p1 s03

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Your Name: _____________________________________________________ Check Your TA’s Name: ____________ Vladimir ____________Raji ______________ Joe _____________ Jing _____________Jose . Econ 101 - Wissink - S03 PRELIM #1 J. WISSINK February 27, 2003 INSTRUCTIONS 1) There are three sections in this exam. 2) ANSWER ALL QUESTIONS. TOTAL POINTS = 100 3) Part I: 14 multiple choice questions (2.5 points each) Part II: 3 short essay questions (14 points each) Part III: 1 problem (23 points each) 4) Read all questions carefully . 5) Write legibly and remember to label all graphs . 6) Total time = 90 minutes. GOOD LUCK P.S.: There is a blank work sheet at the end of this exam for your use.

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2 Part I. Multiple choice. Do the following 1 4 multiple choice questions: Read each question carefully and CIRCLE the best answer. It often helps to jot down a quick graph or do some work next to the question before searching for the answer. 1. When the supply curve is vertical, supply is said to A. be perfectly inelastic. B. be unitary-elastic. C. be relatively elastic. D. be infinitely elastic. E. reflect extremely high price sensitivity. 2. Income levels rise by 10 percent, ceteris paribus, causing the quantity demanded for video rentals to go up by 4 percent. From this information, which one of the following is true? A. Video rentals are inferior goods. B. The income elasticity of demand for video rentals is 2.5. C. Videos rentals are luxuries. D. Video rentals are necessities. E. None of the above are true. 3. A price ceiling imposed on the vodka market that is set below the natural market equilibrium price of vodka will A. increase the demand for vodka B. increase the supply of vodka C. lower prices in the long run D. have no economic impact at all E. create a shortage of vodka 4. Empirical studies of labor supply behavior in the United States suggest that the elasticity of labor supply is close to zero and therefore A. most of the economic burden of the Social Security payroll tax in the United States is borne by consumers in the form of higher prices. B. the economic burden of the Social Security payroll tax is split equally between employers and employees. C. most of the economic burden of the Social Security payroll tax in the United States is borne by employees. D. most of the economic burden of the Social Security payroll tax in the United States is borne by employers. E. none of the above.
3 5. You are the sole producer of the new Volkswagen Beetle. Suppose the price that you are currently charging lands on the elastic portion of the linear demand curve for the Volkswagen Beetle. What should you do in order to maximize total sales revenue? A. Raise the price of the Volkswagen Beetle. B. Reduce the price of the Volkswagen Beetle.

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