Econ2_Practice_final

Econ2_Practice_final - page 1 of 10 Economics 2 Winter 2009...

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page 1 of 10 Economics 2 your name _______________________________ Winter 2009 your student i.d. __________________________ PRACTICE FINAL EXAM DIRECTIONS: No calculators, books, or notes of any kind are allowed. All papers and notebooks must remain closed and on the floor at all times throughout the exam, and students are not allowed to leave the examination room until finished. Please do not turn in your exam before 9:00 a.m. Answer all questions in the space provided with the exam. HINTS: Feel free to use either of the following formulas if you find them useful. Area of a triangle = (1/2) (base) (height) Area of a trapezoid = (1/2) (base1 + base2) (height) MULTIPLE CHOICE—circle the correct answer (4 points each, 200 points total) 1.) Which of the following best explains why a subsidy results in an inefficient use of resources? a.) when firms receive the subsidy, they only pass some of it along as a cost saving to consumers but take much of it simply in the form of increased profits b.) as a result of the subsidy, the marginal benefit to some consumers of receiving the good is less than the marginal cost of producing the good c.) the subsidy increases producer surplus, but decreases consumer surplus by more than the increase in producer surplus d.) the government has a difficult time figuring out which firms have the greatest need of getting the subsidy 2.) Suppose that the demand curve for a particular good slopes down (less than perfectly elastic demand) but the supply curve is vertical (perfectly inelastic supply). Which of the following best characterizes what would happen if there were a per-unit tax placed on buyers of the good? a.) the decrease in consumer surplus would be greater than the increase in government revenue b.) the decrease in consumer surplus would be equal to the increase in government revenue c.) the decrease in consumer surplus would be less than the increase in government revenue d.) there would be no change in consumer surplus 3.) If a single firm buys up all the firms that used to comprise a perfectly competitive industry so as to create a monopoly, a.) producer surplus would go up and consumer surplus would go up b.) producer surplus would go down and consumer surplus would go down c.) producer surplus would go down and consumer surplus would go up d.) producer surplus would go up and consumer surplus would go down 4.) What would happen in a natural monopoly if the producer set price equal to marginal cost? a.) the firm would maximize profit b.) the firm would earn negative profit c.) no one could afford to buy the product d.) the price would have to fall all the way to zero
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page 2 of 10 5.) Which of the following is the best economic justification for why consumers in the U.S. should pay a higher price for pharmaceutical drugs than consumers in Canada? a.) to provide an incentive for research and development of new drugs b.) to help ensure a more equitable distribution of world income c.) to help cover the higher physical production costs associated with producing the drug in the U.S.
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This note was uploaded on 09/17/2009 for the course ECON ECON 2 taught by Professor Hamilton during the Spring '09 term at UCSD.

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Econ2_Practice_final - page 1 of 10 Economics 2 Winter 2009...

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