# Exam 1 - ECON 2005 Fall 2007 Name SS First Exam KEY B Instructions Since a wrong answer has the same impact on your score as no answer you should

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E C O N 2 0 0 5 N a m e : Fall 2007 SS # : First Exam: KEY B Instructions: Since a wrong answer has the same impact on your score as no answer, you should answer every question. The total time is 65 minutes. The total score is 99 points. GOOD LUCK! 1. A rational decision maker takes an action only if a. the marginal benefit is greater than the marginal cost b. the marginal benefit is less than the marginal cost c. the average benefit is greater than the average cost d. the average benefit is less than the average cost 2. Given the following demand and supply equations, find the equilibrium price and quantity: P = 3 + 4Q s P = 9 2Q d a. P=7, Q=1 b. P=1, Q=7 c. P=11, Q=2 d. P=2, Q=11 3. Which of the following is NOT illustrated by the PPF? a. Efficiency b. Opportunity cost c. Equity d. Tradeoffs 4. Suppose a binding price ceiling is imposed on the market for lawn mowers. At the price ceiling, a. the quantity of lawn mowers demanded will be greater than the quantity supplied. b. The quantity of lawn mowers demanded will be equal to the quantity supplied. c. The quantity of lawn mowers demanded will be smaller than the quantity supplied. d. The quantity of lawn mowers demanded will be artificially restricted by the price ceiling.

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5. The discovery of new hybrid wheat would tend to increase the supply of wheat. Under what conditions would wheat farmers realize an increase in revenue? a. If the supply of wheat is elastic b. If the supply of wheat is inelastic c. If the demand for wheat is inelastic d. If the demand for wheat is elastic 6. Virginia Tech has decided to raise the price on parking permits to enhance revenue for parking improvements. If the buyers of parking permits respond substantially to an increase in price, then a. the planned price increase would not enhance revenue. b. the planned price increase would enhance revenue. c. Virginia Tech should increase the price of parking permits a lot. d. the price elasticity of demand for parking permits is inelastic. 7. Suppose that chocolates and Tabasco sauce are complements. Then the cross price elasticity between them is a. Negative b. Positive c. Zero 8. Suppose that a freeze in California reduces the supply of avocados. Avocados are an input in the production of guacamole, and guacamole is a substitute for salsa. What should happen? a. the price of guacamole increases and the price of salsa decreases b. the price of guacamole decreases and the price of salsa increases c. the price of guacamole increases and the price of salsa increases d. the price of guacamole decreases and the price of salsa decreases e. No way to tell what can happen 9. Which of the following is a positive statement? a. An unemployment rate of 7% is a national disgrace.
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## This note was uploaded on 03/30/2008 for the course ECON 2005 taught by Professor Zirkle during the Fall '07 term at Virginia Tech.

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Exam 1 - ECON 2005 Fall 2007 Name SS First Exam KEY B Instructions Since a wrong answer has the same impact on your score as no answer you should

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