ex1f08 - UNIVERSITY OF ARIZONA ELLER COLLEGE OF MANAGEMENT...

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Unformatted text preview: UNIVERSITY OF ARIZONA ELLER COLLEGE OF MANAGEMENT DEPARTMENT OF ECONOMICS FALL, 2008 PROFESSOR McBREARTY INDV 103 INDIVIDUALS & SOCIETY: AN ECONOMIC PERSPECTIVE SECTION 2 ’ 9:30-10:45 AM ILC 120 ‘ FIRST MID—TERM EXAMINATION (TUESDAY, SEPTEMBER 23, 2008) Name: STUDENT lD# (Please print clearly) Signature: E-mail SLA SEC. # . GENERAL INSTRUCTIONS TURN OFF ALL CELL PHONES! NO CAPSIHOODS AND NO EAR PIECES! NO CALCULATORS! There are 50 Multiple Choice Questions on the examination. The total examination is worth 100 points or 25% of the course grade. Print your name, Student ID number, section and E—mail address on both the Questions and the Scantron Answer Sheet. Fill in your answers in the spaces provided 0 n the Scantron Answer Sheet by coloring completely the box for the appropriate letter for the Multiple Choice questions. Make dark marks on the Scantron sheet with a No. 2 or mechanical pencil. ’55:, SCANTRON INSTURCTIONS Use #2 Pencil or Mechanical Pencil 0 Enter your student ID number If your SID starts with an “S” substitute “0” Bubble your SID 0 Put down your Last Name, First Name and MI. Bubble your name - Enter the Test Form based on your exam version Green: Form A Pink: Form B _ Enter your e-mail address where it says “Name”, followed by the Subject, Date and Hour (8:00AM) u Indicate the color of your exam in the middle above where it says,”Parscore Score Sheet" Completely erase any mistakes At the front of the classroom in two separate piles, turn in your: Exam Questions Scantron Answer Sheet 4 > Make sure your Scantron answer sheet is put into the appropriate pile, i.e., Form A or Form B MULTIPLE CHOICE QUESTIONS (Completely color over the most appropriate answer on they Scantron answer sheet. Do not circle your answer.) ’ 1. Suppose that when the price of milk is increased by 25 percent the quantity demanded declines by 20 percent. The coefficient of demand elasticity is equal to: a. 0.45 X 0.80 c. 1.25 d. 0.05 e. 5.00 2. An increase in the price of lumber would probably result in: SD sacks» an increase in the supply of new homes and higher new home prices a decrease in the supply of new homes and higher new home prices an increase in the supply of new homes and lower new home prices a decrease in the supply of new homes and lower new home prices a decrease in the demand for lumber substitutes 3. When Trustworthy Airlines reduced its fares by 20 percent, it sold 35 percent more tickets than before. The coefficient of demand elasticity is equal to: a. b. c. d x 0.55 1.25 0.57 0.07 1.75 4. Which of the following will shift the demand curve for compact cars to the right? a. b. ' 0. £ e. a reduction in the price of compact cars the expectation of lower compact car prices in the near future an increase in income, assuming that compact cars are an inferior good a substantial increase in the price of gasoline a reduction in the price of steel, an input in the manufacture of compact ca [‘3 5. If consumer preferences switch from pork to fls_h, this is likely to cause: a. b. C. y e. a decrease in the price of fish an increase in the price of pork increases in the price of fish and pork . an increase in the price of fish and a reduction in the price of pork decreases in the price of fish and pork 6. Bethuel Fizhugh, a character in an Economics murder mystery book, claimed that the price of iced tea in the cocktail lounge of a fancy resort in the US. Virgin Islands should be zero. if the price were actually zero, people would consume the iced tea up the point where: a. _ they received negative total utility . )1 they received no additional satisfaction from another swallow c. marginal utility was negative d. total utility is zero e. none of the above 7. Which of the following is t_ru§? a. the fewer the substitutes that exist for a product, the more elastic the demand ' b. the smaller the fraction of the family budget spent on ’é‘product, the more elastic the demand 0. the demand for Pepsi Cola is likely to be less elastic than the demand for cola drinks as a group d. the demand for tennis shoes as a product class is likely to be more elastic than the demand for a particular brand of tennis shoes I the demand for Bic Pens is likely to be more elastic than the demand for ball point pens as a product class 8. Which of the following pairs does go_t belong with the others? a. shoes and boots . ice cream and chocolate syrup 0. wallpaper and paint d. pizzas and hamburgers e. magazines and paperbacks 9. One would expect that during “hospitality hour" if all drinks at a cocktail lounge are half m: a. the supply of drinks would increase b. the quantity supplied of drinks would decrease f the quantity demanded of drinks would increase d. the demand for drinks would decrease e. the demand for drinks would increase 10. Which of the following is m); an example of a change in supply? a. a freeze in Brazil kills coffee plants y concern about lung cancer affects sales of cigarettes 0. shopping centers can earn more rent from discount clothing stores than from boutique-type stores, so they have been encouraging more such stores to open up in their facilities d. a strike interrupts production of autos high interest rates drive home builders out of business 9’ 11. 