spring+2012+makeup+exam

8/11/2019 SPRING+2012+Makeup+Exam

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Professor: M. Rush

ECO 2023

SPRING 2012

MAKE UP EXAMThis test is governed by UFs academic honesty code. It is intended to have 35

multiple choice questions. Please check to be sure your copy has all 35. Chose the

best answer for each question.

The next is important: Unless you are specifically told otherwise, on this test do

notassume that demand or supply is either perfectly elastic or perfectly inelastic.

On the bubble sheet, please enter:

1. Your name and initials

2. Your UF ID number

3. Form code: A

4. Sign your name on the bubble sheet.

TURN OFF ALL CELL PHONES AND OTHER

COMMUNICATION DEVICES

Check that the form code and UF ID number you bubbled-in are correct now. Also check

to be sure your name is correctdo it now. I investigated the rumor that the ability to

correctly record these had been mastered by a few students at FSU. This rumor turned

out to be false. But, the rumor that an accounting major and a journalism major did

successfully record these on a test is true. These students have since been bronzed and

are on display outside their respective colleges to serve as an inspiration for all other

accounting and journalism students.CHECK YOUR FORM CODE AND UF ID NUMBER. IF YOU GET EITHER OF THESEWRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED, YOU WILL

LOSE 6 POINTS (which equals 2 questions)!

I have become increasingly concerned that some students are at a real disadvantage

because they are unwilling to ask questions during the exam while others ask a lot of

questions. Hence, to level the playing field, I have decided to eliminate allquestions

during the test. I dont like this policy, but it seems the fairest policy.

Do not ask questions of me or the TAs; in the interest of fairness I

have instructed them not to answer any questions during the exam.

You will have one hour (60 minutes) to complete the exam andbubble in all youranswers. When the TAs say that time is up, you musthand in your exam. We will not

give extra time to finish bubbling in the answers, so be sure you are done when the 60

minutes are up. Of course, you may hand in your test at any time before the 60 minutes

are up.


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E C O 2 0 2 3 M A K E U P E X A M S P R I N G 2 0 1 2

2

An answer key will be posted on the class web page later this

evening at about 10:00.

The test scores will be on class web page probably by Monday or

Tuesday.

Once you see the answer key, you might have a question about why one answeris right and another is wrong. For these questions, email me at

[email protected] 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 [email protected] 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 thereported answer on the web is correct, you will lose 1 additional question.


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1) The number of firms producing cement increases. As a result, the equilibrium priceof cement ____ and the equilibrium quantity ____.

A) rises; increasesB) rises; decreasesC) falls; decreases

D) falls; increasesE) does not change; increases

2) Suppose a monopoly firm is making an economic profit. As a result, as time passes

I. new firms enter the industry.

II. the market price falls.

III. the economic profit of the existing firm eventually decreases.

A) I, II and III.B) I and II.C) II and III.D) I and IIIE) None of the above answers are correct.

3) Taco Bell is a monopolistically competitive firm. If the demand and marginalrevenue for its food increases, then Taco Bell ____ the quantity of food it producesand Taco Bells ____.

A) increases; supply of labor increasesB) decreases; demand for labor decreasesC) increases; demand for labor increases.D) decreases; supply of labor decreasesE) None of the above answers are correct.

4) A country that must decrease production of one good in order to increase theproduction of another

A) must be using resources inefficiently.B) must be producing on its production possibilities frontier.C) must be producing beyond its production possibilities frontier.D) must not have private ownership of property.

5) A farmer discovers that the total cost of growing 50 acres of eggplant is $50,000 andthat the total cost of growing 51 acres of eggplant is $52,000. The marginal cost ofthe 51st acre of eggplant is

A) $52,000.B) $50,000.C) $2,000.D) $1,020.E) $1,000.

6) Which of the following definitely decreases the equilibrium price?

A) An increase in both demand and supply.B) A decrease in both demand and supply.C) An increase in demand combined with a decrease in supply.D) A decrease in demand combined with an increase in supply.


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7) Which of the following is the BEST example of a common resource?

A) a house.B) the Internet.C) air traffic control.D) fish in the ocean.E) a lighthouse

8) Suppose that the demand for pork is elastic and the demand for beef is inelastic andthat the supply curve of pork is identical to the supply curve of beef. If bothsupplies decrease by the same percentage, the price of pork ____ than the price ofbeef and the quantity of pork ____ than the quantity of beef.

