Practice+Exam+2+Econ+101+W09

Practice+Exam+2+Econ+101+W09 - Name_ Winter 2009 PRACTICE...

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Name___________________________ Winter 2009 PRACTICE Second Exam Economics 101
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___The estimated demand function for ramen noodles is Q d = 5 Pop – 25 P – 10 Y + 2.5 P m where P is the price of the noodles, P m is the price of a box of macaroni-and- cheese, Y is median income (in thousands of dollars/month) and Pop is population (in hundreds of thousands). If the population is 2 million people, median income is $3,000/month, the price of a box of macaroni-and-cheese is $2 and the price of ramen noodles is $1, then the: (a) elasticity of demand with respect to population is 2 and the elasticity of demand with respect to income is -0.6; (b) elasticity of demand with respect to population is 20 and the elasticity of demand with respect to income is -0.6; (c) elasticity of demand with respect to population is 0.2 and the elasticity of demand with respect to income is -6; (d) elasticity of demand with respect to population is 0.5 and the elasticity of demand with respect to income is -6; (e) elasticity of demand with respect to population is 0.1 and the elasticity of demand with respect to income is -0.5. 2. ___The US imports shrimp at the current world price. The Federal government is considering the implications of imposing taxes or offering subsidies in the local shrimp market. Which of the following statements is true? (a) A consumption subsidy of $1/unit in combination with a production tax of $1/unit has the same effect on producer surplus as a tariff of $1/unit. (b) A consumption tax of $1/unit in combination with a production tax of $1/unit has the same welfare effects as a tariff of $1/unit. (c) A consumption tax of $1/unit in combination with a production subsidy of $1/unit has the same effect on the level of imports as a tariff of $1/unit. (d) The increase in producer surplus generated by a $1/unit tariff is greater than the loss in consumer surplus associated with the same tariff. (e) Imports must be higher under a $1/unit consumption tax than under a $1/unit production subsidy.
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3. ___The following graph depicts the domestic market for hand-lotion (an export good at current world price of $30/gallon). Suppose the US border is suddenly closed to hand-lotion exports. Which of the following will NOT occur? (a) Domestic consumers would be worse off. (b) Domestic producers would be worse off. (c) The quantity of hand-lotion exports falls. (d) The domestic price of hand-lotion would fall (e) Social surplus would fall. 4. ___The graph shows the Dutch market for wooden clogs. 2 4 6 8 10 14 12 16 18 20 22 100 200 300 400 500 600 24 domestic demand Price ($) Quantity domestic supply 700 Quantity (gallons) $/gallon Demand Supply World Price 30
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Due to the emergence of low-cost clog manufacturers in China, the Netherlands is now a price taker in this market. If the world price is $20 per pair and the Dutch government levies an export tax of $2 per pair, how much tax revenue will they generate? (a) $900
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Practice+Exam+2+Econ+101+W09 - Name_ Winter 2009 PRACTICE...

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