12. 13. 14. 15. Suppose a recent study found that an increase in the Federal excise tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: a. if d. beer and marijuana are substitute goods beer and marijuana are complementary goods beer is an inferior good ' marijuana is an inferior good Economic resources are also called: a. b. 0. free gifts of nature consumption goods units of money capital human wants factors of production Suppose there is an increase in the price of tractor fuel. We would expect: a. b. an increase in both equilibrium price and quantity of farm products exchanged . a decrease in both equilibrium price and quantity of farm products exchanged ». a decrease in equilibrium price and an increase in equilibrium quantity of farm products exchanged an increase in equilibrium price and a decrease in equilibrium quantity of farm products exchanged government: _ a. b. c. d. y producing the good itself . reducing the demand for the good by consumers buying and storing the surplus output using output constraints both (c) and (d) New oil deposits found in the deep waters of the Gulf of MeXiCBWWOUId be an example of: t a. b. c. d. y i an end to the economic problem of scarcity entrepreneurship capital labor land Answer questions 16 through 20 on the basis of the following graph: roan an u so to no 121: no no no 2cm “3139232116 16. If the economy is operating at point C, the opportunity cost of producing Q additional t_1_n_ijt§ of fggg would be: a. 40 units of clothing 60 units of clothing ‘0. 80 units of clothing d. 140 units of clothing e. 20 units of clothing 17. Which of the following statements is Egg? a. if the economy is operating at point A, it is producing only clothing. b. if the economy is operating at point B, the opportunity cost of producing 20 additional units of food would be 40 units of clothing. c. if the economy is operating at point D, the opportunity cost of acquiring 100 additional units of clothing would be 40 units of fodda.k if the economy is operating at point E, the opportunity cost of producing 80 additional units of clothing would be 30 units of food. v e. If the economy is operating at point D, the opportunity cost of acquiring 20 additional units of food would be 80 units of clothing. 18. If the economy were operating at point F: a. the opportunity cost of producing 20 additional units of food would be 30 units of clothing b. the opportunity cost of acquiring 30 additional units of clothing would be 20 units of food y additional food couldrbe produced at no opportunity cost in terms of sacrificed clothing d. the opportunity cost of acquiring 20 additional units of food would be 40 units of clothing e. additional clothing cannot be produced unless there is a technological advance or new resources are discovered 19. 20. 21. 22. 23. Point G on the graph represents: a. b. 9! d. e. the same combination of products that is aVailable at point C a combination of products that reflects the existence of unemployed resources a combination of products that is beyond the economy’s current production capability the combination of products that the economy is currently producing a combination of products that is forever beyond the economy’s ‘ production capability As we move along the production possibilities curve from point A to point B to point C, the opportunity cost of an additional 20 unit increment of food: a»! b. C. d. e. rises, because resources are not equally well suited to producing food and clothing . falls, because resources are not equally well suited to producing food and clothing rises, because the economy is moving closer to its maximum production potential fails, because the economy is using its resources and more efficiently remains constant If consumers expect the price of a product to increase in the future they will probably: ’ sneaks» reduce their current demand for the product increase their currentdemand for the product move down along their stationary demand curve to a higher quantity move up along their stationary demand curve to a lower quantity buy less of that product today than they normally would If the price of gasoline declined, we would expect: ? . b. c. d. e. consumers to move down along their stationary demand curve to a higher quantity the demand curve for gasoline to shift to the right 2 consumers to move up along their stationary demand curve, to a lower quantity the demand curve for gasoline to shift to the left the demand curve for large cars to shift to the left One reason that consumers choose to buy more of a product at a l0wer price than at a higher price is because the product becomes more attractive relative to other i terns serving the same function. This is called: the substitution effect the price effect the income effect the normal good effect the Adam Smith effect 24. A production possibilities curve shows: a. the combination of two products that an economy is actually producing with its stock of economic resources )1 the combination of two products that an economy is capable for producing with its finite resource stock 0. the combinations of two products that society desires the most d. all the combinations of two economic resources that will maximize the economy’s output e. all the