summer+a+2012+midterm+2

5/19/2018 SUMMER+A+2012+Midterm+2

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Professor: M. Rush

ECO 2023

SUMMER A 2012

MIDTERM 2Read all instructions on this page

This test is governed by UFs academic honesty code. It is intended to have 33

multiple choice questions. Please check to be sure your copy has all 33. Choose

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 number3. Form code: A

4. Sign your name on the bubble sheet.

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. As I said on the last exam, I heard rumors

that the ability to correctly record the form code has been mastered by a few students at

FSU. I am still checking this out. But in the meanwhile a friend told me that accounting

majors have been known to be able to record this letter, often correctly. Plus, I have

heard of one journalism major who could get the UF ID right at least 30% of the time!

While I doubt this last rumor, because the UF ID involves numbers which means it is

close to being math, nonetheless I think that the skill of correctly bubbling in the formcode and UF ID is not too difficult to acquire.

CHECK YOUR FORM CODE AND UF ID. IF YOU GET EITHER OF THESE

WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED, YOU

WILL LOSE 6 POINTS (which equals about 2 questions)!

TURN OFF ALL CELL PHONES AND OTHER

COMMUNICATION DEVICES

You

may notuse a cell phone, a Blackberry, or any other sort of device that allows forcommunication as your calculator.

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.


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EC O 2023 MI D T ERM 2 S U M M E R A 2 0 1 2

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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 your

answers. When the TAs say that time is up, you musthand in your exam. We will notgive 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.

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

evening at around 9:30 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

[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 the

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


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1) There currently are proposals for the U.S. government to impose large tariffs ontires imported from China. If the government imposes these tariffs, the price of atire in the United States will ____, the consumer surplus from tires in the UnitedStates will ____, and the quantity of tires produced in the United States will ____.

A) rise; increase; increase

B) rise; decrease; increase

C) not change; not change; increase

D) not change; decrease; increase

E) rise; decrease; decrease

2) (This is an out-of-the-book question.) Economies of scale are cost reductionsachieved by

A) the production of multiple, related products.

B) the production of large amounts of a single product.

C) minimizing employment.

D) maximizing employment.

3) The market demand for wheat is ____ and the demand for wheat produced by anindividual farm is ____.

A) perfectly elastic; perfectly inelastic

B) not perfectly elastic; perfectly elastic

C) not perfectly inelastic; inelastic

D) elastic; unit elastic

E) None of the above answers is correct

4) In a budget line/indifference curve diagram, a fall in the price of the goodmeasured on the vertical axis causes the budget line to

A) rotate outward and become flatter.

B) rotate outward and become steeper.

C) rotate inward and become flatter.

D) make a parallel outward shift.

E) None of the above answers are correct because the change in the price creates a

movement along the budget line but does not shift or rotate it.

5) Suppose the price of coffee is $3, the price of a bagel is $2 and a persons budget is$40. The budget lines equation is

A) $2/Qbagel + $3/Qcoffee= $40.

B) $2(Qbagel ) + $3(Qcoffee ) = $40.C) Qbagel /$2 + Qcoffee/$3 = $40.

D) Qbagel+Qcoffee = $40/($3 + $2).


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Quantity ofsoda

Marginalutility from

soda

Quantity ofpizza

Marginalutility from

pizza1 150 1 2002 120 2 1803 100 3 1504 90 4 1205 60 5 1006 40 6 60

6) Lisa spends all her income on pizzas and soda. The above table shows Lisasmarginal utility for pizza and marginal utility for soda. If the price of a pizza is $10and the price of a soda is $5 and Lisa has $40 to spend on the two goods, whatcombination of pizza and soda will maximize her utility?

A) 6 sodas and 1 pizza

B) 4 sodas and 2 pizzas

C) 2 sodas and 3 pizzas

D) 5 sodas and 4 pizzas

7) Denise owns a plant that produces watch parts in Ohio. Denise noticed that whenshe hired the last worker, that workers marginal product exceeded the marginalproduct of the previous worker. As a result, when the last worker was hired,Denises average product of labor

A) decreased.

B) increased.

C) did not change.

D) perhaps changed, but there is not enough information to determine whether or

not it did change.

