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econ exam 2

# econ exam 2 - VERSION A Georgia State University Principles...

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VERSION A Georgia State University Principles of Macroeconomics, ECON 2105 Second Midterm Exam Key This exam consists of twenty-five multiple choices questions. Please select the best answer and bubble your answer on the scantron. Each question carries five points. 1. The inverse demand and supply of PC are respectively given by P =1200 - 0 . 7 Q and P =350 + 0 . 3 Q. The net societal benefit at the unregulated market equilibrium quantity equals VB # 15 and VC # 19 a. \$345.290. b. \$375,750. c. \$282,900. \$361,250 . e. none of the above. In the given information, from Inverse demand a = 1200 and m d = 0 . 7, and from inverse supply, b = 350 and m s = 0 . 3. NSB = ( a - b ) 2 2( m d + m s ) = (1200 - 350) 2 2(0 . 7 + 0 . 3) = \$361 , 250 . 2. The ordinary demand and supply of wig are respectively given by Q =100 - 2 P and Q = - 30 + 4 3 P. The net societal benefit at the unregulated market equilibrium quantity equals VB # 16 and VC # 20 Here we have ordinary demand and supply. In order to apply the given formula you need to have a and m d of inverse demand; and b and m s of inverse supply. In the ordinary demand D = 100 and M = 2, from the formula sheet a = D/M = 100 / 2 = 50 and m d = 1 /M = 1 / 2 = 0 . 5. For inverse supply b = - S N = - ( - 30) 4 3 = 30 × 3 4 = 22 . 5 Note that division is nothing but mulitiplication by the reciprocal of the divider. m s = 1 4 3 = 1 × 3 4 = 0 . 75 . 1

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NSB = ( a - b ) 2 2( m d + m s ) = (50 - 22 . 5) 2 2(0 . 5 + 0 . 75) = \$302 . 50 . 3. Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) the economy begins a recession which lowers the buyers income. An economist would predict with certainty that VB # 17 and VC # 21 a. equilibrium quantity of automobiles will rise. b. equilibrium quantity of automobiles will fall. c. equilibrium price of automobiles will rise. equilibrium price of automobiles will fall . c. none of the above will happen. First event increases the supply of automobile, the second event of lower income of buyers decreases the demand for automobile. Now see the table when supply goes up and demand goes down what is the answer. Price obviously goes down, quantity is unknown. 4. Consumers have show an increased preference for compact disks. If, at the same time, more factories make compact disks, what should happen to the equilibrium price and quantity of compact disks? VB # 18 and VC # 22 Increased preference will increase the demand for compact disk, and more factories producing it will increase its supply. Now when both demand and supply go up, quantity obviously go up, price is unknown.
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