- Econ 001 Final Exam(Dr Stein Answer Key May 10th 2011 Instructions This is a 120-minute examination Write all answers in the blue books provided

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Econ 001: Final Exam (Dr. Stein) Answer Key May 10th, 2011 Instructions: This is a 120-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label all diagrams carefully. Write your name and your Recitation Instructor's name in every blue book that you use. This exam is given under the rules of Penn's Honor system. All blue books, blank or filled, must be handed in at the end of this exam. No blue books may be taken from the room. Calculators are not allowed on this exam. The Exam has 3 parts. You will need 3 blue books. One for each part. Part I: Multiple Choice Questions (3 points each/33 points total). Please write your answers in blue book 1. 1. Currently the unemployment rate is close to 10%. Given this information, which of the following will be true? a. If unemployment decreases the economy will be able to produce outside the PPF. b. If unemployment decreases the economy will move to a different point on the PPF c. Both statements are true. d. Neither statement is true. 2. We are given that the price of corn is $4 a bushel and that a million bushels are exchanged in the market. We also know that the supply & demand curves are straight lines. i. If we calculate total surplus we will find that the more inelastic the demand is, the larger is total surplus. ii. If we calculate producer surplus we will find that the more inelastic the supply is the smaller is producer surplus. Which of the above statements is true? a. Only i. b. Only ii. c. Both are true. d. Neither is true.
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3. We are told that the demand for wheat is elastic. Suppose the price of wheat increases by 50%, we should expect quantity demanded to: a. Increase by 50%. b. Decrease by more than 50%. c. Decrease by less than 50%. d. Increase by more than 50%. . 4. Using our model of consumer theory, which of the following statements are correct? Ι. If both prices double but income is unchanged, consumption of both goods will go down. ΙΙ. If both prices double but income is unchanged, substitution effect must be zero. ΙΙΙ. If income doubles and prices are constant the MRS at the consumption point will be unchanged. a. I only b. II only c. III only d. I and II e. II and III f. I and III g. I, II and III 5. Assume that a perfectly competitive market for corn is in a long run equilibrium. Now suppose that fixed costs have increased. What will happen to prices in this market? a. In short run prices will remain constant. b. The long run price will increase. c. Both a and b are correct. d. Prices will increase in both the short and long run. e. Fixed costs will not affect prices, as prices are determined by demand only. 6.
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This note was uploaded on 01/14/2012 for the course ECON 101 taught by Professor Profeessor during the Spring '11 term at Aachen University of Applied Sciences.

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- Econ 001 Final Exam(Dr Stein Answer Key May 10th 2011 Instructions This is a 120-minute examination Write all answers in the blue books provided

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