Spring 2008 Midterm 1 Test Code A

Spring 2008 Midterm 1 Test Code A - Professor: M. Rush ECO...

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Unformatted text preview: Professor: M. Rush ECO 2023 SPRING 2008 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 36 multiple choice questions. Please check to be sure your copy has all 36. If you do not answer a question, you will not get credit for that 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. 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. This time includes completing the extra credit question if you choose to answer it. 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 SPRING 2008 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. EXTRA CREDIT QUESTION INSTRUCTIONS There is an extra credit question on the last page. You can earn up to 3 points added to this exam’s test score. If you choose to answer the extra credit question, be sure to follow all the instructions on the page with the extra credit question and provide all the required information. DO IT LEGIBLY IF WE CANNOT READ YOUR NAME AND/OR UF ID, YOU WILL NOT GET ANY EXTRA CREDIT! When you hand in your test, you must hand in the extra credit page. You may copy your answer to the extra credit question in the space below. I will announce in class when the extra credit questions are graded and will post the grades on the class page but it will take a week or two. Do not email me, the grader, or the email address for questions about when the extra credit will graded. I will announce this in class. THERE IS NO APPEAL ABOUT THE GRADE—IT IS WHAT IT IS. 2 ECO 2023 MIDTERM 1 SPRING 2008 1) Vera Bradley makes a specific style of cloth purses. The elasticity of demand for a Vera Bradley purse likely is ____ the elasticity of demand for purses in general. A) larger than B) the same as C) smaller than D) not comparable to 2) Suppose jet fuel rises in price. Then the equilibrium price of travel by plane ____ and the equilibrium quantity of travel by plane ____. A) rises; increases B) does not change; decreases C) falls; decreases D) rises; does not change E) rises; decreases 3) The demand for gasoline is inelastic and the supply of gasoline is elastic. If the government imposes a tax on gasoline, the tax incidence is such that A) producers pay more of the tax. B) consumers pay more of the tax. C) consumers and producers pay equal amounts of the tax. D) None of the above answers is correct because information is needed about whether the tax is imposed on buyers or sellers. E) None of the above answers is correct because information is needed about the amount of the tax. 4) Potatoes used to make potato chips fall in price while simultaneously people decide that eating potato chips is good for them. As a result, the equilibrium price of a bag of potato chips ____ and the equilibrium quantity ____. A) rises; increases B) probably changes but in an ambiguous direction; decreases C) falls; probably changes but in an ambiguous direction D) does not change; increases E) probably changes but in an ambiguous direction; increases 5) Shaniq is willing to pay $50 for a Christmas tree, John is willing to pay $45 and Jeff is willing to pay $40. The price of a tree is $40. The total consumer surplus for Shaniq, John and Jeff taken together is A) $15 B) $135 C) $40 D) $95 3 ECO 2023 MIDTERM 1 SPRING 2008 6) Adam Smith’s Wealth of Nations, written in 1776, describes the market’s invisible hand representing the A) King of England’s control over the colonies. B) control all governments have in organizing the market. C) efficiency the market achieves without the interference of governments. D) inefficiency of markets when governments do not organize them. 7) 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 $10. The producer surplus to society of another purse is A) $60. B) $30. C) $20. D) $10 E) $50. 8) Suppose the number of Mexican restaurants falls as some restaurants close. As a result, the equilibrium price of Mexican food ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 9) New technology for producing ethanol is discovered. As a result, the equilibrium price of ethanol ____ and the equilibrium quantity ____. A) falls; decreases B) falls; increases C) falls; does not change D) rises; decreases E) rises; increases 4 ECO 2023 MIDTERM 1 SPRING 2008 10) In the above figure, before the tax was imposed, the price per CD paid by consumers was ____ and after the tax the price (including the tax) paid by consumers is ____. A) $20; $20 B) $10; $30 C) $10; $20 D) $20; $10 E) $20; $30 11) In the above figure, the consumer surplus before the tax is imposed is ____ and the consumer surplus after the tax is imposed is ___. A) $800 million; $200 million B) $800 million; $400 million C) $400 million; $100 million D) impossible to determine; $100 million E) None of the above answers are correct. 12) Raising the minimum wage ____ the employment of low‐skilled workers such as teenagers. A) raises B) does not change C) lowers D) None of the above answers is correct. 5 ECO 2023 MIDTERM 1 SPRING 2008 13) Suppose the demand for drug is perfectly inelastic. If the number of firms producing the drug increases, the equilibrium price of the drug ____ and the equilibrium quantity ____. A) falls; decreases B) falls; increases C) rises; does not change D) does not change; decreases E) falls; does not change 14) The more elastic the demand for a product, ____ effect of a tax on the equilibrium quantity and the ____ the effect of a tax on the price paid by consumers. A) larger; larger B) larger; smaller C) smaller; larger D) smaller; smaller Point A B C D E Production chocolate bars 0 10 20 30 40 Production cans of cola 100 90 70 40 0 15) The above table shows production points on Sweet‐Tooth Land’s production possibilities frontier. What is the opportunity cost of one chocolate bar if Sweet‐tooth Land moves from point D to point E? A) 40 cans of cola B) 1 chocolate bar C) 4 cans of cola D) 0 cans of cola E) Infinite. 16) Suppose Cox Communications decreases the price it charges for cable television service and its total revenue decreases. What can we conclude about the price elasticity of demand? A) demand is elastic B) demand is unit elastic C) demand is inelastic D) Not enough information is given to conclude anything about price elasticity of demand. 