Exam 1 v1 with Answers

Exam 1 v1 with Answers - v1 Name_ UMID_ Chad Hogan First...

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v1 Name___________________________ UMID___________________________ Chad Hogan Winter 2008 First Exam Economics 101 The University of Michigan NOTES: 1. For each question, a correct answer is worth 5 points, no answer is worth 1 point, and an incorrect answer is worth 0 points. 2. Given that the exam has 30 questions, the maximum possible score is 150. 3. Given that each question has 5 possible answers, a wild guess will earn 1 point on average, the same number of points earned by providing no answer. Guessing only gives you a better return than leaving the question unanswered if you can eliminate at least one answer (in which case a guess will earn more than 1 point on average). 4. The use of calculators, cell phones, personal digital audio players, or any other electronic devices will not be permitted during the exam. 5. Have your UMID with you at all times during the exam. 6. In order for your scantron to be correctly graded, you must fill in the version number of your exam (see the upper left corner of this page) on the scantron. 7. When you are done with the exam, you will turn in this page (with name and UMID filled in) along with your scantron. 8. Unless a question explicitly notes otherwise, assume that all supply and marginal cost curves slope upward and that all demand and marginal value curves slope downward.
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Page 2 1. ___ Corn has many uses. For example, it can be made into corn ethanol, and sold to gasoline producers who use it as an additive. Or it can be made into high fructose corn syrup for use in all sorts of delightful offerings such as soda. Consequently, we might expect that prices in the gas and corn markets will both be affected by shocks to the soda market. Suppose that Pepsi runs a series of extremely funny and successful advertisements during the Super Bowl. In response demand for Pepsi (and demand for high fructose corn syrup) increases. This is likely to: (a) increase the price of corn, and reduce the price of gasoline; (b) reduce the price of corn and reduce the price of gasoline; (c) increase the price of corn and increase the price of gasoline; (d) reduce the price of corn and increase the price of gasoline; (e) increase the price of corn, but have no impact on the price of gasoline. 2. ___ In a small, isolated village economy, the opportunity cost of producing the marginal clay pot is 2 bushels of wheat. An additional bushel of wheat is worth about ¼ of a clay pot to Orson, but that same bushel of wheat would be worth ½ of a clay pot to Reginald. From this information, we can conclude that: (a) the efficient quantity of clay pots is produced in the village; (b) it would be more efficient to produce more clay pots, but an increase in social surplus could only be realized if the extra clay pots were given to Orson; (c) it would be more efficient to produce more clay pots, and an increase in social surplus could be realized whether Orson or Reginald received extra pots; (d) it would be more efficient to produce fewer clay pots, but an increase in social
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Exam 1 v1 with Answers - v1 Name_ UMID_ Chad Hogan First...

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