PracticeMidterm_221-W_11

PracticeMidterm_221-W_11 - Midterm Exam 221 Fall 2010...

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Unformatted text preview: Midterm Exam 221 Fall 2010 Version B Name: Date: 1. The publisher of an economics textbook finds that when the book's price is lowered from $5 to $3, sales rise from 10,000 to 30,000. Using the midpoint method, you can calculate that the price elasticity of demand is: A) 1/2. B) 1/5,000. C) 5/3. D) 2. Use the following to answer question 2: Table: {Ifrrnsutmr fillrpllm _________.___.._.___._ This table shows some. Atlanta college students‘ willingness to pay in sea Tia? Nun-,1: ji‘eiéfft'fn‘s‘éffiffiv“, by the. Atlanta. Ballet. _____________—__—-———————-—— Stmlent 1WiIlillggmss 0:. I‘m Lois S 1 CH} lx-iiguel Qt} Nar'um r35 {Thea r :30 Pat 1 S 2. (Table: Consumer Surplus) If the price of a ticket to see The Nutty Nutcracker is $75, then Lois’s consumer surplus is: A) $25. B) $60. C) $75. D) $100. 3. The total consumer surplus for Good X can be calculated in all except one of the following ways. Which is the exception? A) the sum of the individual consumer surpluses for all buyers of X B) the area below the demand curve for X and above the price of X C) the area bounded by the demand curve for X and the two axes D) the sum, for all buyers of X, of the difference between what each buyer is willing to pay for X and the amount actually paid Page 1 Midterm Exam 221 Fall 2010 Version B 4. A tax: A) generates tax revenue and creates deadweight loss. B) increases consumer and producer surplus. C) creates revenue for the government and increases total surplus. D) is always efficient. 5. In a single day, George can bake 6 cakes while Greta can bake 8 cakes. We then know that: A) George has a comparative advantage in baking cakes. B) George has an absolute advantage in baking cakes. C) Greta has a comparative advantage in baking cakes. D) Greta has an absolute advantage in baking cakes. 6. If an decrease in income leads to an increase in the demand for a good, then the good is said to be: A) normal. B) a luxury. C) inferior. D) a staple or necessity. 7. Along a given demand curve, a increase in the price of a good: A) will increase consumer surplus. B) will decrease consumer surplus. C) will have no effect on consumer surplus. D) It's impossible to tell what will happen to consumer surplus. Page 2 Midterm Exam 221 Fall 2010 Version B Use the following to answer question 8: Figure and Table: Market for Apartments Monthly 3 ram (per g apartment): $22:an $200 was ace 690;: 0 . Quantity of apartments (miéiions) Rent Quantity Bettiz‘nidetl Quz‘intitjr finpplietl 41 per at part nwnt ( mil “4) us of { millin ns of per month} almrtnwnts} zaps-:trlments} $1 .400 1 .6 2.4 1.300 1 2 '3 l it'll} 1 2,3 l JEN?) 1.33.3 11 t {"300 2.0 3.1} Willi"; 2. 1 l .9 'FQI} 2.3 t M)“ 2.4 L6 . - 8. (Figure and Tablet Market for Apartments) This figure represents a competitive market for apartments. If a government price floor at $900 is now imposed on this market, then an inefficiency will result in the form of a: A) surplus of 0 million apartments. B) shortage of 0.6 million apartments. C) surplus of 0.2 million apartments. D) shortage of 0.2 million apartments. D) Page Midterm Exam 221 Fall 2010 Version B 9. An example of a positive statement is: A) the rate of unemployment is 4%. B) a high rate of economic growth is good for the country. C) the federal government should spend half of its budget on national defense. D) everyone in the country needs to be covered by national health insurance. 10. A good is normal if: A) when income increases, the demand remains unchanged. B) when income increases, the demand decreases. C) when income increases, the demand increases. D) income and the demand are unrelated. Use the following to answer question 11: Figure: Demand Curve 3.0 a3?- UX C”; “‘3 03 am a . 3 , ,4, w Quantity 11. (Figure: Demand Curve) Using the midpoint method, you can calculate that the price elasticity of demand between $1 and $3 is approximately: A) 1. B) 3/7. C) 1/4. D) 4. Page 4 Midterm Exam 221 Fall 2010 Version B Use the following to answer question 12: Table: Bongos and Frisbees Hill, Sly-lickev Bangers Frisbees Bmigns Frisbees l 10 4 l4 3 ‘3 '5 12 3 6 1 ii) 12. l3. 