practuce exam 1 solutions

practuce exam 1 solutions - University of Illinois at...

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1 University of Illinois at Urbana-Champaign ECON302 Intermediate Microeconomics Exam 1 Solutions PART I: Multiple Choice Questions (55 points) 1. Use the following two statements to answer this question: I. In order to answer normative questions, it is necessary to make value judgments. II. In order to conduct positive economic analysis, it is always necessary to use empirical evidence in addition to economic theories. a. I and II are incorrect. b . I i s c orr ec t , II i in c. I is incorrect, II is correct. d. Both I and II are correct. 2. Although the U. S. airline industry has only a relatively small number of sellers, the market is nevertheless highly competitive. The reason is that: a. The number of buyers is very large. Du e o fi r ce omp i ion no firm ha ignifi an on rol ov r pri c. Due to fierce competition, no firm has significant control over the quantity supplied. d. Most airline routes are served by relatively many sellers. 3. What does it mean when the CPI is higher this year than last? a. The rate of inflation has increased. Th ha ee n infla ion la st y ar c. Real prices have increased. d. Real prices have decreased. e. All of the above 4. The CPI in 1970 was 38.8 and in 1998 the CPI was 163.0. If the real price of a gallon of milk in 1970 in terms of 1998 dollars is $0.70, what was the nominal price of milk in 1970? a. $2.94 $0 17 c. $4.20 d. $0.91 e. Cannot be determined since the inflation rate in 1970 is not known.
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2 5. Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline. a. I only. b. II only. c . III only d. II and III only. 6. From 1970 to 1993, the real price of eggs decreased and the total annual consumption of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed? a. A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. b. A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. c. A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs. d. Non e of t h abov . 7. Use the following two statements to answer this question: I. The supply of newly mined copper is more elastic in the long run than in the short run. II. The supply of scrap copper is more elastic in the short run than in the long run. a Bo h I and II ar ru b. I is true, and II is false. c. I is false, and II is true. d. Both I and II are false. 8. For which of the following pairs of goods the cross-price elasticity of demand is positive? Co a-Cola and P p s i b. Grape jelly and peanut butter c. Chocolate chip cookies and milk d. Computers and software e. None of the above 9. Indifference curves are convex to the origin because of: a. transitivity of consumer preferences.
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practuce exam 1 solutions - University of Illinois at...

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