ECO2023 - Summer A 2009 Midterm 1

ECO2023 - Summer A 2009 Midterm 1 - Professor: M. Rush ECO...

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Unformatted text preview: Professor: M. Rush ECO 2023 SUMMER A 2009 MIDTERM 1 Read all instructions on this page On the scantron bubble sheet, please enter: 1. Your name and initials 2. Your UF ID number 3. Special Code: 11 4. Test code: A 5. Sign your name on the back of the bubble sheet. 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. If you do not answer a question, you will not get credit for that question. For each question, choose the best answer. ♦ 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. 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. 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. TURN OFF ALL CELL PHONES AND OTHER COMMUNICATION DEVICES You may not use a cell phone, a Blackberry, or any other sort of device that allows for communication as your calculator. You will have 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 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 Web later this evening. The test scores will be on the Web within a few days. Check if the test code and UF ID number you bubbled‐in are correct now. Also check to be sure your name is correct—do it now. I have heard a rumor that the ability to correctly record these had been mastered by a few students at FSU as well as a couple of accounting and journalism students. I will investigate these rumors but in the meanwhile, CHECK YOUR TEST CODE AND UF ID NUMBER. IF YOU GET EITHER OF THESE WRONG, YOU WILL LOSE 5 POINTS!!!! ECO 2023 MIDTERM 1 SUMMER A 2009 After the scores are posted, if you think your posted score is incorrect, email the grader at the email address on the syllabus page and the last question on this exam. You have one week after the curved score is posted to request a grade check. After a week, 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 that what is reported and the reported answer on the web is correct, you will lose 1 additional question. 2 ECO 2023 MIDTERM 1 SUMMER A 2009 1) When the allocatively efficient quantity of pizza is produced, the deadweight loss in this market is ____ and the total consumer surplus from pizza ____ the total producer surplus from pizza. A) zero; is larger than B) zero; is equal to C) zero; is less than D) positive; is equal to E) zero; might be less than, more than, or equal to 2) Tacos and pizzas are substitutes for consumers. If the price of a taco rises, then the equilibrium price of pizza ____ and the equilibrium quantity ____. A) rises; increases B) rises; does not change C) rises; decreases D) falls; decreases E) None of the above answers is correct 3) When a tax is imposed on a product, the larger the price elasticity of demand, the ____ the fraction of the tax paid by demanders and the ____ the fraction of the tax paid by suppliers. A) larger; larger B) larger; smaller C) smaller; larger D) smaller; smaller 4) Before there is any international trade in wheat, the price of a bushel of wheat in the United States is $4 and the world price of a bushel of wheat is $6. After international trade is allowed, then in the United States the price of a bushel of wheat ____, the quantity consumed ____, and the quantity produced ____. A) rises; increases; increases B) falls; decreases; increases C) rises; does not change; increases D) rises; decreases; increases E) None of the above answers are correct. 3 ECO 2023 MIDTERM 1 SUMMER A 2009 5) Before any international trade in wheat, the price of a bushel of wheat in the United States is $4 and the world price of a bushel of wheat is $6. After international trade is allowed, then in the United States the total consumer surplus from wheat ____ and the total producer surplus from wheat ____. A) increases; increases B) decreases; increases C) does not change; increases D) increases; decreases E) None of the above answers are correct. 6) The most anyone is willing to pay for another purse is $60. Currently the price of a purse is $40, and the cost of producing another purse is $30. The marginal social benefit from another purse is A) $60. B) $40. C) $30. D) $20. E) $10. 7) (This is an out‐of‐the‐book question.) Before any government action, the equilibrium price of a ton of sugar is $50 and the equilibrium quantity is 5 million tons. If the government then imposes a production quota of 4 million tons, the price of a ton of sugar ____ and a deadweight loss ____ created. A) rises; is B) rises; is not C) does not change; is D) does not change; is not E) falls; is 8) (This is an out‐of‐the‐book question.) The ____ argument for protection applies when a new industry needs time to lower its costs so that it can compete in world markets. This argument ____ a totally valid argument for imposing a tariff. A) dumping; is B) dumping; is not C) infant industry; is D) infant industry; is not E) None of the above answers is correct. 