ECO2023 - Fall 2009 Final Exam

ECO2023 - Fall 2009 Final Exam - Professor: M. Rush ECO...

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Unformatted text preview: Professor: M. Rush ECO 2023 FALL 2009 FINAL EXAM Read all instructions on this page 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. Chose the best answer for each question. ♦ 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. On the bubble sheet, please enter: 1. Your name and initials 2. Your UF ID number 3. Special Code: 51 4. Test code: A 5. Sign your name on the back of the bubble sheet. TURN OFF ALL CELL PHONES AND OTHER COMMUNICATION DEVICES 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. I investigated the rumor that the ability to correctly record these had been mastered by a few students at FSU. This rumor turned out to be false. But, the rumor that an accounting major and a journalism major did successfully record these on a test is true. These students have since been bronzed and are on display outside their respective colleges to serve as an inspiration for all other accounting and journalism students. CHECK YOUR TEST CODE AND UF ID NUMBER. IF YOU GET EITHER OF THESE WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED, YOU WILL LOSE 6 POINTS (which equals 2 questions)! 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. 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. 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 ECO 2023 FINAL EXAM FALL 2009 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 main class web page later today. The test scores will be on the Final Exam Feedback web page within a few days. Once you see the answer key, you might have a question about why one answer is right and another is wrong. For these questions, email me at mark.rush@warrington.ufl.edu Do NOT email the grader about these questions! After the scores are posted, if you think your posted score is incorrect, then email the grader at eco2023.grader@cba.ufl.edu If you email me about your test score, I will not forward the email nor respond to you—you MUST email the grader. You have until noon on Dec 18 to request a grade check. After that, 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 than what is reported and the reported answer on the web is correct, you will lose 1 additional question. 2 ECO 2023 FINAL EXAM FALL 2009 1) A technological improvement lowers the cost of producing computer chips. As a result, the equilibrium price of a computer chip ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; decreases D) falls; increases 2) Compared to a single‐price monopoly, the price charged by a competitive market with the same costs A) is higher than the monopoly’s price. B) is the same as the monopoly’s price. C) is lower than the monopoly’s price. D) could be higher than, lower than, or the same as the monopoly’s price. 3) Since about 1979, the distribution of income in the United States has ____ A) become more equal. B) become less equal. C) not changed its degree of inequality. D) changed so that the distribution today is no longer comparable to that in 1979. 4) Taco Bell determines that the price elasticity of demand for their tacos is 0.5. So if Taco Bell raised the price of a taco by 10 percent, the quantity demanded decreases by ____ percent. A) 5 B) 20 C) 0.5 D) 50 percent E) None of the above answers is correct. 5) Jane’s Garage Cleaning is a perfectly competitive firm that currently cleans 40 garages a week. Jane’s marginal cost is $35, her price is $35, and her average total cost is $40. Jane 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 incurring an economic loss. D) not maximizing her profit and is earning a normal profit. E) more information is needed to determine if she is or is not maximizing her profit but she is incurring an economic loss. 6) Which of the following definitely lowers the equilibrium price? A) An increase in both demand and supply. B) A decrease in both demand and supply. C) An increase in demand combined with a decrease in supply. D) A decrease in demand combined with an increase in supply. 3 ECO 2023 FINAL EXAM FALL 2009 7) A student buys a pizza. This pizza is A) nonrival and nonexcludable. B) nonrival and excludable. C) rival and nonexcludable. D) rival and excludable. 8) The price of jet fuel rises. As a result the equilibrium price of airline travel ____ and the equilibrium quantity ____. A) rises, increases B) rises, decreases C) falls, increases D) falls, decreases 9) In the above figure, if the market is unregulated, A) more than the efficient amount of output will be produced. B) less than the efficient amount of output will be produced. C) the efficient amount of output will be produced. D) More information is needed to determine if the equilibrium quantity produced is more than, less than, or equal to the efficient quantity. 10) (This is a “semi” out‐of‐the‐book question.) In the above figure, in order to promote an efficient allocation of resources, the government could A) impose a tax equal to $10 per unit. B) impose a tax equal to $15 per unit. C) grant a subsidy equal to $10 per unit. D) grant a subsidy equal to $15 per unit. 11) The number of farmers growing tomatoes increases. As a result, the price of a pound of tomatoes ____ and the quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 4 ECO 2023 FINAL EXAM FALL 2009 12) Tariffs ____ the domestic price of an imported good and import quotas ____ the domestic price of an imported good. A) raise; raise B) raise; lower C) lower; raise D) lower; lower E) raise; do not change 13) Suppose that the University of Florida signs a contract so that only Pizza Hut pizza can be sold at UF athletic events. This agreement is an example of ____ and is most likely ____. A) a tying contract; illegal B) product discrimination; legal C) price fixing; illegal D) monopolization; illegal E) an exclusive deal; legal 14) For a common resource, efficiency requires that the ____ equals the ____. A) marginal private benefit; marginal social cost B) marginal social benefit; marginal social cost C) marginal private benefit; marginal social benefit D) marginal social cost; marginal private cost. 15) Pharmaceutical drugs are used more by older people than younger people. As our population ages, the price of pharmaceutical drugs ____ and the quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 16) As more of a good is consumed, its marginal utility _____ and its total utility _____. A) rises; rises B) does not change; rises C) rises; falls D) falls; rises E) falls; falls 17) A natural monopoly that is regulated to set its price equal to its marginal cost A) incurs an economic loss. B) makes a normal profit. C) makes an economic profit. D) creates the maximum deadweight loss. 5 ECO 2023 FINAL EXAM FALL 2009 18) Public goods are ____ by the private market because ____. A) under provided; the marginal cost of production is too high B) over provided; public goods are nonexcludable but rival C) under provided; of the free‐rider problem D) over provided; marginal benefit of consumption is too high 19) The more substitutes available for a good or service, the A) larger is its price elasticity of demand. B) smaller is its income elasticity of demand. C) smaller is its price elasticity of demand. D) larger is its income elasticity of demand. 