6 ECO 2023 MIDTERM 1 SPRING 2008 17) Plywood is used in the construction of houses. If the price of plywood rises, what happens to the supply of houses? A) The supply increases so that the supply curve shifts rightward. B) The supply decreases so that the supply curve shifts leftward. C) The quantity supplied increases but there is no shift in the supply curve. D) The quantity supplied decreases but there is no shift in the supply curve. Wage rate (dollars per hour) 12 10 8 6 4 2 0 b D 20 40 60 80 100 120 140 Quantity (thousands of workers) a c d S 18) The above figure shows a labor market with a minimum wage of $8 an hour. The deadweight loss equals the A) area abc. B) distance ab. C) distance ad. D) area acd. E) area bad. 19) An increase in the expected future price of oil shifts the current demand curve for oil ____ and shifts the current supply curve of oil ____. A) rightward; rightward B) rightward; leftward C) leftward; rightward D) leftward; leftward 20) The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a soda? A) 3 bags of corn chips B) 1/3 of a bag of corn chips C) 1 bottle of soda D) $1 E) 33¢ 7 ECO 2023 MIDTERM 1 SPRING 2008 21) People discover that eating fast food tacos leads to increased health. As a result, the equilibrium price of a fast food taco ____ and the equilibrium quantity ____. A) rises; decreases B) rises; increases C) falls; decreases D) falls; increases 22) When the efficient quantity of blue jeans are produced, then A) the total consumer surplus of blue jeans equals the total producer surplus. B) the marginal social benefit of a pair of blue jeans exceeds the marginal social cost by as much as possible. C) the total consumer surplus of blue jeans plus the total producer surplus equals zero. D) the marginal social benefit of a pair of blue jeans equals the marginal social cost. 23) From 9 to 10 a.m., Fred can sleep in, go to his economics lecture, or play tennis. Suppose that Fred decides to go to the lecture but thinks that, if he hadn’t, he would otherwise have slept in. The opportunity cost of attending the lecture is A) sleeping in and playing tennis. B) playing tennis. C) sleeping in. D) one hour of time. 24) If the income elasticity of demand for candy bars is positive, then A) the demand for candy bars is price elastic. B) the demand for candy bars is price inelastic. C) candy bars are an inferior good. D) candy bars are a normal good. 25) The price of a pizza falls. Which of the following is a possible cause? A) A decrease in the price of soda, a complement to pizza. B) A discovery that pizza cause diabetes. C) An increase in the income of the average household, with pizza being a normal good. D) An increase in the wages paid workers who produce pizza. 8 ECO 2023 MIDTERM 1 SPRING 2008 26) An increase in a nation’s resources A) shifts its PPF inward. B) shifts its PPF outward. C) makes its PPF steeper. D) makes its PPF less steep. Price (dollars per unit) 10 8 6 4 2 D 10 20 30 40 50 60 Quantity (units) 27) The figure above illustrates a linear demand curve. In the range from $8 to $4, the price elasticity of demand is equal to A) 1.50. B) 5.00. C) 0.20. D) 0.67. E) 4.00. 28) A price ceiling set above the equilibrium price results in A) a surplus. B) a shortage. C) a rightward shift of the demand curve. D) a rightward shift of the supply curve. E) None of the above. 29) Tacos are a normal good and people’s incomes rise. As a result, the equilibrium price of tacos ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 9 ECO 2023 MIDTERM 1 SPRING 2008 30) Of the following factors, which directly shifts both the demand curve and the supply curve of automobiles? A) An increase in costs. B) An increase in income. C) An increase in technology. D) An increase in the (current) price of an automobile. E) None of the above. 31) When the price of pizza falls by 4 percent, the quantity of pizzas demanded increases by 3 percent. The price elasticity of demand equals A) 4.0. B) 8.0. C) 1.33. D) 0.75. E) 1.00. 32) Research is publishing which shows that using cell phones results in an increased chance of cancer. As a result, the efficient quantity of cell phones ____ and the producer surplus from cell phones ____. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; does not change E) decreases; decreases 10 ECO 2023 MIDTERM 1 SPRING 2008 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 above figure shows the market for pizza. Teenagers eat morepizza on average than do other age groups. Which panel shows the effect of a decrease in the number of teenagers? A) Figure A. B) Figure B. C) Figure C. D) Figure D 34) (This is an out‐of‐the book question.) If the government outlaws the purchase and sale of egg rolls, then the equilibrium price of egg rolls will ____ and the equilibrium quantity will ____. A) rise; decrease B) not change; decrease C) fall; decrease D) fall; not change E) probably change but in an ambiguous direction; decrease 11 ECO 2023 MIDTERM 1 SPRING 2008 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 gave a test on Valentine’s day. B) he yells into an envelope in order to send a voice mail. C) he thinks Taco Bell is a Mexican phone company. 12 ECO 2023 MIDTERM 1 SPRING 2008 EXTRA CREDIT QUESTION _____________________________ (Name) PRINT your name and UF ID in the spaces above. YOU MUST WRITE ___________________________ (UF ID) YOUR NAME AND UF ID LEGIBLY TO RECEIVE CREDIT FOR THIS QUESTION. When you have answered the question, hand in this page and ONLY THIS PAGE. Keep the rest of the test to help you study for the final exam. 1. Draw a diagram showing the market for hot dogs. Suppose that the market is in equilibrium. Label all the curves and show the efficient quantity, the equilibrium quantity, and the consumer surplus. 13 ...
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This note was uploaded on 02/08/2011 for the course ECO 2023 taught by Professor Rush during the Spring '08 term at University of Florida.

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