Econ 221 fall02 midterm exam1 - Econ 221 Fall 2002...

Info icon This preview shows pages 1–9. Sign up to view the full content.

Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 4
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 6
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Econ 221 Fall, 2002 Williamson Midterm Exam #1 I. Multiple Choice: 90 Points Possible (2.5 points each) 1. The law of demand states that quantity demanded of a product increases as a. consumer income rises b. the prices of other products fall c. the price of the product rises (:l the price of the product falls 2. The law of supply states that a. Firms supply more of a product as consumer income rises b. Firms supply more of a product as consumer income falls Firms supply more of a product as the price of the product rises . Firms supply more of a product as the price of the product falls 3. The demand for chocolate is given by Q = 24 - 2? and the supply of chocolate is given by Q = P — 6. The equilibrium price of chocolate is a. $4 b. $6 24‘292P'LQ @ $10 39:30 d. $12 P... [O 4. Suppose that the demand for pizza can be written as Qd = 36 - P and the supply of pizza can be written as Q5 = P - 12. If the price of pizza is $30, which of the following is true? :31: “0...?” ‘2 a. There will be excess supply of 8 pizzas ' —' ‘ Ck). There will be excess supply of 12 pizzas Z :48 c. There will be excess demand of 12 pizzas (1‘ . L d. The market is in equilibrium iJ:“l ' V/ “~b Which of the following will not increase the demand for airline tickets? a. A Department of Energy order closing gasoline stations on weekends. 6;} A fall in the price of airline tickets. . A rise in the price of gasoline. d. An excellent record of airline safety. e. All of the above will increase the demand for airline tickets. Two goods are substitutes in consumption if a. The supply of one good decreases when the price of the other increases b. The supply of one good decreases when the price of the other decreases c. The demand for one good decreases when the price of the other increases (:> The demand for one good decreases when the price of the other decreases 7. Assume that compact discs and compact disc players are complements. When the price of compact discs increases, a. The demand for compact disc players increases The demand for compact disc players decreases c. The supply of compact disc players increases d. The supply of compact disc players decreases 8. Suppose that ramen noodles are an inferior good. When income increases the equilibrium quantity of ramen noodles will and the equilibrium price of ramen noodles will a. rise; rise b. rise: fall . fall; rise Cf) fall; fall 9. Suppose that people expect that the price of orange juice will rise next month. We would predict that the equilibrium quantity of orange juice will and the equilibrium price of orange juice will this month. (:i rise; rise b. rise; fall c. fall; rise d. fall; fall ‘h‘ Bananas and apples are substitutes. When the price of bananas rises, and rv 4% a technological advance in apple production occurs at the same time, a] The equilibrium price of apples rises and the equilibrium quantity of apples falls b. The equilibrium price of apples rises and the equilibrium quantity of apples rises c. The equilibrium price of apples rises and the equilibrium quantity of apples might rise or fall The equilibrium quantity of apples rises and the equilibrium price of apples might rise or fall ./ . . ‘!-. Suppose that in a month the price of coffee mugs increases from $1 to $2. At the same time, the quantity of coffee mugs demanded decreases from 100 to 80. The price elasticity of demand for coffee mugs {calculated using the initial value formula) is [OCJ 5K) 2!; @ 0.2 0 AQ _____-.._———- [00 . 0.5 {1 _#J3 \rqfia\ 1 10¢) .:I._V_fl. 6- 5 stiff- Q—w 9+ 20 ”TI—'— '1' “i P}, 12. If the price elasticity of demand is 1.3, demand is a. upward sloping. b. inelastic. . unitary elastic. Cf) elastic. 13. Demand for low budget items, such as candy, is generally (V than demand for large budget items, such as automobiles. a. higher b. lower . more elastic 6%) less elastic; WiiiCF‘OFJQ 14. Which of the following products has the least elastic demand? (v a. Coca Cola in 12 oz cans b. all cola drinks . all carbonated beverages @ all beverages V \ Suppose that in a month the price of school bumper stickers increases from $1 to $1.50. If the price elasticity of demand (calculated using the initial value formula) is 0.1 and the initial quantity demanded was 200, the new quantity demanded is a- 10 ><' ' q goo—k 20L? b. 50 __ :3 0 296 C- 150 351$... .. ‘ j.- 3 257;) i 30:20 2“; u— . ‘ - W '- .. 2 190 ' S/\ 20" X 540 \ ‘T {v \ Suppose we observe that as a firm decreases its price its total revenue does not change. What do we know? 200 5 \ .—-———‘J a. demand is price inelastic '75 b. demand is price elastic 200 C? demand is unitary elastic 100 210015, . demand is perfectly price elastic ‘00?- .,57K 17. A good is said to be "normal" if it if of high quality. consumers buy more of it at a high price. it has few substitutes. it has a positive income elasticity of demand. @9575“ 's most likely _ , , 5 -. @ positiver/ SUbShi‘u’reS HS \miR‘JQ. . negative ./ C0 Mpkhwchig c. zero. d. no way to tell. {v \ The cross elasticity of demand between orange juice and grapefruit juice 19. The difference between the maximum amount that a consumer is willing to y for a product and the price that is paid for the product describes: @ consumer surplus. . the cost of producing a unit of the product. c. marginal utility. d. producer surplus. 