4 ECO 2023 MIDTERM 1 SUMMER A 2009 9) If the cross elasticity of demand between goods A and B is positive, A) the demands for A and B are both price elastic. B) the demands for A and B are both price inelastic. C) A and B are complements. D) A and B are substitutes. 10) The market for unskilled labor is illustrated in the figure above. The market is in equilibrium when a minimum wage of $5 per hour is imposed. Employment will fall by a total of A) 0 hours. B) 10 million hours per year. C) 20 million hours per year. D) 30 million hours per year. 11) Suppose a freeze in Florida destroys a large fraction of the orange crop. As a result, the equilibrium price of orange juice ____ and the equilibrium quantity of orange juice ____. A) falls; decreases B) falls; increases C) rises; decreases D) rises; increases 12) The more substitutes available for a good or service, A) the larger is its price elasticity of demand. B) the smaller is its income elasticity of demand. C) the smaller is its price elasticity of demand. D) the larger is its income elasticity of demand. 5 ECO 2023 MIDTERM 1 SUMMER A 2009 13) Among the factors that create a deadweight loss and inefficiency are A) minimum wages, but not taxes. B) rent ceilings, but not taxes. C) taxes, but not minimum wages or rent ceilings. D) minimum wages, rent ceilings, and taxes. 14) The price of jet fuel rises. As a result, the equilibrium price of travel by airplanes ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 15) If the price of a candy bar is $1 and the price of a fast food meal is $5, A) the relative price of a candy bar is 5 fast food meals. B) the money price of a candy bar is 1/5 of a fast food meal. C) the relative price of a fast food meal is 5 candy bars. D) the money price of a fast food meal is 1/5 of a candy bar. 16) The fact that people with higher incomes get to consume more goods and services most directly addresses the ____ question. A) “for whom” B) “when” C) “where” D) “how” E) “what” 17) Dining out is a normal good and people’s incomes rise. The equilibrium price of dining out ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 18) On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. You go to the library. Your opportunity cost is A) working out at the gym, having breakfast with friends, and sleeping late. B) working out at the gym. C) zero because you do not have to pay money to use the library. D) not clear because not enough information is given. 6 ECO 2023 MIDTERM 1 SUMMER A 2009 19) In the above figure, suppose the quantity produced is 40. Then A) the marginal social cost of the 40th unit is 1. B) the willingness to pay for the 30th unit is 1. C) production is inefficient and there is no deadweight loss because more than the efficient quantity is produced. D) production is inefficient and there is a deadweight loss. 20) In the above figure, at the equilibrium price and quantity, the total consumer surplus is ____. A) $90. B) $60. C) $45. D) $30. 21) Suppose that both suppliers and demanders of gasoline believe that the price of gasoline next month will be lower than they had previously thought and that the magnitude of the impact on the demanders is larger than that impact on the suppliers. As a result, the current equilibrium price of gasoline ____ and the current equilibrium quantity of gasoline ____. A) rises; probably changes but whether it increases or decreases is ambiguous B) falls; probably changes but whether it increases or decreases is ambiguous C) falls; decreases D) probably changes but whether it rises or falls is ambiguous; increases E) falls; increases 7 ECO 2023 MIDTERM 1 SUMMER A 2009 22) Suppose that both suppliers and demanders of gasoline believe that the price of gasoline next month will be lower than they had previously thought. As a result, the current equilibrium price of gasoline ____ and the current equilibrium quantity of gasoline ____. A) rises; probably changes but whether it increases or decreases is ambiguous B) falls; probably changes but whether it increases or decreases is ambiguous C) falls; decreases D) probably changes but whether it rises or falls is ambiguous; increases E) probably changes but whether it rises or falls is ambiguous; decreases 23) Before any government action, suppose that the markets for