spring+2014+makeup+exam

8/11/2019 SPRING+2014+Makeup+Exam

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Professor: M. Rush

ECO 2023

SPRING 2014

MAKE UP TEST

Read all instructions on this pageThistestisgovernedbyUFsacademichonestycode.

Thistesthas34questions.IFyouareusingthistesttomakeupfor

missingeitherMidterm1or2,answerthefirst30questions;ifyou

using

this

test

to

make

up

for

missing

the

final

exam,

answer

all

34

questions.Choosethebestanswerforeachquestion.

Unlessyouarespecificallytoldotherwise,onthistestdonotassume

thatdemandorsupplyiseitherperfectlyelasticorperfectlyinelastic.

Onthebubblesheet,pleaseenter:

1.Yournameandinitials

2.YourUFIDnumber

3.Formcode:A

4.Signyournameonthebubblesheet.

Check if the form code and UF ID number you bubbled-in are correctnow

. Also check tobe 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 THESE WRONG, YOUR TEST MIGHT NOT BE

GRADED AND IF IT IS GRADED, YOU WILL LOSE 3 POINTS!

TURN OFF ALL CELL PHONES AND OTHER

COMMUNICATION DEVICESYoumaynotuseacellphoneoranyothersortofdevicethatallowsforcommunication

asyourcalculator.


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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 4

2

Ihavebecomeincreasinglyconcernedthatsomestudentsareatarealdisadvantage

becausetheyareunwillingtoaskquestionsduringtheexamwhileothersaskalotof

questions.Hence,toleveltheplayingfield,Ihavedecidedtoeliminateallquestions

duringthetest.Idontlikethispolicy,butitseemsthefairestpolicy.

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.

Youwillhaveonehour(60minutes)tocompletetheexamandbubbleinallyour

answers.WhentheTAssaythattimeisup,youmusthandinyourexam.Wewillnot

giveextratimetofinishbubblingintheanswers,sobesureyouaredonewhenthe60

minutesareup.Ofcourse,youmayhandinyourtestatanytimebeforethe60minutes

areup.

An

answer

key

will

be

posted

on

the

class

web

page

tomorrow.

The

test

scores

will

be

on

class

web

page

within

a

few

days.

Onceyouseetheanswerkey,youmighthaveaquestionaboutwhyoneanswer

isrightandanotheriswrong.Forthesequestions,emailmeat

[email protected] DoNOTemailthegraderaboutthesequestions!

Afterthescoresareposted,ifyouthinkyourpostedscoreisincorrect,thenemail

[email protected] Ifyouemailmeaboutyourtest

score,IwillnotforwardtheemailnorrespondtoyouyouMUSTemailthe

grader.Youhaveoneweekafterthecurvedscoreispostedtorequestagrade

check.

After

a

week,

the

score

will

not

be

changed.

If

the

web

reports

what

you

bubbledinforeachquestionandyouaskthegradertocheckananswerbecause

youbelieveyoububbledinsomethingotherthanwhatisreportedandthe

reportedansweronthewebiscorrect,youwilllose1additionalquestion.


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3

1) The Coase theorem is the proposition that if property rights exist and transactionscosts are low,

A) external costs result in deadweight losses.

B) external benefits result in deadweight losses.

C) efficiency will result without need for further government action.

D) the government needs to intervene in the market to guarantee efficiency.E) None of the above are correct.

2) The distribution of income in the United States has become more unequal between1970 and 2014. One explanation for this trend is that advances in technologies have____ low-skilled labor and ____ high-skilled labor.

A) decreased the demand for; increased the demand for

B) increased the demand for; decreased the demand for

C) decreased the supply of; increased the supply of

D) increased the supply of; decreased the supply of

E) increased the supply of; increased the demand for

Sears

Lower pricesDont lower

prices

Lowerprices

S: $5 millionW: $9 million


Walmart Dontlowerprices



3) Sears and Wal-Mart must decide whether to lower their prices, based on thepotential economic profits shown in the table above. In the above table, 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 strategy.

E) None of the above are correct.

4) More pizza delivery companies open. As a result, the equilibrium price of adelivered pizza ____ and the equilibrium quantity ____.

