Q2S08 - Name Test Form A Economics 1 Quiz 2 May 7, 2008...

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Name Test Form A Economics 1 Quiz 2 May 7, 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. If the supply curve crosses the demand curve at a single point, then when the market for that good is in competitive equilibrium, everybody who buys a unit of the good pays the same price. 2. If trades are arranged between buyers and sellers so that each buyer who makes a trade has a higher buyer value than the seller cost of the person with whom he or she trades, the outcome of these trades must be efficient. 3. If the demand curve is a downward sloping straight line, then demand is more elastic at lower prices than at higher prices along this line. 4. If demanders are paid a subsidy of $10 for each unit that they purchase, the demand curve is shifted vertically upwards by $10. 5. The supply curve for a good is as follows. At prices below $10, none will be supplied. At any price above $10, exactly 10,000 units will be supplied. With no sales tax, the competitive equilibrium price of the good is $50. If a sales tax of $25 per unit is collected from buyers of this good, in the competitive equilibrium with the sales tax, demanders’ profits will be the same as they were without the sales tax. Multiple Choice Questions
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2 6. This year natural gas prices increased sharply in California. Also, more natural gas was sold in the state than in previous years. This suggests that: (a) the theory of supply and demand does not apply to necessities like natural gas, since if it did, demand would decrease when the price goes up. (b) the supply curve for natural gas is vertical. (c) the demand curve for natural gas has shifted up and the supply curve for natural gas is upward sloping. (d) the supply curve for natural gas has shifted to the right. (e) the supply curve for natural gas has shifted to the left. 7. Suppose that an oil cartel succeeded in reducing the supply of crude oil by 5% and suppose that the price elasticity of demand for crude oil is - 0 . 10. What will happen to the equilibrium price of crude oil? (a) It will fall by 5%. (b) It will rise by 5%. (c) It will rise by 20%. (d) It will rise by 50%. (e) It will rise by 30%. 8. The shrimp harvest was unusually good this year. The demand curve did not shift from last year, but because of the abundant harvest, the price fell from $100 per sack to $85 per sack. The price elasticity of demand for shrimp is - 1 . 40. What happened to the total revenue of fishermen? Choose the closest answer. (a) It decreased by about 6%. (b) It decreased by about 12%. (c) It decreased by about 48%. (d)
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This note was uploaded on 10/12/2008 for the course ECON 1 taught by Professor Bergstrom during the Spring '07 term at UCSB.

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Q2S08 - Name Test Form A Economics 1 Quiz 2 May 7, 2008...

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