Econ001Springf 12 - Econ 001: Final Exam (Dr. Stein) Answer...

Econ001Springf 12
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Econ 001: Final Exam (Dr. Stein) Answer Key May 4th, 2012 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/42 points total). Please write your answers in blue book 1. 1. Three months prior to Madonna’s spectacular Superbowl halftime performance, she contemplated singing either “Material Girl” or “Just like a Prayer.” If Madonna sings “Material Girl,” she would need to pay $8,000 for a bejeweled bodysuit. For “Like a prayer” the costume would cost only $3, 000. Additionally, Madonna gets $15,000 of benefit from singing “Material Girl” and $5,000 in satisfaction from “Like a Prayer”. Prior to purchasing either costume, what is the opportunity cost of singing “Material Girl”? a. 23,000 b. 18,000 c. 13,000 d. 10,000 e. 3,000 2. Which of the following situations best illustrates the concept of consumer surplus? a. a manufacturer reduces the price of an item from $ 2.50 to $ 2.30 in the hope of being able to sell more units. b. a consumer who was not willing to buy a car at $ 100,995, but was prepared to buy it at $ 99,995. c. a British tourist who was willing to pay $ 5.00 for a burger, but was only charged $ 4.00 instead. d. a market reaches a condition whereby the demand for a product is greater than the producers' ability to supply it.
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3 . For every one percent increase in the price of beer, consumers decrease their consumption by one third of a percent. The elasticity of demand for beer is best described as which of the following? a. inelastic b. unit-elastic c. elastic d. unit-inelastic 4. Sheila consumes just two goods: milk and biscuits. Biscuits are inferior goods. Please consider the case that the price of milk recently decreased and state which of the following statements must be true. I. Sheila will buy more milk. II. Sheila will buy less biscuits. a. Only I b. Only II c. Both I and II d. Neither 5. If a (binding) price ceiling is imposed, for a monopoly market, the quantity consumed will ___; for a perfectly competitive market, the quantity consumed will __. a. increase; decrease b. increase; increase c. decrease;decrease d. decrease;increase
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6. If leisure is a normal good, then when wages increase, the substitution effect tells us that workers will work __, while income effect says that workers will work __. a. more; less
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