A) rises by more, increases by moreB) rises by less, decreases by moreC) falls by less, increases by moreD) falls by more; decreases by moreE) rises by more; decreases by less

9) Public choice theory suggests that in the presence of rational ignorance, the size of

government isA) larger than the efficient size.B) the efficient size.C) smaller than the efficient size.D) unaffected by bureaucrats.E) determined by the efficient quantity of public goods and the efficient use of common

resources.

10) The opportunity cost of leisure (time spent not working) is

A) called the substitution effect.B) called the income effect.C) the persons wealth.

D) the persons wage rateE) None of the above answers are correct.

11) Tomatoes are discovered to help prevent heart disease. Simultaneously tomatopickers negotiate a higher wage rate. As a result, the price of a pound of tomatoes

____ and the quantity ____.

A) rises; increasesB) rises; decreasesC) falls; probably changes but whether it increases or decreases is ambiguousD) rises; probably changes but whether it increases or decreases is ambiguousE) probably changes, but whether it rises or falls is ambiguous; decreases

12) Most natural monopolies, such as regulated electric, gas, and water utilities, have

____ fixed costs and ____ marginal costs.A) low; highB) high; lowC) high; highD) low; lowE) no; high


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P= $20

P= $10

P= $20P= $10

Firm Bsstrategies

Firm As strategies

$40

$40 $60

$55

$35

$60

$55$35

13) The only two firms in a market are trying to decide what price to charge. The payoffmatrix for this duopoly game is shown above. Which firm(s) has a dominantstrategy?

A) Only firm A has a dominant strategy.B) Only firm B has a dominant strategy.C) Both firm A and firm B have a dominant strategy.D) Neither firm A nor firm B has a dominant strategy.E) More information is needed to answer the question.

14) In ____ market structure, a firms output depends ____.

A) an oligopoly; only on its own marginal revenue and marginal cost curvesB) a monopolistically competitive; in part on its competitors price and quantity decisionsC) an oligopoly; in part on its competitors price and quantity decisions.D) a monopolistically competitive; only on its marginal revenue curve.

15) Which of the following does NOT shift the demand curve for broccoli?

A) An increase in the number of broccoli farmers.B) An increase in income if broccoli is a normal good.C) An increase in the price of spinach, a substitute for broccoli, because rodents gobbled up

much of this years spinach crop.D) An increase in income if broccoli is an inferior goodE) An increase in the number of people who like broccoli.

16) A natural monopoly has a deadweight loss if

I. it is regulated according to an average cost pricing rule

II. it is regulated according to a marginal cost pricing rule

III. it is unregulated.

A) only I.B) only II.C) I and II.D) I and III.E) only III


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17) Janes Garage Cleaning is a perfectly competitive firm that currently cleans 40garages a week. Janes marginal cost is $35, her price is $40, and her average totalcost is $40. Jane is

A) maximizing her profit and is earning an economic profit.B) not maximizing her profit but is earning an economic profit anyway.C) maximizing her profit and is earning a normal profit.D) not maximizing her profit but is earning a normal profit anyway.E) maximizing her profit and is incurring an economic loss.

18) Which of the following is TRUE about a profit maximizing monopolisticallycompetitive firm in its long-run equilibrium?

A) P = MC.B) P = MR.C) ATC = MC.D) P = ATC.E) MR > MC

19) Salsa and chips are complements and salsa falls in price. As a result, the equilibrium

price of chips ____ and the quantity of chips ____.A) rises; increasesB) rises; decreasesC) falls; decreasesD) falls; increasesE) does not change; increases

20) If both firms in a duopoly cheat on a collusive cartel agreement, the prices will ____,both firms are ____ off, and society is ____ off.

A) fall; better; betterB) rise; worse; worseC) fall; worse; better

D) fall; better; worseE rise; better; better

21) In the long run, variable costs are

A) zero and fixed costs are zero.B) zero and fixed costs are positive.C) positive and fixed costs are zero.D) positive and fixed costs are positive.

22) The price of new cars increases by 10 percent. If the price elasticity of demand fornew cars is 1.25, the quantity of new cars demanded will decrease by

A) 2.5 percent.B) 8 percent.

