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Unformatted text preview: Professor: M. Rush
ECO 2023 SUMMER A 2007 MIDTERM 2 Read all instructions on this page
On the bubble sheet, please enter: 1. Your name and initials 2. Your UF ID number 3. Special Code: 21 4. Test code: A 5. Sign your name on the back of the bubble sheet. This test is governed by UF’s academic honesty code. It is intended to have 35 multiple choice questions. Please check to be sure your copy has all 35. ♦ The next is important: Unless you are specifically told otherwise, on this test do not assume that demand or supply is either perfectly elastic or perfectly inelastic. Do not ask questions of me or the TA’s; in the interest of fairness I have instructed them not to answer any questions during the exam. I have become increasingly concerned that some students are at a real disadvantage because they are unwilling to ask questions during the exam while others ask a lot of questions. Hence, to level the playing field, I have decided to eliminate all questions during the test. I don’t like this policy, but it seems the fairest policy. TURN OFF ALL CELL PHONES AND OTHER COMMUNICATION DEVICES
You will have one hour (60 minutes) to complete the exam and bubble in all your answers. When the TAs say that time is up, you must hand in your exam. We will not give extra time to finish bubbling in the answers, so be sure you are done when the 60 minutes are up. Of course, you may hand in your test at any time before the 60 minutes are up. An answer key will be posted on the Web later this evening. The test scores will be on the Web within a few days. Check that the test code, special code, and UF ID number you bubbled‐in are correct now. Also check to be sure your name is correct—do it now. As I said on the last exam, I heard rumors that the ability to correctly record the test code has been mastered by a few students at FSU. I am still checking this out. But in the meanwhile a friend told me that accounting majors have been known to be able to record this letter, often correctly. Plus, I have heard of one journalism major who could get the special code right at least 30% of the time! While I doubt this last rumor, because the special code involves numbers which means it is close to being math, nonetheless I think that the skill of correctly bubbling in the test code and special is not too difficult to acquire. CHECK YOUR TEST CODE AND UF ID NUMBER. IF YOU GET EITHER OF THESE WRONG, YOUR TEST MIGHT NOT BE GRADED OR YOU WILL LOSE 5 POINTS! ECO 2023 MIDTERM 2 SUMMER A 2007 After the scores are posted, if you think your posted score is incorrect, email the grader at ECO2023.firstname.lastname@example.org. You have one week after the curved score is posted to request a grade check. After a week, the score will not be changed. If the web reports what you bubbled in for each question and you ask the grader to check an answer because you believe you bubbled in something other that what is reported and the reported answer on the web is correct, you will lose 1 additional question. 2 ECO 2023 MIDTERM 2 SUMMER A 2007 1) There are many cell phone manufacturers, each producing somewhat different cell phones. This market is best considered an example of A) a monopoly market. B) an oligopolistic market. C) a perfectly competitive market. D) a monopolistically competitive market. 2) The above figure shows one of Sam’s indifference curves between gasoline and coffee. Which of the following about a movement along Sam’s indifference curve is correct? A) As he moves leftward along the curve, he likes the combinations of gasoline and coffee better and better. B) As he moves rightward along the curve, he likes the combinations of gasoline and coffee better and better. C) He likes all combinations of gasoline and coffee along the curve equally well. D) As he moves leftward along the curve, he can better afford the combinations of gasoline and coffee. E) As he moves rightward along the curve, he can better afford the combinations of gasoline and coffee. 3) Company A has earnings per share of $4 and a stock price of $20 per share. Company B has earnings per share of $1 and a stock price of $10. Which company has the higher PE ratio? A) Company A. B) Company B. C) The PE ratios of the two companies are the same. D) More information is needed to determine which has the higher PE ratio. 3 ECO 2023 MIDTERM 2 SUMMER A 2007 4) (This is an out‐of‐the‐book question.) In the long run, when Jitters Coffee Company, Inc., can lower the average total cost of packaging a pound of coffee by doubling the quantity packaged each day. It is achieving A) economies of scale. B) economies of scope. C) economies of team production. D) All of the above answers are correct. 