 1. NAME 2. X.500 username (= email without “@umn.edu”) 3. Identification Number, 4. Section (recitation number) 5. 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. For quesquestiona) Form The questiopizza a 2. From Te(10 pizza) (8 pib) (8 pc) (6 pid) (32 pe) (24 p 3. Supposebudget cslice of pa) ½ sob) 1 soc) 2 sod) 3 soe) 4 sostion 1, plean to verify them A ons on thisnd soda anerrapin’s indas, 10 sodaszzas, 12 sodpizzas, 22 sozzas, 6 sodapizzas, 4 sodpizzas, 2 sode Terrapin hconstraint inpizza equalsoda da das das das ase fill in (a) e exam form page and tnd the graphifference curs) and das) odas) as) das) das) as an incom the above fs on your bubm.) the next pah illustratesrves, we canme of $60, thfigure. From 2bble sheet, aage refer to s his indiffern determine at PPizza=$4,m this we canas this is exathe graph rence curvethat Terrapi, and that PSn see that tham form A. (below. Teres. in is indiffereSoda=$2. Drhe opportunit(We are usinrrapin consent between raw Terrapinty cost of onng this umes having n’s ne more34. At this income and prices of soda and pizza, the optimal consumption bundle for Terrapin is a) (7.5 pizza, 15 sodas) b) (4 pizza, 22 sodas) c) (15 pizza, 0 sodas) d) (10 pizza, 10 sodas) e) (14 pizza, 2 sodas) 5. Suppose the price of pizza falls from $4 to $2. The change in the demand for pizza equals a) 0 b) 4 c) 8 d) 10 e) 12 6. When the pizza price falls from $4 to $2, what can we say about the substitution and income effects on the demand for pizza? a) They are both positive, and the substitution effect is bigger than the income effect. b) They are both positive, and the substitution effect is less than the income effect. c) The substitution effect is negative and the income effect is positive. d) The substitution effect is positive and the income effect is negative. e) The substitution effect is zero and the income effect is negative. 7. When the price of pizza falls from $4 to $2, at the new optimal consumption bundle, the marginal rate of substitution will equal _____ (soda for pizza) a) 0 b) .5 c) 1 d) 2 e) 4 8. Go back to the beginning when the price of pizza is PPizza=$4 (and PSoda=$2 and income is $60). Suppose Terrapin wins a prize where he can pick between lowering his pizza price to PPizza=$2 (for as many slices as he wants to buy) or increasing his income by $2 to $62. Which of the following is true? a) He prefers a $2 price cut per pizza slice over a $2 income increase b) He prefers a $2 income increase over a $2 price cut. c) He is indifferent between the two prizes. d) There is not enough information to answer this question.9. Under w(i.e. perf(i) Margi(ii) The s(iii) Ther(iv) The (v) Inpu a) (i) anb) (iii) ac) (i), (id) (ii), (e) (i), (i Suppose thecost strudemand10. Fixed coa) 9 b) 5 c) 8 d) 12 e) 15 what assumpfectly flat)? inal cost is gsame technore are no basupply curvut prices do nd (ii) and (iv) iii), and (iv) (iii), and (v) ii), (iv), and (e required aucture illustrad curves, D1 ost equals ptions will thegreater than ology is avairriers to entre has unit enot change (v) ssumptions ated in the leand D2. e long-run suaverage totailable to all fry in the indulasticity as the indusfrom above eft graph be4upply curve al cost at evfirms. ustry. stry expandshold for thelow. The rigfor the widgvery quantitys e widget indught graph illuget industry by level. ustry. Each ustrates two be perfectlywidget firm different poelastic has the ssible5For the next four questions, assume demand is D1 and the industry is in long-run equilibrium. (Note D1 is the demand curve on the right.) 11. The price PLR is a) 8 b) 5 c) 12 d) 4 e) 6 12. Long-run output per firm qLR equals a) 2 b) 3 c) 4 d) 5 e) 6 13. Long-run industry quantity QLR equals a) 500 b) 700 c) 300 d) 400 e) 600 14. Long-run number of firms NLR equals a) 50 b) 100 c) 150 d) 200 e) 300 15. Suppose the industry is initially in long-run equilibrium at demand D1 and the number of firms equals the number in the previous question. Demand then shifts to D2. In the short-run, the equilibrium price will be a) 4 b) 5 c) 6 d) 7 e) 8 16. Continuing the previous question, after demand shifts to D2, in the short run, the profit of each firm will be a) –2 b) –4 c) –8 d) 4 e) 9617. When demand shifts like in the previous question, price changes ______ in the short run than the long run, and quantity changes ______ in the short run than the long run. a) less, more b) less, less c) more, more d) more, less Name Willingness to Pay D1 7 D2 3 D3 1 D4 0 18. In Econland, the willingness-to-pay for a national park is given by the table above. Suppose that a national park is nonrivalrous in consumption and nonexcludable. It is socially efficient to build the national park if and only if the cost is no higher than a) 6 b) 2 c) 20 d) 11 e) 7 19. Suppose Econland is initially in autarky. Then after it opens up to trade, widget producers in Econland become better off while widget consumers in Econland become worse off. After Econland leaves autarky, a) it must be using an import quota on widgets. b) it must be using a tariff on imported widgets. c) it must be exporting widgets. d) None of the above.7Robinson works 5 hours a day. He can make 8 apples per hour or 2 oranges per hour. Friday works 10 hours a day. He can make 1 apple per hour or 4 oranges per hour. The figures below show the indifference curves for Robinson and Friday. Illustrate Robinson’s and


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