lOMoAR cPSD| 36271885 lOMoAR cPSD| 3627188
Midterm exam, group M05 (First semester, year 2021 - 2022)
Course: Microeconomics (KT103H) Your fullname Ordinal no: Score Your signature Your student code:
Instructions: Write your answers in the spaces after the questions. For maximum score,
show all work. Writing an answer without showing work may not receive full score. Exam 2.
Q 1. A vegetable fiber is traded in a competitive world market, and the world price is $9
per pound. Unlimited quantities are available for import into the United States at this
price. The U.S. domestic supply and demand for various price levels are shown as follows: Price US supply (million Lbs) US demand (million Lbs) 3 2 34 6 4 28 9 6 22 12 8 16 15 10 10 18 12 4
a. What is the equation for demand? What is the equation for supply?
b. At a price of $9, what is the price elasticity of demand? What is it at a price of $12?
c. In a free market, what will be the U.S. price and level of fiber imports?
Q 2. Steve has a utitily function from consuming X and Y as follows U = X0,5Y0,5. He has
an income of $12 and price of X and Y are, respectively, $1 and $2.
a) What is the market basket (X,Y) that the Steve will choose to maximize his utility?
b) Prove that if both prices of X and Y are doubled and income is doubled, then, the
individual consumes the same market basket as in question b)