SUMMER A 2008 Midterm 1A

SUMMER A 2008 Midterm 1A - Professor M Rush ECO 2023 SUMMER...

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Unformatted text preview: Professor: M. Rush ECO 2023 SUMMER A 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 34 multiple choice questions. Please check to be sure your copy has all 34. 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 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. 2 ECO 2023 MIDTERM 1 SUMMER A 2008 1) There are technological advances in the production of HD televisions. The price of an HD television will ____ by more when the demand for an HD television is ____. A) rise; elastic B) rise; inelastic C) fall; elastic D) fall; inelastic 2) Research stating that eating pizza prevents heart disease is published and widely believed. As a result, the equilibrium quantity of pizza ____ and the efficient quantity of pizza ____. A) increases; increases B) does not change; increases C) increases; does not change D) increases; perhaps changes but more information is needed to determine if it increases, decreases, or does not change E) perhaps changes but more information is needed to determine if it increases, decreases, or does not change; increases 3) Neither the supply nor demand for books is perfectly elastic nor perfectly inelastic. The government imposes a $2 per book tax on books. As a result, the equilibrium price of a book A) rises by more than $2. B) rises by $2. C) rises by less than $2. D) does not change. 4) Potatoes used to make potato chips rise in price while simultaneously the number of people who eat potato chips increases. 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) rises; probably changes but in an ambiguous direction D) does not change; increases E) None of the above answers is correct 3 ECO 2023 MIDTERM 1 SUMMER A 2008 5) For which of the following is the cross elasticity of demand positive? i. Tennis balls and tennis rackets. ii. DVDs and laundry detergent. iii. Pizza and tacos A) i only. B) iii only. C) i and ii only. D) ii and iii only. E) i, ii, and iii. 6) When the quantity of coal supplied is measured in kilograms instead of pounds, the demand for coal becomes A) more elastic. B) less elastic. C) neither more nor less elastic because the elasticity does not change. D) undefined. Capital Possibility goods A 0 B 2 C 4 D 6 E 8 Consumption goods 60 55 45 25 0 7) The table above presents the production possibilities frontier for a nation. Using the information in the table, when moving from possibility C to D, the opportunity cost of 1 capital good _____. A) 2 capital goods B) 10 consumption goods per capital good C) 45 consumption goods D) 25 consumption goods E) None of the above answers is correct. 8) Suppose Mexican food is a normal good and people’s incomes rise. 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 4 ECO 2023 MIDTERM 1 SUMMER A 2008 9) The social arrangement that gives you ownership of your labor is A) B) C) D) E) a market. property rights. the invisible hand. minimum wage laws. dynamic work ability. 10) In the above figure, the tax ____ and the deadweight loss from the tax equals ____. A) raises the price consumers pay for a CD to $40 per CD; $200 million B) lowers the price suppliers keep to $10 per CD; $200 million C) raises the price consumers pay for a CD to $30; $400 million D) has no effect on the price consumers pay for a CD; $100 million E) None of the above answers is correct 11) Fewer farmers grow wheat. As a result, the equilibrium price of a bushel of wheat ____ and the equilibrium quantity ___. A) rises; increases B) does not change; decreases C) falls; does not change D) falls; decreases E) None of the above answers are correct. 12) Raising the minimum wage ____ the unemployment 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 SUMMER A 2008 13) Suppose the demand for a life‐saving drug is perfectly inelastic. If the government imposes a tax on the drug, the equilibrium price consumers pay for the drug ____. A) falls by the amount of the tax B) does not change C) rises by the amount of the tax D) rises by less than the amount of the tax E) rises by more than the amount of the tax 14) The more elastic the demand for a product, the ____ effect of a cost hike on the equilibrium quantity and the ____ the effect on the equilibrium price. A) larger; larger B) larger; smaller C) smaller; larger D) smaller; smaller 15) The maximum price that Shaniq is willing to pay for a slice of pizza is the ____ for that slice of pizza. A) efficient price B) efficient amount C) marginal social benefit D) marginal social cost 16) The demand for Mountain Dew, a soft drink, ____ the demand for soft drinks in general. A) is less price elastic than B) has the same price elasticity as C) is more price elastic than D) None of the above because it is not possible to compare the price elasticity of Mountain Dew with that of soft drinks because Mountain Dew is, itself, a soft drink. 17) Plywood is used in the construction of houses. If the price of plywood falls, A) the supply of houses increases so that the supply curve shifts rightward. B) the supply of houses decreases so that the supply curve shifts leftward. C) the price of a house falls so that the demand for houses increases and the demand curve shifts rightward. D) the price of a house falls so that the demand for houses increases and the demand curve shifts leftward. 6 ECO 2023 MIDTERM 1 SUMMER A 2008 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) (This is a question from the old exams on the class web page.) 