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Q1S08 - Name Test Form A Economics 1 Quiz 1 Each correct...

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Name Test Form A Economics 1 Quiz 1 April 23, 2008 Each correct answer is worth 5 points. Answers left blank are worth 2 points. Wrong answers are worth 0 points. True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. When General Motors closed its assembly plant at Willow Run, Michigan and moved many of the workers from that plant to a plant in Texas, occupancy rates in apartment buildings located near the Willow Run assembly plant fell drastically. Because of the reduced occupancy rates, economists would expect the owners of these apartment to raise their rents so as to be able to recover their costs from a smaller number of renters. 2. The price of gasoline is higher in the summer than in the winter even though more gasoline is sold per month in the summer than in the winter. This fact is best explained by a shift in the demand curve for gasoline between summer and winter. 3. Ellen is deciding whether to attend graduate study. If she attends graduate school, she must leave a full-time job paying $50,000 per year. The salary she would forgo if she attends graduate school is part of the opportunity cost of attending graduate school. 4. A competitive equilibrium results in the largest possible number of transactions in which both buyers and sellers make a profit. 5. A competitive equilibrium price is defined to be a price at which buyers and sellers make equal profits. Multiple Choice Questions
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Economics 1 2 6. A market has 45 potato growers and 55 potato consumers. Each grower can sell at most one sack of potatoes. Each consumer can consume either 0 or 1 sack of potatoes. There are 15 low-cost potato growers, each of whom can produce potatoes at a cost of $5 per sack and 30 high-cost potato growers, each of whom can produce potatoes at a cost of $40 per sack. There are 20 consumers who have Buyer Values of $50 a sack and 35 consumers who have Buyer Values of $30 a sack for potatoes. If prices do not have to be the same for every trade, what is the largest number of sacks of potatoes that could be traded in such a way that all buyers and all sellers make a profit? (a) 20 (b) 55 (c) 45 (d) 40 (e) 35 7. In the previous problem, how many sacks of potatoes would be sold in competitive equilib- rium? 8. For winter quarter, the UCSB market for used Econ 1 textbooks has 100 buyers and 100 sellers. The buyers are students who will be taking Econ 1 in the winter, and the sellers are students who completed the course in the fall. Each buyer wants to purchase one textbook at most, and each seller has only one textbook to sell. Fifty of the buyers are willing to pay up to $40 for a used textbook, and fifty are willing to pay up to $30 for a used textbook. Seventy-five students from fall quarter are willing to sell their textbooks if they receive at least $25 for a textbook, and 25 students are willing to sell for at least $35 for a textook. In a competitive equilibrium in the UCSB market for used textbooks, what is the total profit of buyers and sellers?
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