5) A) B) C) D) When comparing perfect competition to a monopoly, a single‐price monopolist with the same costs charges a higher price and produces more output. lower price and produces less output. higher price and produces less output. lower price and produces more output. Labor (workers) 0 1 2 3 4 5 Output (units per day) 0 3 8 12 14 15 Total cost (dollars) 30 50 70 90 110 130 6) In the above table, the total variable cost at 15 units of output is A) $0. B) $130. C) $100. D) More information is needed to determine the total variable cost. E) There is enough information to determine the total variable cost, but none of the above answers are correct. 7) In the above table, when output increases from 12 to 14 units, the marginal cost of one of those 2 units is A) $110. B) $45. C) $55. D) $10. E) None of the above answers are correct. 4 ECO 2023 MIDTERM 2 SUMMER A 2007 8) In the above figure, if the price is $4 per unit, how many units will a profit maximizing perfectly competitive firm produce? A) 0 B) 5 C) 20 D) 30 E) 35 9) In the above figure, at what price does a perfectly competitive firm earn a normal profit? A) $4 per unit. B) $8 per unit. C) $12 per unit. D) $16 per unit. 10) For a single‐price monopoly, the marginal revenue from a unit of output is ____ the price of this unit of output. A) greater than B) equal to C) less than D) sometimes greater than, sometimes less than, and sometimes equal to 11) What condition must exist for a firm to effectively price discriminate? A) The firm must face consumers with identical willingness to pay. B) The firm must produce a good or service that can be resold. C) The firm must produce a good or service that cannot be resold. D) The firm must charge the highest price possible. 5 ECO 2023 MIDTERM 2 SUMMER A 2007 12) Which of the following types of business organization have limited liability? I. proprietorship II. partnership III. corporation A) I, II only B) II, III only C) III only D) I only E) I, II, III 13) A perfectly competitive firm maximizes its profits by producing the amount of output such that A) MR = P. B) MR = MC. C) P = AVC. D) P = ATC. 14) In the above figure, if a single‐price monopolist charges the profit‐ maximizing price, the triangle dce represents A) consumer surplus. B) producer surplus. C) deadweight loss. D) total revenue. E) total cost. 6 ECO 2023 MIDTERM 2 SUMMER A 2007 15) If a consumer’s income increases, his or her budget line A) becomes flatter. B) becomes steeper. C) shifts rightward only if he or she buys only normal goods. D) shifts leftward no matter if he or she buys normal goods and/or inferior goods. E) shifts rightward no matter if he or she buys normal goods and/or inferior goods. 16) The figure above shows the demand and cost curves for a single‐price monopolist. What amount of output maximizes the firm’s economic profit? A) 0 units B) 5 units C) 10 units D) 15 units E) 20 units 17) The figure above shows the demand and cost curves for a single‐price monopolist. What price will the firm charge? A) $50 per unit B) $40 per unit C) $30 per unit D) $20 per unit E) $10 per unit 7 ECO 2023 MIDTERM 2 SUMMER A 2007 18) Firms that can price discriminate between customers do so to ____ and the more the firm can price discriminate, the ____ is the amount of its output. A) increase consumer surplus; larger B) increase employment; larger C) increase their profit; smaller D) decrease consumer surplus; smaller E) increase their profit; larger 19) A firm’s total cost is $900, its average fixed cost is $30, and its output is 20 units. Its average variable cost is A) less than $10. B) between $10.01 and $20. C) between $20.01 and $40. D) more than $40.01. 20) The law of diminishing returns states that as a firm uses more of A) all inputs, the marginal product of each of these inputs eventually decreases. B) a variable input, with a given quantity of fixed inputs, the firm’s marginal cost eventually decreases. C) a variable input, given the quantity of fixed inputs, the firm’s average total cost will eventually decrease. D) a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases. 21) The market for maple syrup is perfectly competitive. Suppose that the market is in long‐run equilibrium and then the market demand for maple syrup increases. In the long run, firms will have ____ the market and the market ____ will have ____ . A) left; supply; decreased B) entered; demand; decreased C) left; supply; increased D) entered; supply; decreased E) entered; supply; increased 8 ECO 2023 MIDTERM 2 