A) rises; increases

B) falls; decreases

C) rises; decreasesD) falls; increases


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4

5) When the price rises 4 percent, the quantity demanded decreases 10 percent. Hencethe elasticity of demand equals

A) 40.0

B) 25.0

C) 0.4

D) 2.5E) None of the above are correct.

6) If the marginal social cost of generating a kilowatt of electricity is $0.10 and themarginal private cost is $0.08, what is the marginal external cost?

A) $0.18

B) $0.10

C) $0.08

D) $0.02

7) Pizza and hamburgers are substitutes for consumers. A fall in the price of a pizza

____ the price of a hamburger and ____ the quantity of hamburgers.A) raises; increases

B) raises; decreases

C) lowers; increases

D) lowers; decreases

Sodas(millions

permonth)

Pizzas (millions per month)

ba c

300 40 5020

10

20

30

40

50

10

8) In the figure above,

A) moving from point a to point b would require new technology.B) production at point b is efficient whereas production at point a is not efficient.

C) some resources must be unemployed if production is at point c.

D) the opportunity cost of an additional pizza decreases as more pizza is produced.


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9) When a tax is imposed on the producers of a good or service, then

A) in general the producers pay all the tax.

B) in general the consumers pay all the tax.

C) the consumers pay a larger part of the tax as the demand for the product becomes lesselastic.

D) the consumers pay a larger part of the tax as the demand for the product becomes moreelastic.

10) What will happen to the equilibrium price and quantity of orange juice if orangejuice is discovered to help prevent colds?

A) The effect on the quantity is uncertain and the price will fall.

B) The quantity will increase and the effect on the price is uncertain.

C) The quantity will decrease and the price will rise.

D) The quantity will increase and the price will fall.

E) The quantity will increase and the price will rise.

11) Boxed macaroni and cheese is an inferior good and peoples incomes rise. As aresult, the equilibrium price of boxed macaroni and cheese ____ and the equilibriumquantity ____.

A) falls; decreases

B) falls; increases

C) falls; does not change

D) rises; decreases

E) rises; increases

Quantity(pizzas per hour)

Total cost, TC(dollars per hour)

0 101 182 303 484 705 986 120

12) Giuseppes Pizza is a perfectly competitive firm. The firms costs are shown in thetable above. If Giuseppe shut down, in the short run its economic loss is _____ perhour.

A) $0

B) $48C) $10

D) More information is needed to answer the question.


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13) Suppose firms in a monopolistically competitive market are earning an economicprofit. As new firms make a similar, albeit differentiated product, the economicprofit of each existing firm ____.

A) increases

B) decreases

C) does not changeD) More information is needed to answer the question

14) Credit conditions improve. As a result, the equilibrium price of an automobile ____and the equilibrium quantity ____.

A) rises; increases

B) rises; decreases

C) falls; increases

D) falls; decreases

E) None of the above is correct.

15) The rainforest is an example of a _____ because it is _____.A) private good; rival and excludable

B) public good; nonrival and nonexcludable

C) common resource; rival and excludable

D) common resource; nonexcludable and rival

E) public good; nonrival and excludable

16) The government imposes regulations on petroleum producers that raise their costs.The price consumers pay for petroleum ____ the least if the elasticity of demand forpetroleum is ____.

A) falls; inelastic

B) falls; elasticC) rises; inelastic

D) rises; elastic

17) If the Lorenz curve for income moves closer to the 45 line, then the

A) distribution of income has become more unequal.

B) distribution of income has become more equal.

C) median household income increased.

D) median household income decreased.

E) mean (average) household income increased.

18) Suppose that Coca Cola and Pepsi agree to charge the same prices for their softdrinks. This agreement would

A) always be legal under the antitrust laws.

B) be legal as long as Herfindahl-Hirschman index is less than 1,000.

C) be legal as long as the firms had a cost justification for setting prices.

D) always be illegal under the antitrust laws.


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19) In the short run, a(n) ____ firm alwaysearns an economic profit.

A) monopoly

B) monopolistically competitive

C) perfectly competitive

D oligopolistic

E) None of the above because there is no industry in which a firm always earns aneconomic profit in the short run.

20) The total cost of producing 4 sodas is $12, and the total cost of producing 5 sodas is$20. Then the marginal cost of the 5th soda is

A) $3.00

B) $2.00

C) $4.00

D) $5.00

E) $8.00

21) For a produce with an external benefit, if less than the efficient amount is produced,then for the last unit produced

A) marginal social benefit exceeds marginal social cost.

