Econ 1014 exam 2 - 1-5 Suppose the following graph...

Info icon This preview shows pages 1–7. Sign up to view the full content.

Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 4
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1-5 Suppose the following graph represents the market for college textbooks and government officials decide to help textbook sellers by offerin to provide textbook sellers r each textbook produced and sold. In essence, this means t e government is offering to pay $40 of the :95; of any textbook produced to reduce the out-of-pocket cost for sellers. Use this graph to answer the following questlons. Price of Extboeks I ’ g ; . 5 ' , -11. .mgm t l a; a w w ‘_.?_ ,.... ._..,._..,V .__.........,. .;. _ .1 a m 29 so 40 so so 70 as fixer monument: Q Q3 Quantity of textbooks fl . What is the producer surplus before the subsidy is offered? 1) $6400 170 3 2) $9600 ’% Q 6:499 3 $3000 filo (4% 6 $3200 0 “8% 5) None of the above “$9 % \/ 2. What is the new equilibrium price and quantity bought and sold with the subsidy? l) The new equilibrium price is $80 and the new equilibrium quantity bought and sold is 80. 2) The new equilibrium price is $160 and the new equilibrium quantity bought and sold is 80? ® The new equilibrium price is $93 and the new equilibrium quantity bought and sold is 93. ‘ 4) The new equilibrium price is $147 and the new equilibrium quantity bought and sold is 67. 5) The new equilibrium price is $67 and the new equilibrium quantity bought and sold is 147. .\ 3. Which is more elastic, the supply or the demand? And why? no 13 240’ l The supply is more elastic because the sellers’ share of the subsidy is larger. ss—De The demand is more elastic because the bu ers’ share of the subsid is lar er. {1 y y g ?c-\b=|20-"13=27 +3) The supply is more elastic because the sellers’ share of the subsidy is smaller. 4) The demand is more elastic because the buyers’ share of the subsidy is smaller. 110 5) They are equally elastic because they are for the same good, textbook. 175 /4 How is the subsidy shared between the textbook sellers and buyers? 1) The buyers get the entire subsidy. 2) The sellers get the entire subsidy. 3) The buyers get $13 of the subsidy and the sellers get $27 of the subsidy. 4) The subsidy is shared equally by the sellers and the buyers. © The sellers get $13 of the subsidy and the buyers get $27 of the subsidy. - g I ‘58? (“223 ,Lv J )L‘ ' l / 5. Which of the following statement is true? ‘33 ”’5 ° 1) The deadweight loss is $260. / ‘ a3 _.'———— 2) There is a resource misallocation of 13 books too many bought and sold./ ‘1, O 2) There is no deadweight loss because the market reaches new equilibrium. 56’ None of the above is correct. é) Only 1) and 2) are correct. 6. Over time, housing shortages caused by rent control (1) increase, because the demand for and supply of housing are less elastic in the long run. f (2) increase, because the demand for and supply of housing are more elastic in the long run. 9 decrease, because the demand for and supply of housing are less elastic in the long run. (4) decrease, because the demand for and supply of housing are more elastic in the long run. (5) None of above ‘ / 7. In the housing market, rent control causes (1) quantity supplied and quantity demanded to fall. quantity supplied to fall and quantity demanded to rise. quantity supplied to rise and quantity demanded to fall. (4) quantity supplied and quantity demanded to rise. (5) None of above. 8. If a binding Brice floor is imposed on the video game market, then S (l)‘ the deman for video games will decrease. (2) the supply of video games will increase. Vt ~/(3) a surplus of video games will develop. (4) All of the above are correct. @ None of above. Q5 Q9 ?‘ l ((6,. QWq D 9. Suppose the income elasticity of demand for good X has been estimated at +4.0. From this information we can conclude that: 54(1) GoodXisanormalgood. Jf E70 horUloJ /S Ubfih‘h-fia + (2) Good X is a price elastic good. _ l: 7/ e, M M (3) Good X is a substitute good. / " LO ”\CberC/Co M’ @ All of the above. (5) None of the above. /l0. Recently the media has reported on contaminated ground turkey being sold in the United States and leL How would these news stories E expected to impact the market for ground turkey in the . .. (1) We would expect a decrease in demand leading to higher equilibrium price and higher quantity bought and sold. (2) We would expect a decrease in quantity demanded which would result in lower equilibrium price. This would then lead to lower supply of turkey. This lower supply would then lead to higher price. (3) We would expect a decrease in supply leading to higher equilibrium price and higher quantity bought and sold. (4) We would expect a decrease in supply leading to higher equilibrium price and lower quantity bought and sold. @We would expect a decrease in demand leading to lower equilibrium price and lower quantity bought and sold. 5 (I l 1. Suppose you are working asan economic consultant for a local construction company and you believe that average household income in Columbia will increase b 2 ' . You advise the construction company to build fewer new apartment buildings this year but to build more single family homes. Based on your advice, you must believe t at: (l) The demand for apartments will decrease this year because apartments are a normal good and the demand for single family homes will increase this year because single family homes are a luxury good. (2) The quantity of apartments demanded will decrease this year because apartments are a normal good and the quantity of single family homes demanded will increase this year because single family homes are a luxury good. (3 The demand for apartments will decrease this year because apartments are an inferior good and the demand for single family homes will increase this year because single family homes are a normal good. (4) The price of apartment housing will increase, causing a decrease in demand for apartments while the price of single family homes will decrease, causing an increase in demand for single family homes. (5) None of the above. 