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  • 8/11/2019 FALL 2013 Midterm 1

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    E C O 2 0 2 3 M I D T E R M 1 F A L L 2 0 1 3

    An answer key will be posted on the class web page after 10 PM.

    The test scores will be on class web page within a few days.Once you see the answer key, you might have a question about why one answer

    is right and another is wrong. For these questions, email me at

    mark.rush@warrington.ufl.edu Do NOT email the grader about these questions!

    After the scores are posted, if you think your posted score is incorrect, then email

    the grader at eco2023.grader@warrington.ufl.edu If you email me about your test

    score, I will not forward the email nor respond to youyouMUSTemail the

    grader. You have one week after the curved score is posted to request a grade

    check. After a week, the score will not be changed. If the web reportswhat you

    bubbled in for each question and you ask the grader to check an answer because

    you believe you bubbled in something other than what is reported and the

    reported answer on the web is correct, you will lose 1 additional question.

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    E C O 2 0 2 3 M I D T E R M 1 F A L L 2 0 1 3

    1) When the price of a pizza is $11, 39 million pizzas per day are demanded. When theprice of a pizza is $9, 41 million pizzas per day are demanded. The price elasticity ofdemand equals

    A) 0.25.

    B) 4.00.

    C) 1.73.D) 1.00.

    E) None of the above are correct.

    2) The number of firms producing tablets decreases. As a result, the equilibrium priceof a tablet ____ and the equilibrium quantity ____.

    A) probably changes but more information is needed to determine if the price rises, falls,or does not change; increases

    B) falls; decreases

    C) falls; increases

    D) rises; decreases

    E) rises; increases

    3) At the quantity of 20 million bushels of apples, the marginal social benefit of abushel of apples is $10 and the marginal social cost is $10. To produce theallocatively efficient quantity of apples, then

    A) more apples should be produced.

    B) fewer apples should be produced.

    C) more information on the willingness of consumers to purchase apples is needed.

    D) no changes needs to be made because the allocatively efficient quantity of apples is 20million bushels.

    4) Suppose the minimum wage is increased. Fast food restaurants employ manyworkers who are paid the minimum wage. As a result of the hike in the wage paidthese workers, the equilibrium price of fast food ____ and the equilibrium quantity

    ____.

    A) rises; increases

    B) rises; decreases

    C) falls; increases

    D) falls; decreases

    5) Soda and pizza are complements for consumers and pizza falls in price.Consequently, the equilibrium price of soda ____ and the equilibrium quantity ____.

    A) rises; increases

    B) rises; decreases

    C) falls; increases

    D) falls; decreases

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    E C O 2 0 2 3 M I D T E R M 1 F A L L 2 0 1 3

    Point

    Production

    chocolate bars

    Production

    cans of cola

    A 0 100

    B 10 90

    C 20 70

    D 30 40E 40 0

    6) The above table shows production points on a nations production possibilitiesfrontier. What is the opportunity cost of one chocolate bar if production moves frompoint C to point D?

    A) 40 cans of cola

    B) 1 chocolate bar

    C) 3 cans of cola

    D) 70 cans of cola

    E) 0 cans of cola

    7) A 1 percent fall in the price of a pound of oranges results in a 3 percent increase inthe quantity of oranges demanded and a 1 percent fall in the price of gasolineresults in a 0.2 percent increase in the quantity of gasoline demanded. The priceelasticity of demand of oranges is ____ the price elasticity of demand for gasoline sothat it is likely there are ____.

    A) larger than; more substitutes for oranges than for gasoline

    B) larger than; fewer substitutes for oranges than for gasoline

    C) equal to; the same number of substitutes for oranges and gasoline

    D) equal to; more substitutes for oranges than for gasoline

    E) smaller than; more substitutes for oranges than for gasoline.

    8) The equilibrium rent for an apartment is $600 per month and the governmentimposes a rent ceiling of $500 per month. The producer surplus from apartments

    ____ and a deadweight loss ____ created.

    A) decreases; is not

    B) decreases; is

    C) increases; is

    D) does not change; is not

    E) More information is needed about the demand and supply of apartments to answer thisquestion.

    9) When more of a good is consumed, the total utility from the good ____ and themarginal utility from the good ____.

