Midterm 1 - at tn r W. Vt ECONOMHCS 364K, FALL 2009 D....

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Unformatted text preview: at tn r W. Vt ECONOMHCS 364K, FALL 2009 D. Hamermesh MIDTERM EXAM #E Answer the questions in the space provided on the test sheet or on the reverse side. Write your name and UTEID on each page. You have 80 minutes for the exam, and there are 36 totaf points. Tests wiél be handed back and gone over in class next Tuesday. Please begin Chapter 7 in the text for next Tuesday’s lecture. H. (6 points) During weekends, Mrs. Smith bakes cookies and muffins. She can only prepare the foliowing @ combinations of cookies and muffins: u .3 a. Graph the Production Possibility Frontier for Mrs. Smith and calcuiate the Opportunity cost of each of the 23m and 14?" muffins. If the FF? is not a straight line, Eplain why. ‘ r .7 a r. 511-“ 3"”) w d» -- .,.. -: Q h it; hjtfltfr’fl “t if; {it} iii. J .. b. To remedy the poor performance of her oven, Ms. Smith begins using a better quality of flour for cookies. How do these actions affect her Production Possibility Frontier? Explain and redraw. m 1: "D \ (lea. w . ms, 4 . Mm @6ij t 5. “x r v.“ a E ‘ If I t u ~ all? I ‘ NAME AND UTEED ‘\ first” ‘t {ix-em \oict {3);} mm .. It ‘ \ KE. (3 points each) Use a supply and demand diagram to illustrate and explain the effect of the given shock or shocks on the equilibrium price and quantity in each competitive market. a. ‘An advertisement for a new healthy snack causes consumers” tastes to shift away from m ‘ hotdogs. Graph the effect on the market f0? mustard, which is used mainly when people 3) eat hotdogs. ‘ bl Argentina is cit-porter ml:Eiié'“WE}131"”‘trggmngggfifi £366 government decides to restrict beef exports to keep domestic prices 10w. Show the effec fit ‘ of this policy on the world beef market. give 5 fist M x 'V t 1 l». a EVA/k5,,” / v" Ev NAME AND UTEID c. Gov. Schwarzenegger announces that the State of California will begin subsidizing the production of oak barrels, which are used in the wine industry. Show the effect that eventually will occur in the market for wine in California. d. Diatomacecus earth (DE) is used in pooi filters. After a large amount of debits is picked up by the filter, new DE must be added back in. Iliustrate what happens in the market for DE after a particularly bad rainstorm that puts debris in pools all over North America. . in . r a“ a,“ “PA "flea; is“ All; 6;. ; w-"iié. NAME AND UTEID HI. (6 points) Consider the seashell market in Port Aransas. Seashell sellers collect shells from the beach to sell in their stores. a. Suppose a big hurricane hits Port Aransas, washing up many more sheils on the beach. What happens to the equilibrium price and quantity in the seashell market? Use a graph to explain your 4:? answer. b. New sup -,.;l , pose that, in addition to the hurricane, shell jewelry becomes very popular. From the initial equilibrium, what can you say about the new equilibrium price and quantity? Use a new Q" graph explainyour answer. it; «" 4:} i“ n <3 ‘3”? liflfigbfil: _ '" \ Th city of Port Aransas enacts a new law that caps the price of seashelis at $3. If the equilibrium price is currently $4, what problem would occur? Illustrate this situation with a graph e \ \ r i “l flfisflif‘wtgfifiwwwlflw \._V‘N‘( wag“ NAME AND UTEID 1V. (5 points) I Ralph sells breakfast tacos for $2 each and beer for $3/can out of a trailer on South Congress. a. Mark is a customer of Ralph’s trailer and buys 4 tacos each morning at the current price. If Ralph were to raise the prime of a taco by 50%, Mark would buy only 2 tacos, What is Mark’s elasticity of demand for tacos? ls his demand elastic or inelastic? mu “'13. 2'“ l“ l ;::,-.— h. “’4‘ - l w”? Ii } l tit, {"” ,v‘ \ my? 9 {em 1 IIIIIII ....»‘""~v‘ “hu- ‘\ ‘- r t ‘ 691; a 1 3 MW w : '9 W i é a a a l \m ‘ c. Suppose that Ralph does increase the price of a taco by 50%. Mark reduces his consumption of beer from 4 cans to 2 cans. Are tacos and beer complements or substitutes for Mark? w 2 . m , ,. Mfr w... M t Mu - at; ‘ _ - :2 ._ r/ {TR ‘* :53“ ,: . :7 5h "T- W” A ‘1 “ liar “’2. ' NAME AND UTEID . 3 afifs‘efit\‘ Kafka} if " it: w if“ (2 points) L‘E'aura loves to buy any new fashionable clothing. Every time her income rises she spends 1/3 of it // on clothing. Her income is $10,000 and she purchases 100 clothing items. If her inconkefigirsesgo $1 1,000 and she buys l 10 clothing items, what is her income elasticity of demandfiEipiaih wh’y. 1‘s.E clothingaluxury,anecessity or inferior? ‘ _ . .. L's“ """" ‘m- """"""""""""""""" " K w... :1; * \m M 3:: ‘1. \ \‘9 la; We pm a, V1. FOEHtS) (Wu-lg y; i any: :3;an \gxq'ath-‘t-‘A QQLéfi-Wz \ e‘ I have a budget of$18 for lunch. I can either buy pizzas or hambufiers. Thex’fsrice of one pizza is $6, anti the price of one hamburger is $3. 21. Draw the bijygiget line that} face at lunch. 1.3 l- b. The table below shows my total utility (in money terms) for consuming different quantities of pizzas and hamburgers. How many pizzas and hamburgers should i buy if I want to maximize my utility? Expiain your reasoning. ...
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This note was uploaded on 03/03/2011 for the course ECON 304K taught by Professor Ledyard during the Spring '08 term at University of Texas at Austin.

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Midterm 1 - at tn r W. Vt ECONOMHCS 364K, FALL 2009 D....

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