Simon Fraser University
ECON 103-D100: Principles of Microeconomics
Instructor: Iryna Dudnyk
MIDTERM EXAM 1
Your TA is (circle one)
INSTRUCTIONS: you have 1 hour 30 minutes to complete the exam. Write all your answers in the space provided; any work on the back pages will be given zero credit. You can write in either pen or pencil. If you write in pencil your exam cannot be regraded.
The exam has 6 pages and 2 sections:
15 multiple choice questions
5 written answer questions
I. MULTIPLE CHOICE. 15 questions, each question is worth 1 point. Circle only one answer that you think is the best.
1. At price P = 5.00 a firm sells Q = 3,…show more content… Consider a market with fixed supply and inelastic demand. If supply increases
(A) total gains increase, however, sellers are worse off.
(B) total gains increase, both buyers and sellers are better off.
(C) spending on the good falls, indicating that in this case total gains from trade in fact may fall.
(D) spending on the good increases, buyers are worse off while sellers are better off.
14. Market outcome is efficient
(A) only if the market is in equilibrium
(B) when sum of the consumer and sellers’ surplus is the highest
(C) when total gains are shared fairly between the market participants
(D) (A) and (B)
(E) (A), (B), (C).
15. Consumer’s income increased by 20% while price fell by 10% - all at the same time. As a result Q increased by 30%. Based on these numbers price elasticity of demand is
(E) none of the above.
II. WRITTEN ANSWER. Answer all questions. For full marks provide full explanations and use diagrams where appropriate.
1. When a firm measured price in dollars and quantity in kilograms, it estimated that the elasticity of demand was E = 0.2. If instead of dollars price was measured in cents, the elasticity would be E = 20. Is this statement true or false? (3 marks)
2. Recently TransLink increased fares by around 10%. The objective was obviously to increase revenues. What assumption about demand is TransLink making? Will this policy have the same effect in the short-run and the