C) 10 percent.D) 12.5 percent.


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23) According to the Coase Theorem, if transactions costs are low then a private market(that is, an unregulated market) is efficient

A) only if property rights are assigned to the person who is being harmed by the externalcost.

B) only if property rights are assigned to the person who is creating the external cost.C) if property rights are assigned either to the person who is creating the external cost or to

the person who is being harmed by the external cost.D) if property rights are eliminated wherever an external cost or benefit appears.

24) McDonalds, Wendys, and Burger King agree with each other not to sellhamburgers for less than $3.95 apiece. In the United States, this agreement is

A) per seillegal.B) illegal if it substantially lessens competition under the tying clause of the Clayton Act.C) illegal if it substantially lessens competition under the exclusive deal clause of the

Clayton Act.D) legalE) None of the above answers is correct.

25) If the price of salt increases and the quantity demanded does not change, then theA) price elasticity of demand is equal to zero.B) demand for salt is perfectly inelastic.C) demand curve for salt is perfectly horizontal.D) demand for salt is perfectly elastic.E) Both answers A and B are correct.

26) Last year I read a story in the Wall Street Journalabout the firms that make thewooden floors upon which basketball games are played. The story said that therewere many firms in the industry and that the firms were constantly innovating,making floors that were a little different from those made by their competitors.These firms are best described as being in

A) a perfectly competitive market.B) a monopoly market.C) a monopolistically competitive market.D) an oligopoly market.E) None of the above answers are correct.


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27) The above figure shows the marginal benefit, marginal private cost and marginal

social cost curves of producing steel. If the market is competitive and unregulated,the equilibrium quantity of steel is ____ tons and the efficient quantity of steel is

____ tons.

A) 2; 2B) 2; 4C) 4; 2D) 4; 8E) None of the above answers is correct.

28) The above figure shows the marginal benefit, marginal private cost and marginalsocial cost curves of producing steel. If the market is competitive, what governmentpolicy might move the market closer to efficiency?

A) The government could subsidize the production of steel.B) The government could tax the production of steel.C) The government could issue vouchers to steel consumers.D) The government could give steel producers individual transferable quotas.E) None of the above answers is correct.

29) Compared to a perfectly competitive industry, a single-price monopoly

A) increases producer surplus by raising costs.B) increases consumer surplus by lowering producer surplus.C) increases both consumer and producer surplus.D) creates a deadweight loss.

30) Compared to a single-price monopoly, if a monopoly price discriminates, it

produces ____ output, makes a ____ economic profit, and ____consumer surplus.A) more; smaller, increasesB) less; larger, increasesC) more; smaller; decreasesD) more; larger, decreasesE) less; larger; decreases


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31) If a public good were left to be provided by the private sector, it would be

A) over-provided.B) under-provided.C) provided at the efficient level.D) provided at very low prices.

32) Suppose that the price of flour used to produce bagels increases. Hence theequilibrium price of a bagel ____ and the equilibrium quantity ____.

A) rises; increasesB) rises; decreasesC) falls; increasesD) falls; decreases

Sears

Lower pricesDont lower

prices

Lowerprices

S: $13 millionW: $5 million

S: $6 millionW: $30 million

Walmart Dontlowerprices

S: $10 millionW: $11 million S: $9 millionW: $9 million

33) Sears and Wal-Mart must decide whether to lower their prices, based on thepotential economic profits shown in the table above. Who has a dominant strategy?

A) Walmart has a dominant strategy but Sears does not.B) Sears has a dominant strategy but Walmart does not.C) Both Walmart and Sears have dominant strategies.D) Neither Walmart nor Sears has a dominant strategyE) More information is needed to determine if either Sears or Walmart has a dominant

strategy.


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34) The figure above shows the market for pizza. Suppose that scientists discover andwidely publicize the result that pizza helps prevent heart attacks. Which figureshows the effect of this publicity in the market for pizza?

A) Figure AB) Figure BC) Figure CD) Figure D

35) Keeping in mind that you are to email the grader (within 1 week after the test scoresare posted) if you have a question about your test score and you are to email me ifyou have a question about a question, then the director is so stupid that

A) if she spoke her mind, shed be speechless.B) she said whats the letter after x and when I said Y, she said Cause I wanna know...C) she thought hamburger helper came with another person.

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