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Exam1_W08_solnA - jé$& k TEST NUMBER_A PART I MULTIPLE...

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Unformatted text preview: jé$& k TEST NUMBER__A__ PART I - MULTIPLE CHOICE PROBLEMS (4 points each) Read each of the following questions carefully and circle the letter of the one best answer. Note that diagrams are often helpful in determining the correct answer. 1) Jeff‘s restaurant can produce tacos and pizza. The table above gives J eff” 3 production possibilities. @e opportunity cost of a taco is pizza(s). 0.5 B) 2 C) 20 D) 40 2) An increase in the price of a good A) shifts the good’s demand curve to the left. causes a movement to the right along the demand curve. @ causes the demand curve for a complementary good to shift to the left. D) all of the above. 3) Hot dogs and buns are complements in consumption. Hot dogs and hamburgers are substitutes in consumption. All else equal, if the price of hot dogs rises, then the quantity of buns will _ and the quantity of hamburgers will A) rise; rise B fall; fall fall; rise D) rise; fall 4) A rise in the price of potatoes from $4.00 to $6.00 per bushel decreases the quantity demanded from 21,000 to 19,000 bushels. The price elasticity of demand is @ 0.25 B) 2.5 C) 4.0 D) perfectly elastic 5) When the price of a round of golf is $25.00 the demand for golf is elastic, and when the price is $20.00 the demand is unit elastic. If the Wildhorse Golf Club cuts the price from $25.00 to $21.00, its total revenue from golf . ® will increase B) will decrease C) will remain the same D) might increase, decrease, or remain the same T E s T N U M B E R ________ 6) Robbie is 21 years old and he can purchase each case of Keystone Light for $13. For the first case purchased Robbie is willing to pay $20, for the second case $15, for the third case $14 and for the fourth case $10. Robbie buys _____ whole cases and his total consumer surplus is ____? A) 2; $10 3; $10 C) 3; $1 D) 4; $8 7) All else equal, the more inelastic the demand for a good, the larger is the amount of the tax on the good that the pays and the _ is the dead weight loss from the tax. A) seller; greater B) buyer; greater seller; lower buyer; lower 8) If beef and leather are complements in production, an increase in the demand for beef will the price of beef and the supply for leather. increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease 9) If the minimum wage increases from $5.15 to $7.25 per hour, employment will unless the elasticity of demand for labor is A) increase; perfectly inelastic. increase; perfectly elastic. decrease; perfectly inelastic. D) decrease; perfectly elastic. TEST NUMBER Hots (millions per year) o W 3 4 5 6 fl ononos (millions of pounds per year) 10) In the production possibilities frontier depicted in the figure above, what is the opportunity cost of increasing the production of hats from five million to six million? A) 1/2 million of pounds of bananas B) 1 million of pounds of bananas ) 2 million of pounds of bananas ) 5 million pounds of bananas 11) An increase in the demand for computers and a decrease in the number of sellers of computers will cause the price of computers to and quantity of computers to ® increase; unknown B) decrease; unknown C) unknown; increase D) unknown; decrease TEST NUMBER 3 (3 II (A Price (dollars per chicken sandwich) HMWkUIO ‘ ‘MB =1 D O 3 6 9 12 15 18 Quantity (chicken sandwiches per day) 12) In the above diagram, at the efficient quantity of chicken sandwiches the total economic surplus is per day and the economic surplus from the last sandwich purchased is “ $12;$3 E‘ $12; $0 C) $24; $3 D) $24; $0 13) In the above diagram, if a price floor of $4 were implemented in the market for chicken sandwiches, the quantity of chicken sandwiches sold would be _ per day and, in total, producers surplus would be A) 3; 6 B) 9; 7.5 6; 1.5 3; 7.5 14) The existence of a shortage A) means resources are being allocated efficiently Bi is impossible in a market economy ) pushes prices up pushes prices down 15) A processor of alligator hides can produce either purses or shoes. If the demand for alligator shoes ecreases, then the purses will _. @supply of; increase B) supply of; decrease C) demand for; decrease D) demand for; increase TEST NUMBER ________ PART II - SHORT ANSWER QUESTIONS 2. (25 points) On the show “The Simple Life” Paris and Nichole work at Burger King fast food restaurant. The chart below shows the time in minutes Paris and Nichole take to make a hamburger and serve a customer and their subsequent production during an 8—hour shift. _-_ a) (4 oints) What are Nichole’s opportunity costs for hamburgers and customers? OK‘VS *- Nt‘CLOlf M2305 IHr—=‘ c IQ: VBH' [037/33- b) (2 points) Who has a comparative advantage in hamburgers? M‘lee hag a 60M? MU I‘A MWM'XO’S I, c) (2 points) Who has an absolute advantage in serving customers? PAV‘l‘é K49 an fibula/it MU l‘h CKQLOMQ/‘S W (1) (10 points) Graph Paris and Nichole’s COMBINED PPF when they work an eight-hour shift. Clearly label the intercepts, slopes, endpoints, etc. Fill in the table to the right if it is helpful. 8-hour shift ——-— Hamburgers ‘50 9 Customers e) (3 points) If Paris and Nichole must serve exactly 100 customers during the day, what is the maximum number of hamburgers they can jointly make? $otAki‘3, H», GM make 43 mamas. 1C Paris Serves ‘l’Le R‘s-L % auger-ref? Ui‘ckoll' musl— sex-«e +Lo lnéi’ {,om’, leam‘vs imm- wougk Howe +0 000k 40 waer§~ f) (4 points) How many customers and burgers should Nichole serve/make when they jointly serve exactly 100 customers? i Customers ELO Burgers get ”10008 QV GM 9/)Qpiamfio’lbfl . 7 610 I10 T E ST N u M B E R ________ 2. (15 points) Supply and Demand shifts. a) (5 points) Draw below a representative supply and demand graph for the market for grapes. Be sure to label the supply curve, demand curve, equilibrium points, and the axes. Q7 G b) (3 points) The government now decides to provide cheaper fertilizer for grape farmers. Draw any shifts in the supply or demand curve and label the new market equilibrium above. Briefly explain. SWQM sktCK ('0 *4" (“55% Cong/3 31le c) (3 points) Next, the Food and Drug Administration (FDA) announces in a study that eating fresh grapes reduces heart disease and increases life expectancy. Draw any further shifts in the supply or demand curve and label the new market equilibrium. Briefly explain. Del/mad SMQQ'S +0 Jr‘w “5% Mfrs M m d) (4 points). What is the overall effect of these two scenarios on the market for grapes? DTP? ...
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