    A) increases; decreasesB) decreases; increases

    C) increases; increases

    D) decreases; decreases

    E) None of the above answers are correct.

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    E C O 2 0 2 3 M I D T E R M 1 F A L L 2 0 1 3

    Income Total utility

    0 0

    $1,000 500

    $2,000 900

    $3,000 1,100

    $4,000 1,200

    10) The above table shows Shaniqs total utility from different amounts of income. If sheis disabled, her income is $0; if she is not disabled her income is $4,000. Shaniq canbuy an insurance policy that will pay her $4,000 if she is disabled and $0 if she isnot. The policy costs $2,000. Will Shaniq buy this insurance policy?

    A) Yes, she definitely buys the policy.

    B) No, she definitely does not buy the policy.

    C) She might or might not buy the policy.

    D) More information is needed to answer the question.

    11) Macaroni and cheese is an inferior good and peoples incomes rise. As a result, the

    equilibrium price of macaroni and cheese ____ and the equilibrium quantity ____.A) probably changes but more information is needed to determine if the price rises, falls,

    or does not change; increases

    B) falls; decreases

    C) falls; increases

    D) rises; decreases

    E) rises; increases

    12) Because of a hurricane, both buyers and sellers of oil come to expect that the price ofoil will be higher in the future. Consequently, todaythe equilibrium price of oil ____and the equilibrium quantity ____.

    A) rises; decreases

    B) does not change; might increase, decrease, or not change but more information isneeded to determine which

    C) rises; might increase, decrease, or not change but more information is needed todetermine which

    D) rises; increases

    E) might rise, fall, or not change but more information is needed to determine which;decreases

    13) Bobby eats hamburgers and hot dogs. He is at his consumer equilibrium. The priceof a hot dog equals the price of a hamburger. Therefore

    A) his total utility from all the hot dogs he eats must be the same as his total utility fromall the hamburgers he eats.

    B) his marginal utility from the last hot dog he eats must be the same as his marginalutility from the last hamburger he eats.

    C) he must be eating the same number of hot dogs and hamburgers.

    D) None of the above are correct.

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    E C O 2 0 2 3 M I D T E R M 1 F A L L 2 0 1 3

    14) Suppose the price of jet fuel rises. As a result, the demand curve for airline travel____ and the supply curve of airline travel ____ so that the equilibrium price ofairline travel ____

    A) shifts leftward; shifts leftward; definitely falls

    B) shifts leftward; shifts leftward; might fall

    C) shifts leftward; shifts leftward; definitely rises

    D) does not shift; shifts leftward; risesE) None of the above answers are correct.

    15) A production point inside the production possibilities frontier

    A) could indicate that some resources are unemployed.

    B) is unattainable.

    C) is more efficient than points on the production possibilities frontier.

    D) occurs when too much capital and not enough labor is being used.

    E) occurs when too much labor and not enough capital is being used

    16) If the elasticity of demand for salt ____ than the elasticity of supply of salt, then ____pay most of any tax levied on salt.

    A) larger; sellersB) smaller; sellers

    C) larger; buyers

    D) None of the above answers are correct.

    17) A price ____ makes it illegal to pay a lower price than the specified level. Oneexample is ____.

    A) floor; the minimum wage

    B) floor; a rent control

    C) ceiling; the minimum wage

    D) ceiling; a rent control

    18) The number of people demanding gluten free food increases while simultaneouslythe number of producers of gluten free food increases. The effect from the increasein the number of producers is less than the effect from the number of demanders.As a result, the equilibrium price of gluten free food ____ and the equilibriumquantity ____.

    A) rises; increases

    B) falls; increases

    C) probably changes, but more information is needed to determine if the price rises, falls,or stays the same; increases

    D) rises; probably changes, but more information is needed to determine if the quantityincreases, decreases, or stays the same

    E) None of the above answers are correct.

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    E C O 2 0 2 3 M I D T E R M 1 F A L L 2 0 1 3

    23) The figure above shows the U.S. demand and the U.S. supply of shirts. If the world

    price of shirts is $24 per shirt, ____ shirts are produced in the United States and theUnited States ____ shirts per year.

    A) 24 million; imports 40