ECO 200

Midterm Exam

Summer 1999

Name (Please Print) _______________________

Part 1: 25 multiple-choice questions

Part 2:

1. Discuss the article Another Chicago Triumph. Explain the statement “A savvy reader of the article ‘A Theory of the Allocation of Time’ would have invested in McDonald’s.”

2. Define the term “income.” Explain the implications of such a broad definition.

3. Bob increased the price of diet coke to $1.50 per container, up from $1.00. He noted that sales fell to 40 containers daily, as compared to 50 units prior to the price increase. Calculate the arc elasticity of demand for coke. Show formulae and all work.

4. Betty takes a short position in the OJ futures market. Because of an early frost the oj crop is small. Is Betty happy? Explain.

5. Use a graph to show the implications of a binding minimum law. Use the graph to indicate who wins and who loses. Use the graph to indicate any non-money costs associated with a binding minimum wage law. Why do minimum wage laws tend to hurt young, unskilled workers?