combinations of two economic resources that are available/possible using existing technology 25. The four categories of economic resources are: a. raw materials, land, equipment, and management ,br labor, capital, entrepreneurship, and land c. raw materials, land, labor, and management d. equipment, raw materials, capital and labor e. money, land, labor, and equipment 26. Which of the following is an example of “capital” as the term is used by economists? /. the stoves and other food preparation equipment in a restaurant b. minerals and other resources in their natural state 0. money d. stocks and bonds owned by businesses and individuals e. the managers who run the company 27. Economics is the study of how to use: a. limited resources to fully satisfy unlimited wants b. unlimited resources to satisfy unlimited wants as fully as possible fl limited resources to satisfy unlimited wants as completely as possible d. unlimited resources to partially satisfy limited wants ‘* e. limited resources to satisfy unlimited wants as fairly as possible 28. The opportunity cost of the US. space exploration program is: a. negative, because it is generally agreed that the benefits derived from space exploration far exceed the costs )7 whatever other goods and services could have been produced with the resources devoted to the space program 0. nonexistent, because the space program was paid for by the government rather than by private consumers ' d. equal to the sum of all the salaries paid to the government personnel involved in the space program e. equal to the sum of the salaries of the astronauts “an” 29. If chicken and _fi_S_h_ are substitutes, then an increase in the gljge of chicken will: increase the quantity of chicken demanded decrease the quantity of fish demanded shift the demand for chicken to the right shift the demand curve for fish to the right increase the demand for Shake-N-Bake, a complement for chicken (but not for fish) 30. If sour cream and baking potatoes are complements, an increase in the price of baking potatoes would tend to: a. increase the demand for sour cream b. increase the demand for baking potatoes I decrease the demand for sour cream d. increase the quantity demanded of sour cream e. increase the quantity demanded of baking potatoes 31. If the p_ri_(§ of fertilizer declined, this would be likely to: a. decrease the quantity of wheat supplied cause wheat farmers to move down along their stationary supply curve to a higher quantity M increase the supply of wheat d. cause farmers to grow less wheat e. increase the supply of fertilizer 32. All of the following would shift the demand curve for pond-raised catfish to the Light except: an increase in per capita income (assuming catfish is a normal good) an advertising campaign touting the health benefits of eating catfish an increase in the price of chicken (a substitute) "z a reduction in the price of catfish an increase in the price of pond—raised trout (a substitute) was??? 33. A leftward shift in the demand curve for new cars could be caused by: a. an increase in the price of new cars b. an increase in fares for public transportation 0. an increase in per capita income d. b expectation of higher new car prices in the future y a reduction in used car prices 34. if the price of leather increases, then: 499 the supply curve of leather shoes will shift to the left the demand for leather will increase c. the supply curve of leather shoes will shift to the right d. the quantity of leather supplied will decrease e the price of leather belts will tend to fall 35. When XYZ manufacturing reduced the price of its product by 20%, its total revenue increased from $2 million to $2.2 million per year. On the basis of this information: a. it can be concluded that demand is elastic b. it can be concluded that demand is inelastic, but the precise value of the elasticity coefficient cannot be found " c. it can be concluded that demand is of unitary elasticity d. nothing can be concluded about the elasticity of demand 9 it can be concluded that demand is inelastic; the coefficient of elasticity is equal to 1/2 36. In general, demand for a product is more elastic: a. the fewer the substitutes and the larger the fraction of the family budget spent on the product b. the fewer the substitutes and the smaller the fraction of the family budget spent on the product i the greater the number of substitutes and the smaller the fraction of the family budget spent on that product d. the greater the number of substitutes and the larger the fraction of the family budget spent on that product e. if consumers believe it is a necessity, rather than a luxury '3’) 37. The President of Ivy College just requested an increase in tuition in order to earn additional revenue to defray rising expenses. Apparently the President believes that: a. the demand for an Ivy College education is elastic I the demand for an Ivy College education is inelastic c. the demand for an Ivy College education is of unitary elasticity d. the demand curve for an Ivy College education is upward sloping e. an increase in tuition will shift the demand curve for an Ivy College education to the right 38. The manager of the City Playhouse is contemplating an increase in ticket prices to help boost revenue. His accountant believes