ECON 1 SP 08 Midterm 1

# ECON 1 SP 08 Midterm 1 - MIDTERM EXAM#A1 Closed book/notes...

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MIDTERM EXAM #A1 Closed book/notes; calculator ok. NO SHARING OF CALCULATORS OR USE OF CELL PHONES. Put answers in space provided. Show work for credit and to avoid allegations of cheating. Carry 3+ decimal places in calculations. Point values of questions in [boldface] . Problem 1 -- Circular Flow For each flow in the list below, write the letter of the corresponding flow from Figure A. [6] List for Figure A G Commodities supplied by producers F Buyer spending on goods and services H Sales revenue of firms A Business costs of production B Employment of resources D Household incomes Market supply and demand functions for good X are given by: Demand: X d = D(P) = 4000 − 60 P Supply: X s = S(P) = −300 + 40 P A. Find equilibrium price and quantity. [2, 2] P* = \$ _43_ per unit X* = _1420_ units B. A price of P = \$50 will cause a { shortage surplus } of _700_ units. [2] Problem 3 – Comparative Statics The market for newsprint (paper used in newspapers) is in equilibrium at [P*, X*] in Figure B. Suppose two things happen simultaneously: #1) Literacy rises in the general population. #2) Costs increase due to new paper mill plant safety regulations. As a result of these changes { Circle best answer} : [[email protected] each] Quantity exchanged {rises, falls, no change, can't tell } Price { rises , falls, no change, can't tell} Pr 1 _____ 6 Pr 2 _____ 6 Pr 3 _____ 4 Pr 4 _____ 6 M-C _____ 12 S-E 16 /50 Fig. A Resource Market Product Market Producing Sector Consuming Sector A H F D G E C B P* X* Fig. B

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Ec 1 MIDTERM #A1 KEY p. 2 Problem 4 – PPF and Exchange Figure 3 shows two (linear) PPFs for Egypt and Sudan. Both economies are capable of producing food (F, in tons) and tools (T, in crates). A. The opportunity cost of producing one ton of food in Egypt is
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ECON 1 SP 08 Midterm 1 - MIDTERM EXAM#A1 Closed book/notes...

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