B) marginal social benefit equals marginal social cost.

C) marginal social cost exceeds marginal social benefit.

D) the deadweight loss is zero.

22) The cheese used to produce tacos in restaurants rises in price. As a result, theequilibrium price of a taco ____ and the equilibrium quantity ____.

A) rises; increases

B) rises; decreases

C) falls; increasesD) falls; decreases

23) The labor supply curve has a positive slope if

A) the substitution effect outweighs the income effect.

B) the income effect outweighs the substitution effect.

C) the wage rate exceeds the reservation wage.

D) the demand for labor is elastic.

E) the demand for labor is inelastic.

24) An oligopolist firm cheats on a collusive price-fixing agreement by setting

A) a lower price and producing less output than agreed.B) a higher price and producing more output than agreed.

C) a higher price and producing less output than agreed.

D) a lower price and producing more output than agreed.


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Price

(do

llars

perpound)

Price

(do

llars

perpound)

Quantity (pounds) Quantity (pounds)Figure BFigure A

D1

D2

S

D2

D1

S

Price

(dollars

perpound)

Price

(dollars

perpound)

Quantity (pounds) Quantity (pounds)Figure DFigure C

D

S2

D

S1

S1 S2

25) The figures above show the market for beef. If beef is a normal good and peoplesincomes increase, which figure shows the consequences?

A) Figure A

B) Figure B

C) Figure C

D) Figure D

Sears

Lower pricesDont lower prices

Lowerprices



Walmart Dontlowerprices



26) 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 strategy.


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

A) A can of Mountain Dew

B) Fish in the ocean

C) A gold mine

D) Cable television

E) National defense

28) People are increasingly coming to prefer coffee, tea, fruit juices, and water to softdrinks. As a result, the price of soft drinks ____ and the quantity ____.

A) falls; does not change

B) rises; decreases

C) probably changes but more information is needed to determine if the price rises or falls;decreases

D) falls; decreases

E) None of the above answers is correct.

29) Under an average cost pricing rule, a regulated natural monopolyA) makes an economic profit, and there is a deadweight loss.

B) makes a normal profit, and there is no deadweight loss.

C) makes a normal profit, and there is a deadweight loss.

D) incurs an economic loss, and there is a deadweight loss

E) incurs an economic loss, and there is no deadweight loss.

30) 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 fat that

A) we took a picture of him last Christmas and its still printing.

B) the only reason he opens his email is because he heard it contained spam.C) when he got his shoes shined, he had to take the guys word ofr it.

D) when he wears a yellow raincoat, people see him and yell Taxi!.

E) Weight watchers wont look at him.

IF YOU ARE MAKING UP EITHER MIDTERM 1 OR MIDTERM 2STOP NOW; DO NOT ANSWER THE NEXT 4 QUESTIONS; IF YOU

ARE MAKING UP THE FINAL EXAM, YOU MUST ANSWER THE

NEXT 4QUESTIONS.


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31) In the above figure, if a single-price monopolist produces the profit-maximizingquantity and charges the profit-maximizing price, the consumer surplus is equal to

area ____.A) hbcd.

B) fjem.

C) abc.

D) cde

E) gcem.

32) A single-price monopoly can sell 2 units for $8.50 per unit. In order to sell 3 units,the price must be $8.00 per unit. The marginal revenue from selling the third unit is

A) $24.00.

B) $8.50.

C) $7.00.

D) $6.50.

E) None of the above answers are correct.

33) Janes Garage Cleaning is a monopolistically competitive firm that currently cleans80 garages a week. Janes marginal cost is $40, her average total cost is $40, and theprice of cleaning a garage is $50. Jane

A) is maximizing her profit and is earning a normal profit.

B) is not maximizing her profit and is earning an economic profit.

C) might be maximizing her profit and is incurring an economic loss.

D) might be maximizing her profit and is earning an economic profit.

E) is not maximizing her profit and is earning an economic profit anyway.

34) To eliminate the inefficiency resulting from an external cost, the government canimpose a tax on producers that is equal to the

A) MSB.

B) MC.

C) MB.

D) MSC.

E) marginal external cost

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