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Mid Ex-2020
Mid Ex-2020
CODE 1
MIDTERM EXAM
Student’s full name:
November 17, 2020
Student’s code:
Duration: 60 minutes
Problem 1. 3.0 pts The demand and supply functions of a good are given by
P = −3QD + 80, P = QS + 8
where P , QD and QS denote price, quantity demanded and quantity supplied, respectively.
(a) Find the equilibrium price and quantity if the government imposes a fxed tax of $36 on each good.
Problem 2. 2.5 pts A taxi firm charges a fixed cost of $15 together with a variable cost of $4 per mile.
(a) Work out the average cost per mile for a journey of 8 miles.
(b) Work out the minimum distance travelled if the average cost per mile is to be less than $5.5.
Problem 3. 2.0 pt An individual saves $2000 in a bank account at the beginning of each year. The
bank offers a return of 10% compounded annually. Determine the amount saved after 10 years.
Problem 4. 2.5 pts A project requires an initial outlay of $25000 and produces returns of $8000, $9000
and $15000 at the end of years 1, 2, and 3, respectively. If the market rate is 8%, find the present value of
the cash flow and then the net present value of the project.
Problem 1. 3.0 pts The demand and supply functions of a good are given by
1
P = −3QD + 98, P = QS + 25
2
where P , QD and QS denote price, quantity demanded and quantity supplied, respectively.
(a) Find the equilibrium price and quantity if the government imposes a fixed tax of $10 on each good.
10
AC = 2Q + 8 +
Q
and the demand function is
P = 32 − Q.
(b) Find the maximum profit and the value of Q at which it is achieved.
Problem 3. 2.0 pts Suppose that the interest rate is 8% compounded annually. Find the present value
of an annuity which give a regular income of $5000 at the end of each year for the next 10 years.
Problem 4. 2.5 pts A project requires an initial outlay of $90000 and produces a return of $30000 at
the end of year 1, $40000 at the end of year 2, and $R at the end of year 3. Determine the value of R if
the internal rate of return is 11%.
Problem 1. 3.0 pts The demand and supply functions of a good are given by
P = −3QD + 112, P = QS + 24
where P , QD and QS denote price, quantity demanded and quantity supplied, respectively.
(a) Find the equilibrium price and quantity if the government imposes a fixed tax of $8 on each good.
Problem 2. 2.5 pts The prices of a good at the end of each year between 2014 and 2018 (with 2015
being the base year) are listed in the table which also shows the annual rate of inflation:
If the index number of the real price for 2019 is 115 and the rate of inflation for that year is 5%, work out
the nominal value of the price in 2019.
Problem 3. 2.0 pts A person borrows $80 000 at the beginning of a year and agrees to repay the loan
in ten equal installments at the end of each year. Interest is charged at a rate of 8% compounded annually.
Find the annual repayment.
Problem 4. 2.5 pts A project requires an initial outlay of $30000 and produces returns of $10000,
$18000 and $25000 at the end of years 1, 2, and 3, respectively. If the market rate is 10%, find the present
value of the cash flow and then the net present value of the project.
Problem 1. 2.0 pt An individual saves $2000 in a bank account at the beginning of each year. The
bank offers a return of 10% compounded annually. Determine the amount saved after 10 years.
Problem 2. 3.0 pts The demand and supply functions of a good are given by
P = −3QD + 80, P = QS + 8
where P , QD and QS denote price, quantity demanded and quantity supplied, respectively.
(a) Find the equilibrium price and quantity if the government imposes a fxed tax of $36 on each good.
Problem 3. 2.5 pts A taxi firm charges a fixed cost of $15 together with a variable cost of $4 per mile.
(a) Work out the average cost per mile for a journey of 8 miles.
(b) Work out the minimum distance travelled if the average cost per mile is to be less than $5.5.
Problem 4. 2.5 pts A project requires an initial outlay of $25000 and produces returns of $8000, $9000
and $15000 at the end of years 1, 2, and 3, respectively. If the market rate is 8%, find the present value of
the cash flow and then the net present value of the project.
Problem 1. 3.0 pts The demand and supply functions of a good are given by
1
P = −3QD + 98, P = QS + 25
2
where P , QD and QS denote price, quantity demanded and quantity supplied, respectively.
(a) Find the equilibrium price and quantity if the government imposes a fixed tax of $10 on each good.
Problem 2. 2.0 pts Suppose that the interest rate is 8% compounded annually. Find the present value
of an annuity which give a regular income of $5000 at the end of each year for the next 10 years.
10
AC = 2Q + 8 +
Q
and the demand function is
P = 32 − Q.
(b) Find the maximum profit and the value of Q at which it is achieved.
Problem 4. 2.5 pts A project requires an initial outlay of $90000 and produces a return of $30000 at
the end of year 1, $40000 at the end of year 2, and $R at the end of year 3. Determine the value of R if
the internal rate of return is 11%.
Problem 1. 3.0 pts The demand and supply functions of a good are given by
P = −3QD + 112, P = QS + 24
where P , QD and QS denote price, quantity demanded and quantity supplied, respectively.
(a) Find the equilibrium price and quantity if the government imposes a fixed tax of $8 on each good.
Problem 2. 2.0 pts A person borrows $80 000 at the beginning of a year and agrees to repay the loan
in ten equal installments at the end of each year. Interest is charged at a rate of 8% compounded annually.
Find the annual repayment.
Problem 3. 2.5 pts The prices of a good at the end of each year between 2014 and 2018 (with 2015
being the base year) are listed in the table which also shows the annual rate of inflation:
If the index number of the real price for 2019 is 115 and the rate of inflation for that year is 5%, work out
the nominal value of the price in 2019.
Problem 4. 2.5 pts A project requires an initial outlay of $30000 and produces returns of $10000,
$18000 and $25000 at the end of years 1, 2, and 3, respectively. If the market rate is 10%, find the present
value of the cash flow and then the net present value of the project.