14. 15. (Table: Bongos and Frisbees) Bill and Mickey make bongos and Frisbees. Who has the comparative advantage in producing bongos? A) Bill B) Mickey C) both D) neither A beneficial technological change enhances the production of the cranberry crop. At the same time, scientists discover the potential cancer risks cased by eating too many cranberries. This will result in: A) an increase in both the equilibrium price and quantity in the cranberry market. B) an increase in the equilibrium quantity, and an uncertain impact on the equilibrium price of cranberries. a decrease in both the equilibrium price and quantity in the cranberry market. a decrease in the equilibrium price, and an uncertain impact on the equilibrium quantity of cranberries. C) D) A persistent shortage may occur if: A) the government imposes a price ceiling. B) a price floor is imposed. C) demand keeps falling. D) supply shifts rightward. The terms decrease in demand and decrease in quantity demanded can be used interchangeably. A) True B) False Page 5 Midterm Exam 221 Fall 2010 Version B 16. Economists define an efficient use of resources as a situation where: A) one person can be made better off, but only by making another person worse off. B) all persons can be made better off, without making anyone worse off. C) all persons receive an equal share of the resourCes. D) all persons are made worse off when one person is made better off. 17. A binding price floor is designed to: A) keep prices low. B) increase the quality of the good. C) prevent shortages. D) keep prices high. Use the following to answer question 18: Figure: Comparative Advantage Eastland and Westland produce only two goods, peaches and oranges, and this figure shows each nation's production possibility frontier for the two goods. Eastland Westland Oranges Oranges six} 15):; as 9% I. at: an an .73 » as ea is: 5:: i 49 49 an 39 '3 2%} 32a ; . ; 'i a a 222 :4; fit) :smzaaecaaaéaazae e 4:3 as an wwnmmewfim Peaches Peaches 18. (Figure: Comparative Advantage) Eastland has an comparative advantage in producing: A) oranges only. B) peaches only. C) both oranges and peaches. D) neither oranges or peaches. Page 6 Midterm Exam 221 Fall 2010 Version B 19. A price that the government guarantees a consumer will pay for a particular product is a(n): A) price ceiling. B) price floor (price support). C) deficiency price. D) export price (export subsidy). 20. If total revenue goes up when price increases, the price elasticity of demand is said to be: A) price-inelastic. B) price unit-elastic. C) price-elastic. D) positive. Use the following to answer question 21: Figure: Supply of Coconuts Price of I coconuts ; 83 31 8; EMS Quantity of coconuts 21. (Figure: Supply of Coconuts) If there is an expectation on the part of coconut suppliers that the price of coconuts will be significantly lower in the very near future, then the movement in the model to reflect today's market behavior would be: A) A to B. B) B to A. C) A to C. D) B to E. Page 7 Midterm Exam 221 Fall 2010 Version B Use the following to answer question 22: Table: Market for Fried 'I‘winkies ___________________.___————-———-——-— Ma rket for Fried Txx‘inkies Quantity Disnmnded Qua I11in Supplied Price {unit} {In nits) {units} '51 .10 8332101} 3,1300 1 .30 534,001.} 33,000 I 31000 '3, 000 1 40 .8230 9,009 1 50 5,000 L 13:3 22. (Table: Market for Fried Twinkies) In response to popular anger over the high price of fried Twinkies and the extreme wealth of fried Twinkie producers, the government imposes a price ceiling of $1.10 per fried Twinkie. From this table, the price ceiling causes: A) a shortage of 3,000 fried Twinkies. B) a shortage of 6,000 fried Twinkies. C) a surplus of 8,000 fried Twinkies. D) a surplus of 3,000 fried Twinkies. Page 8 Midterm Exam 221 Fall 2010 Version B Use the following to answer questions 23-24: Figure: Shifts in Demand and Supply P l """"" Wane; A Panel 8 9 s, 32 $2 3 l 3“ 3 D . D {per period) Quantity (per period) Pane? C p, Page? {3 s 23. 