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) Burrito Brothers knows that the price elasticity of demand for its burritos is 0.8. Hence if Burrito brothers raises the price of a burrito from $2.85 to $3.15, then the quantity of burritos demanded decreases by ____. A) 2.4 percent B) 10 percent C) 1.25 percent D) 8 percent E) None of the above answers is correct 20) (This is an out‐of‐the‐book question.) The price elasticity of demand for corn chips is 0.3 and the price elasticity of supply is 1.3. If the government imposes a tax of $1 per bag on corn ships, when will the equilibrium quantity decrease by the most? A) when the tax is imposed on buyers B) when the tax is imposed on sellers C) more information is needed to answer the question. D) None of the above answers is correct because the equilibrium quantity decreases by the same amount if the tax is imposed on buyers or if the tax is imposed on sellers. 7 ECO 2023 MIDTERM 1 SUMMER A 2008 21) People discover that eating fried chicken leads to increased health. As a result, the equilibrium price of fried chicken ____ 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) Of the following factors, which directly shifts both the demand curve and the supply curve of automobiles? i. An increase in costs ii. An increase in the price of an automobile iii. An increase in the expected future price of an automobile A) i only. B) ii only. C) iii only. D) ii and iii only. E) i and iii only. 24) The price of a soda rises 10 percent and the quantity of milk demanded increases by 20 percent. The cross elasticity of demand between soda and milk equals A) 20.0. B) 2.0. C) −2.0. D) 0.5. 8 ECO 2023 MIDTERM 1 SUMMER A 2008 25) There are technological advances in the production of computers. As a result, the equilibrium price of a computer ____ and the equilibrium quantity of computers ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 26) The cost of producing pharmaceutical drugs rises while simultaneously the number of people using pharmaceutical drugs increases. As a result, the equilibrium price of pharmaceutical drugs ____ and the equilibrium quantity ____. A) rises; decreases B) rises; increases C) rises; probably changes, but more information is needed to determine if it increases, decreases, or does not change D) probably changes, but more information is needed to determine if it rises, falls, or does not change; increases E) None of the above answers is correct 27) The cost of producing pharmaceutical drugs rises while simultaneously the number of people using pharmaceutical drugs increases. The effect of the cost rise is larger than the effect of the increase in number of people. As a result, the equilibrium price of pharmaceutical drugs ____ and the equilibrium quantity ____. A) rises; decreases B) rises; increases C) rises; probably changes, but more information is needed to determine if it increases, decreases, or does not change D) probably changes, but more information is needed to determine if it rises, falls, or does not change; increases E) None of the above answers is correct 28) If the demand for a product increases, then definitely the i. consumer surplus from the product decreases. ii. consumer surplus from the product increases. iii. producer surplus from the product increases A) i only. B) ii only. C) iii only. D) ii and iii only. E) i and iii only. 9 ECO 2023 MIDTERM 1 SUMMER A 2008 Price (dollars per unit) 10 8 6 4 2 D 10 20 30 40 50 60 Quantity (units) 29) The figure above illustrates a linear demand curve. In the range from $4 to $2, the price elasticity of demand is equal to A) 1.50. B) 2.33. C) 0.43. D) 0.67. E) 1.00. 30) A nation produces only computers and food. By rearranging its production, it can produce more computers and more food. This fact means that initially the nation was A) definitely producing at a point on its production possibilities frontier. B) definitely producing at a point beyond its production possibilities frontier. C) definitely producing at a point inside its production possibilities frontier. D) producing at a point either inside its production possibilities frontier or beyond its production possibilities frontier E) producing at a point either on its production possibilities frontier or beyond its production possibilities frontier. 31) Tacos and pizza are substitutes and the price of a pizza rises. As a result, the equilibrium price of tacos ____ and the equilibrium quantity ____. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases 10 ECO 2023 MIDTERM 1 SUMMER A 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 32) The above figure shows the market for pizza. Pizza is a normal good. Which panel shows the effect of a decrease in income? A) Figure A. B) Figure B. C) Figure C. D) Figure D 33) The equilibrium rent for an apartment is $500. If the government imposes a rent ceiling of $600, then the rent ceiling A) creates a surplus of apartments. B) creates a shortage of apartments. C) creates neither a surplus of apartments nor a shortage of apartments. D) might create a surplus of apartments or a shortage of apartments but more information is needed to determine which. 34) After the scores are posted, if you have a question about your test score, email the grader at [email protected] and the director is so stupid (HINT: Be SURE to answer this question because you’ll get credit for any answer.) A) he can’t read an audio book. B) he asked me “What’s the number for 911?” C) that when he was going to Disney World and saw the sign “Disney World—Left” he turned around and went home. 11 ...
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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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