20. Producer surplus is defined as: a. the difference between the highest price consumers are willing to pay for a product and the minimum amount producers are will to accept for that product. b. the difference between the highest price consumers are willing to pay for a product and the actual price they are willing to pay. (c? the difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product. d. the economic profit earned from the sale of good, minus its marginal cost of production. M/I “~‘ Suppose that the price of macaroni rises. Quantity supplied will and producer surplus will . 6;; increase; increase . increase; decrease c. decrease; increase F d. decrease; decrease ' Use the following figure to answer questions 22-27: Price Quantity 22. Assume that the market is initially unregulated. The efficient outcome is represented by the distances for price and for uantity. éip OBI 0Q1 B) 0D; OQl C) 0G; OQ3 D) OJ; OQ2 E) 0A; 0Q2 23. The total economic surplus when the market is unregulated is represented by the points , mace. B) AEJ. C) DGF. ACD E) BBC. 24.Assume that a price ceiling is imposed at point G, i.e., the price is now represented by the distance 0G. The distance measures the extent of the . A) Q2Ql; surplus GF; shortage E) SE; shortage (fifi FI; shortage C) FI; surplus 25. After the price ceiling is imposed, producer surplus and is represented by the points . ) increases; DBC D) decreases; ODFQZ 6%) decreases; DGF E) does not change; DGF ) increases; OGFQZ N \ After the price ceiling is imposed, consumer surplus and is represented by the points A) decreases; BJEH @ increases; GAEFH— \N H) W') Oi'i'Z) EQW B) increases; BAEH ) does not change; BAC VW‘HSRZ C) decreases; JAE f: 27. The total surplus lost due to the price ceiling is represented by the ooints FEC. B) DAC. C) GJECF. D) GJEF. E) JAE + DGE‘. 28. In the longnrun a. all factors of production are fixed. 6:) all factors of production are variable. c. some factors of production are variable, while at least one factor of production is fixed. d. none of the above are correct 29. When at least one factor of production is fixed, firms require more and more workers to produce each additional unit of output. This describes a. increasing marginal returns. (E) diminishing marginal returns. . learning by doing. d. short-run adjustments. / \. The change in total variable cost resulting from a one unit increase in the change in quantity is . average variable cost. Ck; marginal cost. c. average total cost. d. opportunity cost. Wye/Mo ”2416 x K Table 8 31. Table 8 presents the cost schedule for David's Figs. If David produces three figs, David's total variable costs are a. $0 13.320 ® $60 d. $150 32. Table 8 presents the cost schedule for David's Figs. If David produces four figs, Da id's average total costs are a. $40 $47.50 c. $50 d. $100 33. Table 8 presents the cost schedule for David's Figs. If David produces five figs, David's marginal costs ar a. $30 b. $40 c. $48 dd; $50 Average total costs are minimized when a. marginal costs begin to increase. b. marginal costs begin to decrease. c. marginal cost is greater than average total cost. amarginal cost equals average total cost. You observe that at your current production of rutabaga, the average total cost of producing rutabaga is $1 and the marginal cost of producing rutabaga is $2. What should always happen if you increase rutabaga production? ATC \\/\Q a. marginal cost will rise © marginal cost will fall §\ $0, average total cost will rise . average total cost will fall //’;#__i__’ b m A a‘xALAWfiTUS 36. Under which conditions might economies of scale result. Oldie . . . oven a. hampered coordination brought about by bureaucracy “Si" b. increasing costs of inputs \ CL” . increasing output prices (d.> workers having to spend less time switching back and forth between tasks. Econ 221 NAME Fall, 2002 SECTION # Williamson Midterm Exam #1 II . Short Answer/Essay Questions: 40 Points Possible (20 points each) 1. To reduce the amOunt of property crimes, such as petty theft and burglary, being committed by the local population of heroin addicts, the police chief implements a major crackdown on the flow of heroin into the city. What will be the impact of this crackdown on the market for this drug (use a D - S diagram to illustrate your answer), as well as on the property crime rate in the town? 2. Tired of fighting a losing battle against the prostitution trade in her city, the mayor is considering a move towards its legalization. You work on her staff as an economic adviser, and she has asked you to formulate a position paper describing both the positive and negative economic aspects of such a move. Below is a ‘first drafi’ of your paper. (Stick to economic issues, she will decide on the political aspects of this move.) 2. Chapter 3, “Flying The Friendly Skies?” of The Economics of Public Issues discusses the issue of safety in the air travel industry. Write a brief essay describing the proper role, if any, of government in assuring the proper level of safety be maintained by the airlines. Would you recommend the we simply nationalize ( have the government take over control of) the airline industry? ...
View Full Document

  • Spring '05
  • Williamson

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern