econ302-m1-spring08-solution

econ302-m1-spring08-solution - 1 University of Illinois at...

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University of Illinois at Urbana-Champaign ECON302 Intermediate Microeconomics Exam 1 February 21, 2008 Solutions PART I: Multiple Choice Questions (60 points) 1.Which of the following is a positive statement? a. When the price of a good goes up, consumers buy less of it. b. When the price of a good goes up, firms produce more of it. c. When the Federal government sells bonds, interest rates rise and private investment is reduced. d. All of the above. e. None of the above. 2.Use the following two statements to answer this question: I. A market is a collection of buyers and sellers that, through actual or potential interactions, determine the price for a product or set of products. II. An industry is a collection of markets for similar or closely related products. a. Both I and II are true. b. I is true, and II is false. c. I is false, and II is true. d. Both I and II are false. 1

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3.Since last year, the price of gold has risen from \$240 to \$840. What annual inflation rate would leave the real price of gold unchanged over the last twelve months? a. Approximately 29%. b. 40%. c. Approximately 71%. d. 250%. e. None of the above. 4.The nominal price of a 1990 laptop was \$3,500 and the CPI that year was 130.7. The nominal price of a laptop in 1998 was \$1,600 and the CPI that year was 163.0. What is the real price of a 1998 laptop in terms of 1990 dollars? a. \$2806 b. \$1283 c. \$1995 d. \$300 2
e. The real price cannot be determined given the information. 5.The nominal price of a 1990 laptop was \$3,500 and the CPI that year was 130.7. The nominal price of a laptop in 1998 was \$1,600 and the CPI that year was 163.0. By what percent has the real price of laptops changed? a. 24.7% b. -24.7% c. 63.34% d. -63.34% e. The percentage change cannot be determined given the information. 6. Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect a. the price of steel to fall. b. the demand curve for plastic to shift to the left. c. nothing to happen to steel because it is only a substitute for plastic. d. the demand curve for steel to shift to the left. e. the demand curve for steel to shift to the right. 7. Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. 3

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II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline. a. I only. b. II only. c. III only. d. II and III only. e. I and II only. 8. From 1970 to 1993, the real price of eggs decreased and the total annual consumption of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed? a.
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This note was uploaded on 04/29/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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econ302-m1-spring08-solution - 1 University of Illinois at...

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