Economics 1 - Fall 1996 - Olney - Final

Economics 1 - Fall 1996 - Olney - Final - ECON 1 F96 Prof M...

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ECON 1 F96 Prof. M. Olney FINAL EXAM PART I. Questions covering the entire course 1. There are 74,000 seats in Cal's football stadium. In 1994 tickets for the Big Game cost $35 each and the Big Game was sold out. This year, tickets cost $50 each and there were 4,000 unsold tickets for the Big Game. Draw a diagram at right that illustrates the situation, using subscripts '94' and '96.' Briefly explain your graph and state any assumptions you made in drawing it. Was $35 the market-clearing price for Big Game tickets in 1994? Explain. 2. Last week, a bipartisan commission headed by Stanford Professor (and UCB grad) Michael Boskin determined that increases in the Consumer Price Index overstate increases in the cost of living. Based on the reading for this course, give and clearly explain one reason why. 3. West Oakland is one of the oldest and poorest neighborhoods in Oakland. There are no Safeways or other supermarkets in West Oakland, just a few small corner grocery-and-liquor stores. Residents assert the store owners are exploiting them by charging higher prices than a supermarket would charge. Store owners reply that they cannot afford to lower their prices; if they do so, they will incur losses and be forced out of business. Use cost curves to explain why the small stores cannot charge lower prices. Briefly explain your graph.
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