Final 2003

Final 2003 - Department of Economics University of...

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Department of Economics Professor Kenneth Train University of California, Berkeley Spring 2003 ECONOMICS 1 FINAL EXAMINATION May 16, 5-8pm INSTRUCTIONS 1. Please fill in the information below: Your Name: Your SID#: GSI’s Name: Section Days/Time: 2. There are a total of 180 points, 8 questions, and 11 pages (including this cover sheet). The suggested times to spend on each question are in parentheses. 3. Answer the questions in the space provided. (NO BLUE BOOKS.) If you need extra room to answer questions, use the backs of the pages. 4. Calculators are not permitted. 5. You may leave early if you finish prior to 7:45. So that the end of the exam is orderly, please do not leave between 7:45 and 8pm. 6. When time is called, stop writing immediately and pass your exam to your right. HAVE A GOOD SUMMER! J >>> D O NOT TURN THE PAGE UNTIL YOU ARE TOLD TO BEGIN THE EXAM . <<<
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Page 2 of 11 QUUESTION 1: 40 Total Points (40 Minutes) True, False, or Uncertain For each of the following decide whether the statement is true, false, or uncertain and explain why. Your explanation determines the grade; you will be given no credit for an answer without an explanation. Use diagrams where they are appropriate to complement your answer. a) [8 points] A competitive market maximizes social welfare because in a competitive market profits are zero. b) [8 points] The socially optimal level of pollution is zero. c) [8 points] An additional dollar of tax reduction has the same effect on the economy as an additional dollar of government expenditure.
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Page 3 of 11 QUESTION 1 (Continued) d) [8 points] When OPEC triples the price of oil used by American producers, it causes aggregate output and prices to rise. e) [8 points] The aggregate demand curve for the economy is derived by aggregating market demand curves across all markets.
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Page 4 of 11 QUESTION 2: 20 Total Points (20 Minutes) Consider an island economy with only two persons, Alex and Ben, and only two goods, fish and coconuts. Alex could catch 6 fish per hour or collect 12 coconuts per hour, and Ben could catch 4 fish per hour or collect 2 coconuts per hour. These rates are the same no matter how much time they spend in each activity. Each person works 10 hours each day. a)
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Final 2003 - Department of Economics University of...

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