that a rise in ticket prices would reduce the firm’s revenue, not increase it. Apparently, a. the manager believes that demand is elastic, while the accountant believes it is inelastic y the manager believes that demand is inelastic, while the accountant believes it is elastic c. the manager believes that the price hike would reduce ticket sales, but the accountant disagrees d. the accountant believes that the price hike would reduce ticket sales, but the manager disagrees _ e. the manager believes that demand is perfectly inelastic; while the accountant believes it is merely inelastic 39. a. b. c. w e. 40. that: 921.0% .m 41. An economy’s production possibilities curve would shift outward as a result of: an increase in consumer wants a decrease in consumer wants a reduction in the unemployment rate a resource-saving advance in production technology a change in consumer preferences A nation’s production possibilities curve is constructed under the assumption the combination of products produced by the economy will remain unchanged the economy’s resource stock is fixed or unchanged there is no inflation in the economy consumer preferences do not change there is continuous economic growth If a society is operating inside its production possibilities curvé’for guns and butter, then: a b. f e. 42. e. 43. to produce more guns it must sacrifice some butter to produce more butter it must sacrifice some guns some economic resources are unemployed economic growth must occur in order to move the economy to a point on the curve consumer preferences must have changed According to the Law o_f increasing costs: if a society desires more of some particular product, it must sacrifice larger and larger amounts of other products society can obtain additional units of a given product by sacrificing smaller and smaller amounts of other products whenever output increases by a given percentage, production costs will increase at twice that rate whenever input prices increase by a given percentage, production costs will increase at twice that rate inflation accelerates as economies mature If a nation could produce §Q_Q units of civilian goods and flwunits of militag goods gr §§Q units of civilian goods and m units of militam goods, a. b. M the opportunity cost of 50 units of civilian goods is 300 units of military goods the opportunity cost of 100 units of military goods is 50 units of military goods the opportunity cost of 50 units of civilian goods is 100 units of military 'goods the opportunity cost of 200 units of military goods is 150 units of civilian goods the opportunity cost of 50 units of military goods is 100 units of civilian goods 44. Which of the following would n_ot result from [e_n_t controls? a. conversion of many apartments to condominiums b. landlords’ subdivision of apartments c. curtailed maintenance of existing properties i d. a tranSfer of income from landlords to tenants 11% 1} high vacancy rates 45. Why might a resort in the US. Virgin Islands use mainly frozen fish in its restaurants, which is flown in from the mainland U.S., while the natives generally eat the more tasty, but extremely variable local catch supplied by numerous small fishing boats? the frozen fish provide a more stable supply in inventory tothe restaurant b. the guests at the hotel generally demand non-native varieties [of fish 0. the price of local fish is probably too high relative to the frozen fish from the mainland U.S. d. the fishermen who operate the boats in such places are often social activists who refuse to sell to tourists e. none of the above 46. The pricing system in Filene’s department store basement was modeled on a Dutch auction where the price of an item was progressively reduced on a weekly basis until sold. This pricing system was designed to increase the maximum: producer surplus consumer surplus paycheck residual reservation price marginal revenue product $09.0.U\ 47. The typical lawyer might feel less able to afford a vacation than the typical secretary due to: the higher cost of travel to members of the “jet-set,” who fly anywhere on a moments notice the lawyer’s higher opportunity cost of leisure the lawyer’s heavier work load relative to his real income the lawyer’s work obligations the lawyer’s lower opportunity cost of leisure 9.0-9? .m 48. The cost to an individual of going to a matinee movie on a work day is most accurately described in terms of: a. the price of the movie ticket b. the time it takes to view the movie c. the transportation costs to and from the movie d the income given up by going to the movie during normal work hours ’1‘??? all of the above 49. 50. An implication of diminishing marginal utility is that which of the following two commodities M be marketed differently? a. automobiles and airplanes newspapers and candy bars c. coffee makers and can openers d. corn and soybeans e. coffee and juice The price of a rare, one of a kind postage stamp is a matter of: a. time of purchase b. subjective evaluation by buyers (i.e., demand) marginally productivity supply only solely how much gratification the buyer gets from possessing it d: S” ...
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ex1f08 - UNIVERSITY OF ARIZONA ELLER COLLEGE OF MANAGEMENT...

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