Exam 2 - Qxb’ 3'3 (Ll ‘vctw “ Econ 2103 — Spring...

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Unformatted text preview: Qxb’ 3'3 (Ll ‘vctw “ Econ 2103 — Spring 2011 Exam 2 1. Suppose market supply is given by P = 10 + 2Q and market demand is given by P = 150 — 3Q.((Whatl is 6“ f the market equilibrium price and quantity? a. P*=28;Q*:66 (0+ 222 : an’gfi “Bi P*=66; *=28 Q . ’5 C2 : We. (Mr eta c. P*=?;Q*=Increase 423;” ' *_ . *_ r: -— I d. P —10,Q _1500 a, e. E5 e. None of the above 2. Suppose the market supply changes and is now given by P = 20 + 20. Which ofthe following explanations might explain such a shift? _, .7,- 7., l; ‘ ,r a. There was a increase in technology There was an increase in the price of an input c. There was an increase in consumers’ income All or any of the above 3. Consider the information in the previous questions. What is the expected impact of this shift in the supply curve? a. P* increases; (1* increases {9) P* increases; Q* decreases c. P* decreases; 0* increases d. P* decreases; (1* increases @hich ofthe following would likely cause a change in the quantity of paper supplied? a. A change in the price of inputs to the paper production process b. A change in the technology used in paper production A change in the price of paper All of the above For the following questions, assume the market for milk is initially in equilibrium. For each question, analyze the scenario and indicate the expected impacts on the equilibrium in the milk market. 5. There is an increase in the price of chocolate syrup, where chocolate syrup and milk are assumed to "/ be complements. a. P* increases; (1* increases P* increases; Q* decreases c. P* decreases; 0* increases (8:) P* decreases; Q* increases 6. There is an increase in the price of corn, where corn is an essential feedstock for dairy cows. '/ a. P* increases; (1* increases (3) P* increases; (1* decreases c. P* decreases; (1* increases d. P* decreases; (1* increases 7. There is a study released that finds considerable health advantages from consuming camel’s milk, \/ where camel milk and milk are substitutes. JJK“ gas.» P* increases; Q* increases P* increases; (1* decreases c. P* decreases; (1* increases d. P* decreases; (1* increases 8. Suppose you are told that the cross price elasticity of chocolate syrup and milk is estimated to be - 2.3. This would suggest a. Chocolate syrup and milk are indeed complements ‘MA‘NYJ b. Chocolate syrup and milk are, in fact, substitutes c. A 1% change in the price of chocolate syrup causes a 2.3% change in the demand for milk @ Both A and C are correct Oe Both B and C are correct { Suppose the demand for Good X is given by P = 150 — 30. What is the approximate price elasticity of demand between the prices of $45 and $60? ’4 __ .7 3 _ _y a. Cannot be determined (6) -0.54 {(94% vvvvvv m C. mo 3 JO :71} Cl. -1.86 f; r f '3 f ' ,: i} be) None of the above 10. Suppose the demand for Good X is given by P = 150 — 30. Between the prices of $45 and $60, J demand would be characterized as and may be representative of a good like a. Elastic; restaurant meals Elastic; gasoline Inelastic; restaurant meals Inelastic; gasoline . h... {D 93m 9' None ofthe above 11. Which of the following goods would you expect to be the most elastic? a. Toothpaste b. Electricity @ Fruity pebbles (a specific breakfast cereal) d.‘i breakfast cereals (in general) 12. Suppose the market for golf clubs is in equilibrium when consumer income increases. As a result, you observe the price of golf clubs increases and the quantity sold increases. You can conclude: a. The income elasticity of demand for golf clubs is positive b'. Golf clubs are a normal good 5c: The price elasticity of demand for golf clubs is positive Both A and B are correct e. None of the above are correct Market Demand Market Supply P=20—0.2Qd P =4+o.3Q‘ 13. What is the market equilibrium price and quantity in the market characterized by the equations above? 4 P* = 13.6; o* = 32 7;; .. I: a ,, b. P*=8;Q*=4O " c. P*=10.40; (1* =32 1,2,, : o. :3 it ' » m d. P* = 9.75; o* = 28.75 A f e. None of the above 7:3“ 5 3“ f 14. Suppose the government sets a maximum price in this market of S8. What would this policy be caHed? \/ (a? A price ceiling b. A price floor c. A sin tax d. A price stabilizer 15. Suppose the government sets a maximum price in this market of 58. At this price, how many transactions now occur in the market? J @ 13.33 L? 2 b. 20 c. 32 d. 60 16. Suppose the government sets a maximum price in this market of $8. At this price, what is the resulting market shortage? ‘\ J a. $45 It” (a 4567...... ............. . ~ 1:1: c. 32 units / Vi) 11?} r . d. 28 units / 17. With the resulting shortage, how might producers decide to allocated their good given the excess demand they face? \/ a. By discriminating against some costumers on the basis of age, sex, race, etc. b. By allocating the good to repeat (or potential) repeat costumers c. By lottery d. By first—come, first-serve (EH Any of the above would suffice as an alternative allocation scheme \\ j Market Demand Market Supply i (a ,7 L y P = 20 — 0.2Qd P = 4 + 0.3Q‘ , 4... Ca Use the equations above to answer the following questions. 18. Suppose the government sets a minimum price in this market of $15.00. What would this policy be caHed? \/ a. A price ceiling ' iv ":1 , 3;; Cb} A price floor c. A sin tax ,3. d. A price stabilizer 19. Suppose the government sets a minimum price in this market of $15.00. At this price, how many transactions now occur in the market? ‘ /' J a. 8 C5) 25 c. 32 d. 42.5 20. Suppose the government sets a minimum price in this market of$~12€502i At this price, what is the / resulting market surplus? , Q » a. 17.5 units 11.67 units c. 32 units d. 25.33 units Market Demand Market Supply Market Supply with Tax 13:20—020d P=4+0.3Q5 P=6+.3Q 21. The equations above describe a market with a per-unit excise tax imposed statutorily on producers. What is the amount of the per-unit excise tax in this market? a. $6 b. 54 Cc? $2 d 50 22. At the competitive market equilibrium (your answer to question 13 on this test), what is the g, estimated price elasticity of demand? Use the (price/quantity)*(1/slope) formula provided in class. a. —0.667 . , y, i x b. -0.128 (“22” /%';’:> if”; {were j c. —1.0833 x —1.275 «75’ V16 23. At the competitive market equilibrium} your answer to question 3 on this test), what is the estimated price elasticity of supply? Use the (price/quantity)*(l/slope) formula provided in class. i a. 0.085 b. 1.065 c. . (3) 1.625 24. Based on your answers to the previous questions, who do you anticipate will bear a greater share of / the burden of this tax? ' a. Producers because the tax was placed statutorily on them b. Consumers because taxes are always pushed forward onto consumers Producers because they are less responsive to price changes cl. Consumers because they are more responsive to price changes 25. Given the system described in the equations above, the consumer share of the tax is estimated to be \/ S , while the producer share of the tax is estimated to be S a. $2.00; $0.00 b. $2.00; $2.00 c. $1.00;$1.00 \ [,2 ff d. 5120,5080 y/fl/ e. $0.80;$1.20 1%. géyx/ 0 gr" 3.. “w. How much tax revenue is generated by the tax? f, 5% 556 c. $320 b. $64 d. None of the above ...
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This note was uploaded on 01/10/2012 for the course ECON 2013 taught by Professor Staff during the Fall '11 term at Oklahoma State.

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Exam 2 - Qxb’ 3'3 (Ll ‘vctw “ Econ 2103 — Spring...

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