20) If a perfectly competitive firm is incurring an economic loss, it definitely A) shuts down immediately. B) continues to operate until either the price rises or its costs fall so that it no longer has an economic loss. C) shuts down if P < ATC D) shuts down if P > AVC. E) shuts down if P < AVC. 21) In long‐run equilibrium, a firm in monopolistic competition earns A) an economic profit but the economic profit is less than it would be if the firm was a monopoly. B) an economic profit that is more than what it would be if the firm was a monopoly. C) a normal profit. D) an economic profit that is the same amount as it would be if the firm was a monopoly. 22) A firm will continue to increase the amount of output it produces as long as its A) average total revenue exceeds its average total cost. B) average total revenue exceeds its average variable cost. C) marginal cost exceeds its marginal revenue. D) marginal revenue exceeds its marginal cost. 23) A technological improvement lowers the cost of producing coffee. At the same time, consumers’ preferences for coffee increase. The equilibrium price of coffee ____ and the equilibrium quantity ____. A) rises; increases B) falls; might increase, decrease, or not change C) remains the same; increases D) falls; increases E) might rise, fall, or stay the same; increases 6 ECO 2023 FINAL EXAM FALL 2009 24) A point inside a production possibilities frontier indicates A) that resources are being used inefficiently. B) an output combination that society cannot attain given its current level of resources and technology. C) that resources are being used very efficiently. D) that both goods are characterized by increasing costs. 25) Which of the following statements about an individual’s labor supply curve is TRUE? A) The labor supply curve will have a positive slope if the income effect outweighs the substitution effect. B) The labor supply curve will have a negative slope if the substitution effect outweighs the income effect. C) The labor supply curve will have a positive slope if the substitution effect outweighs the income effect. D) The labor supply curve will have a negative slope regardless of whether the substitution effect or income effect dominates. E) None of the above answers is correct 26) (This is an out‐of‐the‐book question) The supply of which of the following resources is typically perfectly inelastic? A) labor B) land C) capital D) entrepreneurship E) None of the above answers is correct 27) A monopoly finds that its MC and ATC have risen. The demand curve for the product does not shift. Presuming that the monopoly does not shut down, it will ____ its price and ____ the quantity it produces. A) raise; increase B) raise; decrease C) not change; decrease D) lower; increase E) lower; decrease 28) When the United States exports a good, U.S. consumer surplus ____ and U.S. total surplus ____. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; does not change E) decreases; decreases 7 ECO 2023 FINAL EXAM FALL 2009 Walmart Sears Set low prices Set high prices S: $6 million W: $10 million S: $6 million W: $9 million Set low S: $9 million prices W: $9 million Set S: $3 million high W: $17 million prices 29) Sears and Wal‐Mart must decide whether to lower their prices, based on the potential economic profits shown in the table above. (An “S” indicates Sears’ profit and a “W” indicates Wal‐mart’s profit.) Who has a dominant strategy? A) Walmart has a dominant strategy but Sears does not. B) Sears has a dominant strategy but Walmart does not. C) Both Walmart and Sears have dominant strategies. D) Neither Walmart nor Sears has a dominant strategy E) More information is needed to determine if either Sears or Walmart has a dominant strategy. 30) A difference between a perfectly competitive industry and a monopoly is that A) in the long run, firms in a perfectly competitive industry earn a normal profit and a monopoly can earn an economic profit. B) a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot. C) only monopolies have an incentive to maximize profit. D) perfectly competitive firms can have a public franchise. 8 ECO 2023 FINAL EXAM FALL 2009 31) The Lorenz curves in the figure above show that A) income is distributed more unequally than wealth. B) wealth is distributed more unequally than income. C) the amount of wealth exceeds the amount of income. D) the amount of income exceeds the amount of wealth. Walmart Sears Set low prices Set high prices S: $6 million W: $8 million S: $2 million W: $9 million Set low S: $5 million prices W: $5 million Set high prices S: $7 million W: $7 million 32) Sears and Wal‐Mart must decide whether to lower their prices, based on the potential economic profits shown in the table above. (An “S” indicates Sears’ profit and a “W” indicates Wal‐mart’s profit.) Who has a dominant strategy? A) Walmart has a dominant strategy but Sears does not. B) Sears has a dominant strategy but Walmart does not. C) Both Walmart and Sears have dominant strategies. D) Neither Walmart nor Sears has a dominant strategy E) More information is needed to determine if either Sears or Walmart has a dominant strategy. 9 ECO 2023 FINAL EXAM FALL 2009 Price (dollars per pizza) S Price (dollars per pizza) S D2 D1 D1 D2 Quantity (pizzas per month) Figure A Price (dollars per pizza) Quantity (pizzas per month) Figure B S2 S1 Price (dollars per pizza) S1 S2 D D Quantity (pizzas per month) Figure C Quantity (pizzas per month) Figure D 33) The figure above shows the market for pizza. Which figure shows the effect of an increase in income if pizza is a normal good? A) Figure A B) Figure B C) Figure C D) Figure D 34) Suppose a single‐price monopolist sells 3 units of a good at $20 per unit. If the monopolist sells 4 units, the total revenue increases to $72. What price is being charged for 4 units? A) $52 each B) $18 each C) $60 each D) $12 each 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 he A) takes an hour to cook minute rice. B) sits on the TV and watches the couch. C) tripped on a cordless phone. 10 ...
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