Econ 10a midterm exam Fall 2021 Version B instructions This is a closed book exam. No outside sources are permitted. To earn full credit when graphing, title each graph and label all axes and curves. 1. (6 points) Short answers (a) You are reading an article in an economics journal (as you do) on the impact of nan- cial incentives on Covid vaccination. The article says that the \"incentive elasticity of vaccination\" is 0.6. Knowing nothing about this subject, what does this tell you? Be as detailed as you can in 3 sentences or fewer. (b) In a sentence, describe your opportunity cost of taking a summer class. 2. (48 points) Consider the market for Crest toothpaste, if one is indifferent between Crest and other brands. (a) Estimate the price elasticity of demand in this market (example: elastic). Explain in a sentence why you think this is the case (b) Estimate the price elasticity of supply in this market. Explain in l sentence why you think this is the case. (c) Draw a supply and demand model for this market. Make sure to indicate relative price elasticities of supply and demand. Remember to title the graph and label the axes ((1) Indicate the equilibrium price and quantity on the graph (e) Dene equilibrium in l sentence (f) Describe in l sentence why equilibrium is an important concept (g) Indicate the areas of consumer and producer surplus (h) Provide a 1 sentence denition of consumer surplus (i) Suppose that all consumers get a $600 check from the government, increasing their income. How would this model change? Describe the change in 1 sentence (j) Suppose the government is considering imposing a tax on toothpaste paid by the sellers. Draw another model with this tax imposed. Indicate the areas of consumer surplus, producer surplus, government revenue, and efficiency tradeoff/deadweight loss (these are two terms for the same thing) (k) Which model is more efcient? Explain your answer in 1-2 sentences. 3. (24 points) The market for strawberries has this demand function: (mp) = 15 E19 And this supply function: 1 615(1)) = 35:0 l (a) What is the equilibrium quantity and price? (b) Plot a supply and demand model for this market. (c) Using the midpoint formula 12Q1 ((12 +q1)/2 102101 (:02 +101)/2 what is the price elasticity of demand as the price increases from 4 to 5? E: 4. (22 points) The legalization of marijuana often comes with new taxes. However, legalizing marijuana likely increases the number of consumers entering the market, and makes those consumers more sensitive to price changes, so that a small change in price would have a larger effect on quantity demanded. Using 2 graphs, model the market for marijuana before and after legalization. Note the rela- tive areas of consumer surplus and producer surplus. Describe these changes in 1-2 sentences. Are consumers better off after legalization? Why or why not