12. Suppose MW in the United States. What would we expect to be the direct impact on the market for hybrid vehicles? We would expect an increase in the quantity demanded for hybrid vehicles (a movement along the original hybrid vehicle demand curve). f (2) We would expect the demand for hybrid vehicles to shift to the right if we believe hybrid vehicles are a normal good. (3) We would expect the demand for hybrid vehicles to shift to the right if we believe hybrid vehicles are an inferior good. . (4) We would expect the supply of hybrid vehicles to shift to the right. (5) None of the above. 40 l 2 3 4 5 6 7 N 9 l() H Quantity /l3. efer to the above figure. At equilibrium, consumer surplus is $36. (2) $72. L44 3L0 (3) $108. , 52 2179 (4) $144. ._.... £3 (5) None of above. \ \2 l »< (a a /' I? 4 / 14. Suppose that you work as a consultant for a company that produces apple Juice. You estimate that a We!“ SfindWiCheS results 1n 3 3 WWW According to this information, the cross— price elasticity of demand between apple Juice and breakfast sandwiches IS equal to: 1 -O.67 3’37 ’32.. § -3-00 ' W...“ IO V320 (3) -0.50 ' " (4) 3.00 ”9% 300 (5) 1.00 l 2 3 4 5 6 7 8 9 ll) ll ll 13 I4 15 [6 I7 18 19 2.0 2] 22 33 24 25 Quumily \/15. Refer to the above figure. If the government imposes a price ceiling of $70 in this market, then the producer surplus will be @3950 :7" 2 I733 (2) $100. (5,6,3: (3) $175. 20 (4) $350. )1 S (5) None of above. 753 /l6. Suppose growing concern with pet obesity results in an increased demand for dietpet food. Suppose at the same time that new government regulations result in a decreased supply of diet pet food. What will be the net impact on the equilibrium price and quantity of diet pet food b ught a (1 sold? (1) Higher Fe and higher Qe gIQ Higher Pe but an indeterminate change in Qe } (3) Higher Fe and lower Qe (4) Lower Fe and lower Qe (5) Indeterminate change in Fe and indeterminate change in Qe /l 7. A drought in California destroys many red grapes. As a result of the drought, th r Surplus in the market for red grapes (1) increases, and the consumer surplus in the market for red wine increases. (2) increases, and the consumer surplus in the market for red wine decreases. 3 decreases, and the consumer surplus in the market for red wine increases. @ decreases, and the consumer surplus in the market for red wine decreases. 18-22. The following is a picture of a market in which the government has levied a tax. 95-9.3 :- 14-\u=4ew\/M Pe—P531Qi8;.2c: S'Mm ' {Lisa 18. Whom is the tax levied on? wt 1) The producers Q The consumers 3) Both the producers and the consumers 4) Primarily on the producers and also on the consumers 5) Cannot determine based on the figure /l9. Buyer’s price will be and seller’s price will be 1) $10, $10 2 $8, $14 «e 0 $14, $8 [Q 4) $14, $10 5) $10, $14 3433 / 20. What is the size of the tax? {0y 1) $4 {WWQ’ 2) $2 L1 1 Q $6 «13 : 26‘ ‘ l )l 3 7" /21.Resource misallocation will be and deadweight loss will be . / C” a) f X) 30 units too few bought and 30 units too many sold; $30 7’ ,Z) 30 units too many bought and 30 units too few sold; $60 \@ 3 30 units too many bought and sold; $90 _~ 76) g} 30 units too few bought and sold; $90 .——-—~ 30 units too few bought and sold; $60 3 0 f2. How much is the tax revenue for the government? 1) $140 2) $280 3) $200 4) $400 @ $420 23. Raisin bran and milk are complementary goods. An increase in the price of raisin bran will (1) increase consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk. (2) increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk. decrease consumer surplus in the market for raisin bran and increase producer surplus in the market for milk. 7» (4) decrease consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk. (5) None of above. Quantit Sunlied 1 2 10- — -— -_ -_ — — 4 2 24. Refer to Table 1. Which of the following price ceilings would be binding in this market? v4 (1) $2 (5) None of above /25. Refer to Table 1. Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market? ( l) 0 units (2) 2 units 8 units (4) 10 units (5) None of above 26. Refer to Table 1. Suppose the government imposes a price ceiling of $5 on this market. What will be the size of the shortage in this market? \ 5 1x (1) 0 units (2) 2 units g” Q 8 units $3 (4) 10 units b (5) None of above 27. On a graph, the area below a demand curve and above the price measures Q producer surplus. 7((2) consumer surplus. (3) deadweight loss. (4) willingness to pay. (5) None of above. 0.4 .9...— 53‘0 J 28. Suppose you observe a 60% i re se in the rice of a l s and as a result there is a mm 0 I the dWars. Based on this information you can say that the cross price elasticity of demand ’— 5 between apples and pears is equal to __ and consumers consider apples and pears to be Q3 (1) 0.06; complements - fw— 11,10 (2) -042; substitutes 2‘5 60 *2 S. C) 0 O «’5 Q 0.42; substitutes w 4.4- (5 \i/ I (4) 0.25; complements x 4 {W8 (5) 0.42; normal oods I’M” . ' g “0 /Eqv‘o ./29_ Suppose that the price of good x has just increased, and as a result you observe a decrease in the demand for good y. From this, you would be able to conclude that: (1) good y is a normal good. (2) good y is an inferior good. 0 goods it and y are complements. (4) goods x and y are substitutes. (5) consumers of good y are price elastic. 30. Suppose the income elasticity of demand for pears is equal to -2. Based on this information, we can predict that a 15% decrease in average household income will result in: 4 (1!) A 30% increase in demand for pears and a shift of the demand curve to the right. (2) A 15% decrease in the quantity of pears demanded which is a movement along a single demand curve. A 30% decrease in the demand for pears and a shift of the demand curve to the left. A 15% increase in demand for pears and a shift of the demand curve to the right. ( 5) A 30% decrease in the demand for pears and a shift down of the demand curve. ...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern