mt1sampletest - EC101 Sample Midterm 1 Questions Solutions...

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EC101 Sample Midterm 1 Questions Spring 2007 Solutions are at the end of the file The next four questions refer to the market for tickets for an event at the BU Agganis Arena, with the demand and supply schedules shown below: Price Quantity Demanded Quantity Supplied $0 40,000 7,000 $2 35,000 7,000 $6 18,000 7,000 $10 10,000 7,000 $14 7,000 7,000 $18 4,000 7,000 $20 1,000 7,000 1. The supply curve for tickets at the BU Agganis Arena is a. Perfectly inelastic b. Unitary elastic c. Perfectly horizontal d. Perfectly elastic 2. The equilibrium price and quantity in the market for tickets at the Arena are 3. Suppose that the BU administration thinks that every student should be able to go to this event, so they make admission free; students can just come by the Arena to pick up a ticket. What will happen in this market? 4. A new administration takes over, and has a very different opinion; they think that BU students are wasting valuable studying time by going to too many sporting events. So, they let the market determine the equilibrium price and quantity, but then set a tax of $5 on buyers of tickets; whenever a student buys a ticket, they must contribute an additional $5 to a University fund. Who will bear the burden of this tax? a. Ticket-buyers and ticket-sellers will bear the burden evenly b. It is impossible to know exactly c. Only ticket-sellers bear the burden d. Only ticket-buyers bear the burden 5. Recall the article “Your Career Matters: A Dearth of Economics Doctorates Leads to Royal Recruiting Battles.” If, as the article suggests happened, the supply of economics doctorates falls while the demand for economics doctorates rises, what would happen to the salary and quantity of economics doctorates to bring the market back into equilibrium? a. The effect on salary is ambiguous, but quantity will rise. b. Salaries will fall and quantity will rise. c. Salaries will rise and quantity will rise. d. Salaries will rise, but the effect on quantity is ambiguous.
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For the next two questions, use the following table. Labor Hours needed to make one unit of: Amount produced in 160 hours: Quilts Dresses Quilts Dresses Helen 40 10 4 16 Carolyn 80 16 2 10 6. Refer to table above. Helen has a comparative advantage in
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