pizza and tacos were both producing the efficient quantity. Then if the government imposes a tax on taco producers, a deadweight loss in that market is ____ and if the government grants a subsidy to pizza producers, a deadweight loss in that market is ____. A) created; created B) created; not created C) not created; created D) not created; not created Quantity of beans (bushels) 5 4 3 2 1 0 Quantity of carrots (bushels) 0 5 9 12 14 15 24) The table above represents different points along a production possibilities curve. What is the marginal cost of moving from 3 bushels of beans to 4 bushels of beans? A) 9 bushels of carrots B) 5 bushels of carrots C) 4 bushels of carrots D) 3 bushels of carrots E) 4 bushels of beans 8 ECO 2023 MIDTERM 1 SUMMER A 2009 25) If a nation’s capital stock increases, then its PPF A) shifts outward. B) shifts inward because fewer people are employed. C) shifts inward but not because fewer people are employed. D) does not shift but there is a movement along its PPF 26) Taco Bell determines that whenever it raises the price of its tacos, its total revenue from the sale of tacos does not change. Hence the demand curve for Taco Bell tacos is A) horizontal. B) vertical. C) a straight line with a negative 45˚ slope. D) a straight line with a positive 45˚ slope. E) None of the above answers is correct. 27) The above figure shows the demand and supply curves for housing. Which of the following would be the effect of a rent ceiling equal to $500 per month? A) a surplus of apartments equal to 3,000 apartments. B) a deadweight loss equal to the area abc. C) consumer surplus equal to area abe. D) a deadweight loss equal to area ace. E) None of the above answers are correct 9 ECO 2023 MIDTERM 1 SUMMER A 2009 28) A nation produces only food and clothing. If its technology does not change and it rearranges which resources are producing which goods, the nation can increase its production of food only if it also decreases its production of clothing. This result means that before the rearrangement, the nation was A) definitely producing at a point beyond its PPF. B) definitely producing at a point on its PPF. C) definitely producing at a point inside its PPF. D) producing at a point either on or within its PPF. E) producing at a point either on or beyond its PPF. 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 29) The above figure shows the market for pizza. Which panel shows the effect of an increase in the number of firms that produce pizza? A) Figure A. B) Figure B. C) Figure C. D) Figure D 30) In the summer time more people drive as they go on vacations. As a result the equilibrium price of gasoline ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; decreases D) falls; increases E) rises; does not change 10 ECO 2023 MIDTERM 1 SUMMER A 2009 31) The elasticity of demand for an HD television is 2.0. If the price of HD televisions falls by 10 percent, then the quantity of HD televisions demanded increases by ____ percent A) 5.0 B) 2.0 C) 20.0 D) 10.0 E) None of the above answers are correct. 32) If the government imposes a tariff on imported wine, then the consumer surplus of domestic consumers of wine ____ and the producer surplus of domestic producers of wine ____. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases E) does not change; does not change 33) Laws are passed that require more ethanol be added to gasoline before the gasoline is sold. Simultaneously the number of ethanol producers increases. The equilibrium price of ethanol ____ and the equilibrium quantity ____. A) rises; increases B) might rise, fall, or not change; decreases C) falls; might increase, decrease, or not change D) falls; decreases E) might rise, fall, or not change; increases 34) If the equilibrium price of a gallon of gasoline is $2.50 and the government imposes a price ceiling of $2.00 per gallon of gasoline, the result is A) a surplus. B) a shortage. C) nothing changes, that is, there is neither a surplus nor a shortage. D) None of the above answers is correct because more information about the equilibrium quantity of gasoline is required. 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 (HINT: Be SURE to answer this question because you’ll get credit for any answer.) A) he called me to get my phone number. B) he asked for a price check at the Dollar Store. C) he studied for a blood test. 11 ...
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This note was uploaded on 09/25/2010 for the course ENC 2023 taught by Professor Rush during the Summer '10 term at University of Florida.

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