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Midterm

term 1 test

8 Pages
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Department
Economics
Course Code
ECO101H1
Professor
W.G.Wolfson

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1.Yes or No Explaining ECO 100 Concepts (22 marks)
1.1Yes or No
(12) Here is an easy way to start this test just circle either Yes or No for the following
statements to indicate whether you agree (Yes) or disagree (“No) with each of them.
Thank your kindly prof for not including a penalty for a wrong answer!
(Assume positively-sloped supply and negatively-sloped Demand as appropriate. Keep in
mind the concepts discussed in lectures.)
a)If, during an economic crisis, an economy suffers unemployment, it is not producing
at its maximum potential it is at a point inside its Production Possibility Curve
(PPC). If the period of unemployment is prolonged and the skills of unemployed
workers decline significantly, the PPC shifts inwards.
Yes No
b)The Demand Schedule for a good is given by this equation:
P= 40 -2QD. For this Demand Schedule, the Price Elasticity of Demand has a value
of 1.5 at QD =8.
Yes No
c)The less elastic the demand schedule, the greater the burden of an excise tax that
will be borne by producers.
Yes No
d)The following equilibrium condition can be utilized in the indifference model of
Consumer Theory:
MUX/PX = MUY/PY
Yes No
e)If the Marginal Rate of Substitution between hot dogs (X axis) and colas (Y axis) is
less than the PC/PHD price ratio, the consumer should buy more hot dogs and fewer
colas to maximize satisfaction.
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Yes No
f)If, between two levels of Labour input, the Average Product of Labour is rising, then
the Marginal Product of Labour exceeds the Average Product of Labour over that
range of Labour input.
Yes No
1.2Explaining ECO 100 Concepts
(10) In your own words, without diagrams or equations, briefly explain the ECO 100
concepts shown below. (Keep in mind the limited marks allocated!)
The answer needs to demonstrate that you understand the meaning of each term. Your
response cannot just be a recitation of an equation or geometric term spelled out in words.
[For instance, in answer to b] Marginal Rate of substitution, stating that it is the absolute
value of the slope of an indifference curve may be true, but it wont get you any makrs!]
a)Production Possibility Curve (for an economy that produces Beef and Fish)
b) Marginal Rate of Substitution in the Labour-Leisure Model (MRSL/I)
c)Income Effect (IE) of a Price Change
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d) Marginal Product of Labour (MPL) for a Production Function that has K and L as
inputs.
2.Supply and Demand (26 Marks)
Consider the following supply and demand curves for sunglasses:
Supply: P= 8 + QSDemand: P= 80- 2QD
Where QS Is the quantity supplied of a good and QD is the quantity demanded.
2.1(16) Using the S and D equations:
a)What are values for price, quantity, consumer surplus (CS) and price elasticity of
supply (ES) at the equilibrium point? (Answers in Table below. Remember to show
your work.)
PriceQuantityCS ES
QSQD
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Description
1. Yes or No Explaining ECO 100 Concepts (22 marks) 1.1 Yes or No (12) Here is an easy way to start this test just circle either Yes or No for the following statements to indicate whether you agree (Yes) or disagree (No) with each of them. Thank your kindly prof for not including a penalty for a wrong answer! (Assume positively-sloped supply and negatively-sloped Demand as appropriate. Keep in mind the concepts discussed in lectures.) a) If, during an economic crisis, an economy suffers unemployment, it is not producing at its maximum potential it is at a point inside its Production Possibility Curve (PPC). If the period of unemployment is prolonged and the skills of unemployed workers decline significantly, the PPC shifts inwards. Yes No b) The Demand Schedule for a good is given by this equation: P= 40 -2Q D For this Demand Schedule, the Price Elasticity of Demand has a value of 1.5 at QD=8. Yes No c) The less elastic the demand schedule, the greater the burden of an excise tax that will be borne by producers. Yes No d) The following equilibrium condition can be utilized in the indifference model of Consumer Theory: MU X =XMU P Y Y Yes No e) If the Marginal Rate of Substitution between hot dogs (X axis) and colas (Y axis) is less than the P CP HDprice ratio, the consumer should buy more hot dogs and fewer colas to maximize satisfaction. www.notesolution.com
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