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Economics 51D
19 September 2007
EXAM ONE ANSWERS
Unfair Version
PART ONE:
Choose N Lose!
Multiple Choice—circle the best answer to each question on
the answer sheet provided.
Each question is worth 5 points.
No credit given for anything
circled on this exam.
1.
Suppose you are in the business of producing Student Bills of Rights to sell to educational
institutions.
In order to produce them, you need to hire Scriveners and rent devices known in the
biz as Habeus Corpustulators, special bacterial colonies that are fed copies of Black’s Law
Dictionary and Sudoku puzzles.
The bacterial colony partially digests the paper and rearranges
the remnants randomly, spewing out (among the gibberish) rules of procedure, evidence and the
like.
Your goal is to produce 20 Student Bills of Rights per week, which can be achieved
through several combinations of Scriveners and Habeus Corpustulators:
Method
Scriveners
Habeus
Corpustulators
A
3
11
B
4
7
C
13
4
D
5
7
E
2
10
If Scriveners earn $2000 per week and Habeus Corpustulators rent out at $1500 per week, then
A.
Methods A, B, C, and E are technically efficient and Method E is economically
efficient.
B.
Methods A, B and C are technically efficient and Method B is economically efficient.
C.
Methods B, C, and E are technically efficient and Method B is economically efficient.
D.
Methods B, C, and E are technically efficient and Method E is economically efficient.
E.
Only Method B is technically and economically efficient.
1
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C
Let’s sort the above table by the number of Scriveners used, and add in a column for total cost
according to the costs in the problem:
Method
Scriveners
Habeus
Corpustulators
Total Cost
E
2
10
19000
A
3
11
22500
B
4
7
18500
D
5
7
20500
C
13
4
32000
Now we can see clearly that Method A uses more of everything than Method E, and Method D
uses more Scriveners than Method B but the same number of Habeus Corpustulators.
So
Methods A and D are not technically efficient, leaving E, B, and C.
Of these three, Method B
has the lowest total cost, at $18,500, so it is economically efficient.
2.
If the quantity supplied falls from 60,000 units to 52,000 units and the price elasticity is .72,
then the price must have fallen from $14 per unit to
A.
$12.56 per unit
B.
$13.22 per unit
C.
$11.47 per unit
D.
$13.53 per unit
E.
$10.31 per unit
Answer:
C
Use the definition of price elasticity of supply:
elasticity = (% change in quantity supplied) / (%
change in price).
We are given .72 as price elasticity , Q
1
= 60,000,
Q
2
= 52,000, P
1
= 14 and
must find P
2
.
Inserting the numbers into the formula for price elasticity of supply gives
2
/
)
14
(
14
2
/
)
000
,
60
000
,
52
(
000
,
60
000
,
52
72
.
2
2
+

+

=
P
P
or
2
/
)
14
(
14
142587
.
72
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 Fall '07
 Fullenkampf
 Economics

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