SUMMER A 2007 22) Homer’s Holesome Donuts has determined that its profit‐maximizing quantity is 10,000 donuts per year. Homer’s earns $12,000 in revenue from the sale of those donuts. Homer’s has two costs. First he pays $16,000 in annual rental payments for its five‐year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Homer’s variable cost is equal to A) 0. B) $5,000. C) $12,000. D) $16,000. E) $21,000 23) When firms exit a monopolistically competitive industry in the which firms are incurring economic losses, each of the surviving firm’s demand curve shifts ____, the price each firm can charge ____, and each firm’s economic loss ____. leftward; rises; increases rightward; rises; increases rightward; falls; shrinks leftward; falls; shrinks rightward; rises; shrinks A) B) C) D) E) 24) The above figure shows the demand and cost curves for a firm in ____ in the ____. A) perfect competition; short run B) monopolistic competition; long run C) perfect competition; long run D) monopolistic competition; short run 9 ECO 2023 MIDTERM 2 SUMMER A 2007 25) The above figure shows the demand and cost curves for a firm. The firm earns the maximum profit when the marginal cost of last item produced equals ____ and the price equals ____. A) $5; $5 B) $5; $10 C) $10; $10 D) $5; $15 E) $15; $15 26) Sarah’s Garage Cleaning is a monopoly that currently cleans 40 garages a week. Sarah’s marginal cost is $40, her price is $40, and her average total cost is $45. Sarah is A) maximizing her profit and is earning an economic profit. B) not maximizing her profit but is earning an economic profit anyway. C) maximizing her profit and is earning a normal profit. D) not maximizing her profit and is incurring an economic loss. E) not maximizing her profit but is earning a normal profit anyway. 27) A price discriminating monopolist charges lower prices to customers with A) lower supply elasticities. B) higher supply elasticities. C) lower average willingness‐to‐pay. D) higher average willingness‐to‐pay. 28) Which of the following is true regarding the long run for a firm in monopolistic competition? A) The firms can earn an economic profit because of product differentiation. B) Marginal cost equals average total cost. C) Output is produced at minimum average total cost. D) Price equals average total cost and so the firm earns an economic profit. E) Price equals average total cost and so the firm earns a normal profit 29) A firm’s average variable cost is $60, its total fixed cost is $3,000, and its output is 600 units. Its average total cost is A) less than $58.00. B) between $58.01 and $62.00. C) between $62.01 and $64.00. D) more than $64.01 and less than $70.00 E) more than $70.01. 10 ECO 2023 MIDTERM 2 SUMMER A 2007 30) Suppose a perfectly competitive firm has some fixed costs. In the short run, the firm A) will shut down if it incurs any economic loss. B) will incur an economic loss if it shuts down. C) does not consider total revenue in its shut down decision. D) shuts down if P < ATC. E) can earn a small economic profit while being shut down. 31) Any point above a given indifference curve is definitely i. inferior to any point on the indifference curve. ii. preferred to any point on the indifference curve. iii. affordable. iv. unaffordable. A) i only. B) ii only. C) iii only. D) iv only. E) both ii and iv. 32) If you think the price of JCPenny stock will fall, then to profit from this view you could i. sell JCPenny stock short. ii. buy a call option for JCPenny stock. iii. buy a put option for JCPenny stock. A) i only. B) ii only. C) iii only. D) i and ii. E) i and iii. 11 ECO 2023 MIDTERM 2 SUMMER A 2007 33) For the unregulated, single‐price monopoly shown in the figure above, when its profit is maximized, the firm will be A) earning a normal profit. B) earning an economic profit of $8. C) earning an economic profit of $24. D) incurring an economic loss. E) None of the above answers is correct. 34) Ernie’s Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie’s average variable cost? A) $10 B) $2 C) $1,600 D) $8 E) More information is needed to answer the question 35) After the scores are posted, if you have a question about your test score, email the grader at ECO2023.Grader@cba.ufl.edu and the director is so stupid (HINT: Be SURE to answer this question because you’ll get credit for any answer.) A) he looks for a bowl when he hears it is chilly outside. B) he climbed over a chain link fence so he could see what was on the other side. C) he had to ask for help to use Hamburger Helper. D) he took a spoon to the Superbowl. 12 ...
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- Fall '08