Q3F09FormA(2)

Q3F09FormA(2) - Name Test Form A Economics 1 Quiz 3...

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Unformatted text preview: Name Test Form A Economics 1 Quiz 3 November 18, 2009 True-False Questions: Fill in Bubble A for True, Bubble B for False. If the demand curve for a good slopes downward, its supply curve slopes upward, and the government sets a ceiling on the price of the good that is below the competitive equilibrium price for the good, the quantity supplied of the good will exceed the quantity demanded of the good. A minimum wage that exceeds the competitive equilibrium wage will increase voluntary unemployment. If the total revenue of a firm divided by the number of workers it employs exceeds the wage it must pay its workers, the firm will increase its profits by hiring an additional worker. If the minimum wage is above the competitive equilibrium wage and thedemand for labor is price elastic, a reduction in the minimum wage will increase the total wage income of workers. If a tax on sellers of a good does not change the competitive equilibrium quantity of the good, the loss in the total profits of buyers and sellers due to the tax must be equal to the revenue raised by the tax. Multiple Choice Questions A firm can hire any number of workers between 1 and 6. The value of the firm’s output is $10 if it hires one worker, $17 if it hires 2 workers, $24 if it hires 3 workers, $30 if it hires 4 workers, $35 if it hires 5 workers, and $39 if it hires 6 workers. If the firm must pay the same wage to every worker it hires, the highest wage at which it would be willing to hire 5 workers is (a) $5 (b) $30 (C) $35 (d) $6 (e) $17 Economics 1 2 In the market for skilled carpenters, 5 carpenters have a reservation wage of $50 per hour, 10 carpenters have a reservation wage of $35 per hour, and 20 carpenters have a reservation wage of $20 per hour. How many of these carpenters will be willing to work if the market wage for skilled carpenters is $30 per hour? (a) 5 (b) 10 (c) 20 (d) 15 (e) 30 In the farmers’ apple market, there are 30 buyers of apples, and 20 sellers of apples. Each buyer can buy at most one bushel of apples, and each seller can sell at most one bushel of apples. Fifteen buyers have a buyer value of $40 for a bushel of apples, and 15 have a buyer value of $20 for a bushel. Ten sellers have a seller cost of $10 for a bushel of apples, and ten sellers have a seller cost of $30 for a bushel of apples. In this market, what is the excess burden of a tax of $5 per bushel levied on sellers of apples? (a) $5 (b) $0 ((1) $75 (d) $50 (e) $25 It’s a new day in Paradise, Idaho. There are still 50 vacant lots in the town, and each owner of a lot is willing to sell that lot if he or she receives a price of at least $10,000. Now, however, there are only 60 retirees from California willing to buy a lot in Paradise. Thirty of those retirees are willing to pay $15,000 for a lot, and thirty are willing to pay $7,500 for a lot. If the town of Paradise imposes a tax of $1,000 on each person who buys a lot, how will the tax affect the competitive equlibriurn price that sellers receive for lots in Paradise? (a) The price will not change. (1)) The price will increase by $1,000. (C) The price will decrease by $1,000. (d) The price will increase by $500. (6) The price will decrease by $500. Quiz 3 3 10. La La Land has ten t-shirt manufacturers. If a manufacturer employs one worker. it can produce two teshirts per hour. If it employs a second worker, it can produce three t-shirts per hour. Each manufacturer has exactly the same relationship between the number of workers and the number of t-shirts, and each can sell its teshirts for $10 er shirt. Thirt workerc have the skills necessary to work in this indu .ry. ave a reservation wage of er hour. and have a reservation wage of er hour. In a competitive equilibrium in this labor mar et, how many workers will be voluntarily unemployed? (a) 10 4—1 item/x (b) 15 5/5.. (c) 20 L (d) 5 (e) 0 $13 11. If a minimum wage of per hour is imposed in the t«shirt industry described in the previous question, how many workers in that industry would be involuntarily unemployed? (a) 5 (b) 20 (c) 15 (d) 10 (e) O 12. The City of Oak Leaf is asking for volunteers to help rake leaves in its parks. All of the residents of Oak Leaf benefit when the parks are free of leaves. However, the City never gets enough volunteers to rake leaves because (a) the demand curve for park services is perfectly inelastic. (b) of the tragedy of the commons. (c) of a negative externality from raking leaves ((1) of the free rider problem 13. In the essay. ”Is Divorce Underrated?,” Tim Harford introduces a fictional game called the Marriage Supermarket. What principle is Harford attempting to illustrate by this game? (a) Making divorces easier to obtain has increased the percentage of men and women who marry. (b) A shortage of men relative to women can lead to fewer benefits from marriage for women. (0) Internet dating has resulted in fewer divorces. (d) Making divorces easier to obtain has resulted in higher educational achievement for women. Economics 1 4 14. 15. If the production of a good produces positive externalities7 total profits of all individuals in the economy can be increased by (a) a tax on buyers of the good. (b) a subsidy for sellers of the good. (C) a ceiling on the market price of the good. ((1) a tax on buyers of complements for the good. The market for milk is currently in a competitive equilibrium. To increase the income of dairy farmers, the government is proposing to establish a minimum price for milk that would be 10% higher than the current price of milk. The price elasticity of demand is ~2. The price elasticity of supply is 3. The proposal would (a) have no effect on the price and quantity of milk. (1)) cause an excess demand for milk equal to 50% of the current quantity of milk. (C) cause an excess supply of milk equal to 50% 0f the current quantity of milk. ((1) cause an excess demand for milk equal to 20% of the current quantity of milk. {6) cause an excess supply of milk equal to 30% of the current quantity of milk. ...
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This note was uploaded on 03/20/2010 for the course ECON 1 taught by Professor Bergstrom during the Spring '07 term at UCSB.

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Q3F09FormA(2) - Name Test Form A Economics 1 Quiz 3...

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