24. (Figure: Shifts in Demand and Supply) The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for used furniture, an inferior good? A) Panel A B) Panel B C) Panel C D) Panel D (Figure: Shifts in Demand and Supply) The figure shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating a tomato a day prevents aging. Which panel best describes how this will affect the market for tomatoes? A) Panel A B) Panel B C) Panel C D) Panel D Page 9 Midterm Exam 221 Fall 2010 Version B 25. If the price elasticity of supply is greater than 1, then: A) supply is price—elastic. B) supply is price-inelastic. C) supply is price unit-elastic. . D) quantity supplied is relatively unresponsive to price changes. Use the following to answer question 26: Figure: Market with Tax Price S: p; .01. pg Pa (31 {32 Quantity 26. (Figure: Market with Tax) The deadweight loss arising from the imposition of this tax is equal to the areas: A) B, D. B) D, E. C) B, C. D) C, F. 27. An economy is said to have a comparative advantage if it: A) can produce more of all goods than another economy. B) can produce less of all goods than another economy. C) has the highest cost for producing a particular good. D) has the lowest cost for producing a particular good. 28. Sales taxes are considered to be: A) proportional. B) progressive. C) degressive. D) regressive. Page 10 Midterm Exam 221 Fall 2010 Version B Use the following to answer question 29: Table: Producw Surplus a 111’] 13mm tum Tickms Studwt Willingness tr;- Sell Tim l 1.11 um 30 Whitney SD R5: lp l1 1 {)0 Rick .150 29. (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if the price for Phantom tickets is $140, and there is no other market for tickets, total producer surplus for these five students is: A) $139. B) $110. C) $40. D) $379. Page 1 l Midterm Exam 221 Fall 2010 Version B Use the following to answer question 30: Figure: Demand for DVDs Rental Rental price price of of {DVDS DVDS C 8 Rental Rental! price price of of DVDS {DVDS {3 Quantity {per period) Quantity {per period) 30. (Figure: Demand for DVDs) A increase in the price of DVD rentals would result in a change illustrated by: A) the move from f to g in panel A. B) the move from h to i in panel B. C) the move from j to k in panel C. D) the move from I to m in panel D. 31. Peanut butter and jelly are complements. If there is a increase in the price of jelly, producer surplus in the peanut butter market: A) will increase. B) will decrease. C) will not change. D) may change, but it is impossible to tell if it will increase or decrease. Page 12 32. Midterm Exam 221 Fall 2010 Version B Brianna and Jess live in Taxland, which only has one tax, an income tax. Brianna pays $2,000 in taxes and Jess pays $1,000. Brianna earns $20,000 and Jess earns $10,000. From this information, you can infer that the tax system is: A) progressive. B) regressive. C) proportional. D) equitable. Use the following to answer question 33: Table: “111231 and Aluminum 1.3 {I} {1' ma ny 33. 34. Wheat Alu mi nu m l’rml action Pniult'lttin n 1 fit} {1 t} 11):} Wheat - Alu minu m il’rothlctiun Production 50 {21 1:1 1051 (Table: Wheat and Aluminum) The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table: A) the United States has a comparative advantage in wheat and an absolute advantage in wheat. B) Germany has an absolute advantage in aluminum and a comparative advantage in wheat. C) the United States has a comparative advantage in both aluminum and wheat. D) Germany has a comparative advantage in aluminum and an absolute advantage in aluminum. Take the following demand function Qd=400~4P+Ps+L where P=25, Ps=10, and I=90. Find the price elasticity of demand. A) 4 B) 1/4 C) 16 D) 1/16 Page 13 35. 36. 37. 39. 