practice exam 1

# practice exam 1 - Econ10-02 practice exam 1 Instructor...

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Econ10-02 practice exam 1 Instructor: Chi-Hung Liao Information for questions 1 through 3: In the market for a certain good there are two consumers, Brenda and Dave, and a firm supplying this good. In the following table you are given some information about this market. Price in \$ 12 9 6 3 2 Quantity demanded by Brenda 2 3 4 5 6 Quantity demanded by Dave 30 40 50 60 70 Total Quantity demanded 32 43 54 65 76 Quantity supplied by the firm 80 75 70 65 60 1) At equilibrium how much do they consume? a) Dave:50; Brenda:15 b) Dave:40; Brenda: 3 c) Dave:60; Brenda: 5 d) Dave:30; Brenda: 2 2) For which of the price in the table will there be a "shortage" of good? a) \$2 b) \$3 c) \$6 d) \$9 e) None 3) The arc price elasticity of Dave's demand for a price change from \$6.00 to \$9.00 is a) 3.333 b) .556 c) .300 d) 1.80 e) 2.00 4) Assume a normally upward sloping supply curve and a downward sloping demand curve. An increase in income will tend to a) decrease the demand for a normal good. b) increase the demand for an inferior good. c) cause the price of a normal good to fall. d) cause the price of an inferior good to fall. 5) Supply curves slope upward and to the right because a) if prices are high enough sunk costs become irrelevant. b) only suppliers pay the transactions cost associated with any market exchange. c) higher prices are required to attract productive resources from other uses. d) otherwise they would not intersect demand curves.

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Information for Questions 6-8: Maria and Giovanni are two bakers that work at Weaver Street Market. Maria is especially good at making herb rustic bread and Giovanni is better at making olive bread. Maria can make 5 rustic herb breads or 2 olive breads in an hour. Giovanni can make 4 olive breads or 3 rustic herb breads in an hour. Both Maria and Giovanni work 8 hours per day. If you construct the PPF from the information above, you can get the plot shown to the right. All three of the next questions can be answered directly from the plot. 6)
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practice exam 1 - Econ10-02 practice exam 1 Instructor...

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