E2_sample_Econ 102

E2_sample_Econ 102 - Economics 102: Principles of...

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Unformatted text preview: Economics 102: Principles of Microeconomics Sample Exam 2 1. Consider the following policies, each of which is aimed at reducing violent crime by reducing the use of guns. Illustrate each of these proposed policies in a supplyand demand diagram of the gun market. A. B. C. D. A tax on gun buyers. A tax on gun sellers. A price floor on guns. A tax on ammunition. 1 Economics 102: Principles of Microeconomics 2. Suppose the demand for French bread rises. Explain what happens to producer surplus in the market for French bread. Explain what happens to producer surplus in the market for flour. Illustrate your answers with diagrams. 2 Economics 102: Principles of Microeconomics 3. Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax for each gallon of gasoline sold. a. Should they impose this tax on producers or consumers? Explain carefully using a supply and demand diagram(s). b. If the demand for gasoline were more elastic, would this tax be more effective or less effective in reducing the quantity of gasoline consumed? Explain with both words and a diagram. c. Are consumers of gasoline helped or hurt by this tax? Why? 3 Economics 102: Principles of Microeconomics 4. How does elasticity affect the burden of a tax? Explain in a few sentences and justify your answer using a supply and demand diagram(s). 5. Answer the following a. Using the concept of willingness to pay, define consumer surplus. b. Using the concept of cost of production, define producer surplus 4 Economics 102: Principles of Microeconomics 6. Domestic furniture makers have been facing intensive foreign competition from China, that competition has led to widespread falling furniture prices and closings and layoffs. Using supplyanddemand analysis, demonstrate graphically that economic welfare in a society (i.e. total surplus) increases with the introduction of free trade. Construct a table similar to the ones we've used in class to show all surplus changes as a result of engaging in international trade. Are U.S. consumers better off with the opportunity to buy furniture manufactured in China? Explain. What about domestic producers? Explain. 5 Economics 102: Principles of Microeconomics 7. Answer the following: a. Using the graph shown, analyze the effect a $300 price ceiling would have on the market for tenspeed bicycles. Would this be a binding price ceiling? b. Using the graph shown, analyze the effect a $700 price floor would have on this market for tenspeed bicycles. Would this be a binding price floor? c. Why would policymakers choose to impose a price ceiling or price floor? 1000 900 S 800 700 600 500 400 300 200 100 D price 1000 2000 3000 4000 5000 6000 7000 8000 quantity 6 Economics 102: Principles of Microeconomics 8. Using the graph below, answer the following questions about hammers: a. b. c. d. e. f. g. h. i. j. k. What is the equilibrium price of hammers before trade? What is the equilibrium quantity of hammers before trade? What is the price of hammers after trade is allowed? What is the quantity of hammers imported after trade is allowed? What is the amount of consumer surplus before trade? What is the amount of consumer surplus after trade? What is the amount of producer surplus before trade? What is the amount of producer surplus after trade? What is the amount of total surplus before trade? What is the amount of total surplus after trade? What is the change in total surplus because of trade? 7 Economics 102: Principles of Microeconomics 9. When is the revenue collected from a tax larger: when demand and supply are elastic or when they are both inelastic? Explain your answer graphically and in words. 8 ...
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This note was uploaded on 07/29/2009 for the course ECON 102 taught by Professor Clague during the Spring '08 term at San Diego State.

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