40. Midterm Exam 221 Fall 2010 Version B Take the following demand function Qd=400-4P+Ps+l, Where P=25, Ps=10, and 1:90. Find the cross price elasticity of demand. A) 1/20 B) 1/ 10 C) 1/40 D) 1/2 Take the following demand function Qd=400—4P+Ps+l, where P=25, Ps=10, and 1:90. Find the income elasticity of demand. A) 9/40 B) 1/40 C) 1/4 D) 9/ 10 Take the demand function Qd=300—2P, and the supple function Qs=P. Find the market equilibrium quantity equilibrium. A) 100 B) 50 C) 300 D) 200 Take the demand function Qd=3 00—2P, and the supple function Qs=P. Find the market equilibrium price. A) 250 B) 100 C) 120 D) 200 Take the demand function Qd=300-2P, and the supple function Qs=P. Find the consumer surplus at market equilibrium. A) $20,000 B) $2,000 C) $35,000 D) $10,000 Take the demand function Qd=3 00-2P, and the supple function Qs=P. Find the Producers Surplus at market equilibrium. A) $20,000 B) $5,000 C) $10,000 D) $40,000 Page 14 Midterm Exam 221 Fall 2010 Version B 41. Take the demand function Qd=300-2P, and the supple function Qs=P. Suppose the market has a price floor of $80. What is the shortage? A) $60 B) $90 C) $22 D) $0 42. Take the demand function Qd=300-2P, and the supple function Qs=P. Suppose the market has a per-unit tax of $30. Find the after tax equilibrium quantity. A) 100 B) 120 C) 80 D) 150 43. Take the demand function Qd=300-2P, and the supple function Qs=P. Suppose the market has a per—unit tax of $30. Find the after tax government revenue. A) $1,000 B) $2,400 C) $3,200 D) $6,400 44. Take the demand function Qd=3 00-2P, and the supple function Qs=P. Suppose the market has a per—unit tax of $30. Find the dead weight loss. A) $1,600 B) $200 C) $720 D) $300 45. The demand for meals at a local Applebee's will fall if: A) the Olive Garden offers a 10% discount coupon in the local newspaper. B) the price of a meal at Applebee's rises. C) local incomes increase and Applebee's is a normal good. D) the price of gasoline falls in the local area. 46. Many public utilities burn oil to generate electricity. If the price of oil increases, we would expect there to be: A) a shift to the right in the supply curve of electricity and a lower price for electricity. B) a shift to the left in the supply curve of electricity and a higher price for electricity. C) a shift to the right in the demand curve for oil and a higher price for electricity. D) a shift to the left in the demand curve for oil and a lower price for electricity. Page 15 Midterm Exam 221 Fall 2010 Version B Use the following to answer question 47: Figure: Demand for Coconuts 9mm of coconuts Quantity of coconuts 47. (Figure: Demand for Coconuts) If coconuts are considered a normal good and there is an expectation on the part of consumers that the prices of coconuts will rise significantly in the near future, then the movement that would take place in the model could be: A) C to A. B) A to B. C) B to E. D) E to B. Use the following to answer question 48: Figure: Supply of Coconuts Price of coconuts ; Quanfity of coconuts Page 16 Midterm Exam 221 Fall 2010 Version B 48. (Figure: Supply of Coconuts) If there is an improvement in the technology used to harvest coconuts (e. g., a faster, less expensive coconut picker), then the movement in the model could be: A) A to C. B) B to A. C) C to A. D) B to E. Use the following to answer question 49: WHO: {lionsumer Surplus This table shims 501112: Atlanta college students‘ willingness to pay; to see The 3653012:Eviattr'ruckw: by the Atlanta Ballet Student Willingness to I‘m: Lois 1 {1!} M i grid-l 9|) Narum 65 Oscar 1' '5 [9 Pat 1 5 49. (Table: Consumer Surplus) If the tickets to The Nutty Nutcracker are free and there is no other market for tickets, the total consumer surplus for the five students is: A) $0. B) $100. C) $150. D) $320. 50. Suppose the market demand curve for Good Y is given by the equation Qd = 100 — 2P, where P is the price per unit and Qd represents the number of units demanded. If the market price of Good Y is $10, then the quantity demanded would equal and the value of consumer surplus will be A) 20 units; $100 B) 80 units; $200 C) 80 units; $1,600 D) 20 units; $1,600 Page 17 51. 52. 53. 54. 55. Midterm Exam 221 Fall 2010 Version B Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is total consumer surplus? A) $10 B) $35 C) $45 D) $60 the demand curve and Consumer surplus is represented by the area the price. A) above; below B) above; above C) below; above D) below; below Luis is willing to sell his pool table for $600, but he has paid $840 for the table. The producer surplus Luis receives is . i A) $600 B) $840 C) $240 D) $1,440 Local cable companies recently increased the price of basic services. A news expert reporting on the increase stated, “While prices have increased 40%, the cable company reports only a 20% increase in revenue.” This remark suggests the demand for basic cable service is elastic. A) True B) False There is no total revenue test for price elasticity of supply because: A) price and quantity are inversely related. B) price and quantity are usually positively related. C) total revenue will not usually change in the direction of a supply price change. D) price and quantity are always positively related. Page 18 Midterm Exam 221 Fall 2010 Version B 56. There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas, no matter how high or low the price. If he is correct in this assertion, what must be true about the demand curve for gas at his station? A) It must be vertical with a price elasticity of zero. B) It must be vertical with a price elasticity of infinity. C) It must be horizontal with a price elasticity of zero. D) It must be horizontal with a price elasticity of infinity. 57. If the income elasticity of demand for a good is , the good is said to be A) negative; inferior good B) negative; negative good C) positive; positive good D) negative; normal good Use the following to answer question 58: Scenario: Price Elasticity When calculating price elasticity with the following data, please use the midpoint method and take the absolute value. Demand and Price Elasticity Quilml'ity Ut‘ll'll-illlilt’d Price 101‘ li’criml 2325:] U 2.2.5 35 2.93;] 5%,} 1,75. ?5 1.50 WI} 1 .25 113‘ 1 {Eat} 15“ I)??? 1?: n so zoo 58. (Scenario: Price Elasticity) What is the price elasticity of demand between $1.25 and $1.00? A) 0.60 B) 0.82 C) 1.0 D) 1.6 Page 19 59. 60. 61. 62. Midterm Exam 221 Fall 2010 Version B If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the absolute value of the price elasticity of demand, using the midpoint method, is: A) 0.5. B) 1. C) 2. D) greater than 2. If an increase in the price of a good leads to an increase in total revenue, then: A) the supply curve must be price inelastic. B) the demand curve must be price inelastic. C) the supply curve is price elastic. D) the demand curve must be price elastic. Which of the following is true? A) When the income elasticity of demand is positive, the good is an inferior good. B) When the income elasticity of demand is negative, the good is a normal good C) Income elasticity of demand measures how much the demand for a good is affected by changes in consumers’ incomes. Income elasticity of demand measures the effect of the change in one good's price on the quantity demanded of the other good. D) When a worker earns income, she and her employer pay equal portions of FICA (the Federal Insurance Contributions Act). Which of the following statements is true? A) Both the worker and the employer bear half the burden (incidence) of the tax. B) The employer bears almost all the burden (incidence) of the tax. C) The worker bears almost all the burden (incidence) of the tax D) It's impossible to determine who bears the burden (incidence) of the tax. Page 20 Midterm Exam 221 Fall 2010 Version B Use the following to answer question 63: Figure: Market for Yachts Price of "V yachts $228,068 : ~ 299,009 } 380,000 tamer} $240,000 1 325,090 288,009 88,0013 €58,000 3 40,000 1 game 0- 2,000 4,00%) 6,000 8,000 10,000 12,000 Number of yachts 63. (Figure: Market for Yachts) A quota of will bring about the same price and output in the market for yachts as would an excise tax of $60,000. A) 2,000 B) 3,000 C) 4,000 D) The answer is impossible to determine. Page 21 Answer Key 4k4>J>ghwmwwmwwaJWNNNNNNNNNNr—ar—lv—ar—Iy—dr—tp—Ir—dy—A ¥WPEPP®NQWPWN?99@899PWNE99®899%9Nf )—-I QWWNQ‘WBP’NE A C A D C B A A C C A D A B A D A A A C . B D C A D D D D C B C A B C A A B D B D C B D U Midterm Exam 221 Fall 2010 Page 22 Version B 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. >OOUUDUUD>D>UJUUOOOOUI>UUU> Midterm Exam 221 Fall 2010 Page 23 Version B ...
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PracticeMidterm_221-W_11 - Midterm Exam 221 Fall 2010...

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