8) For a perfectly competitive firm, no matter how much the firm produces, priceALWAYS equals

A) marginal product.

B) average total cost.

C) minimum average total cost.

D) marginal revenue.

E) None of the above answers is correct because there is nothing that price ALWAYS

equals

9) If the government increases the tax on rutabagas, then the price consumers pay ____

and the deadweight loss ____.A) rises; decreases

B) does not change; increases

C) rises; does not change

D) rises; increases

E) None of the above are correct.


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10) In the above figure, the firm will produce

A) 0 units.B) 5 units.

C) 15 units

D) 20 units.

11) The marginal utility from the consumption of a good is equal to the

A) total utility divided by the quantity consumed.

B) total utility divided by the price.

C) change in total utility divided by the change in the quantity consumed.

D) change in total utility divided by the change in price.

12) A perfectly competitive firm is producing 50 units of output and selling at themarket price of $23. The firms average total cost is $20. What is the firms economicprofit?

A) $23

B) $150

C) $1,000

D) $1,150

E) None of the above answers are correct.

13) (This is an out-of-the-book question from Chapter 10.) In the principal-agentrelationship between a college football coach and the players, the coach is

A) an agent, as are the players.B) an agent and the players are principals.

C) a principal and the players are agents.

D) a principal, as are the players.


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14) A firms average total cost is $80, its average variable cost is $50, and its marginalcost is $60. If the firm increases its output, then its average variable cost

A) increases.

B) does not change.

C) decreases.

D) might increase, decrease or not change but what it does cannot be determinedwithout more information.

TechniqueCapital(units)

Labor(units)

W 5 6X 7 2Y 5 5Z 9 1

15) (This is an out-of-the-book question from Chapter 10.) The table above shows

techniques that can be used to produce 100 shirts. If the price of an hour of labor is$6 and the price of a unit of capital is $10, then the economically efficient techniqueis

A) W

B) X

C) Y

D) Z

E) Both W and Y

16) Imported goods ____ the nations total surplus and exported goods ____ thenations total surplus.

A) increase; increaseB) increase; decrease

C) decrease; increase

D) decrease; decrease

E) decrease; do not change

17) In an indifference curve/budget line diagram, when the price of a good increases,the

A) consumer purchases less of the good and moves to a lower indifference curve.

B) consumer purchases less of the good and moves to a higher indifference curve.

C) consumer purchases more of the good and moves to a higher indifference curve.

D) consumer purchases more of the good and moves to a lower indifference curve.


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18) You are at your consumer equilibrium. The marginal utility from hot dogs exceedsthe marginal utility from hamburgers. Thus

A) your total utility from all the hot dogs you have eaten must be greater than the

total utility from all the hamburgers you have eaten.

B) the price of a hot dog must be greater than the price of a hamburger.

C) the number of hot dogs you are eating must be less than the number ofhamburgers you are eating.

D) Answer A is incorrect but answers B and C are both correct.

E) Answers A, B, and C are all correct.

19) In the short run, a perfectly competitive firm

A) cannot shut down.

B) must earn a normal profit.

C) can earn an economic profit, incur an economic loss, or earn a normal profit.

D) will not incur an economic loss if it shuts down.

E Both answers C and D are correct.

20) Because of an increase in the wage rate it must pay, a perfectly competitive firmsmarginal costs increase but its demand curve stays the same. As a result, the firm

____ the amount of output it produces and ____ its price.

A) decreases; raises

B) increases; lowers

C) increases; does not change

D) decreases; does not change

E) decreases; lowers

21) Changes in prices and/or income shift or rotate ____ and changes in preferences

shift or rotate ____.A) only the budget line; the budget line and the indifference curves

B) the budget line and the indifference curves; only the budget line

C) the budget line and the indifference curves; the budget line and the indifference

curves

D) the budget line and the indifference curves; only the indifference curves

E) only the budget line; only the indifference curves

22) Erikas utility with $2,000 of wealth is 5,000 and her utility with $2,001 of wealth is5,005. Her marginal utility from gaining the additional $1 of wealth is ____.

A) 5,005

B) 5,000$2,000C) 5,000

D) 5

E) 5,005$2,001


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23) A firms total cost is $600, its average fixed cost is $5, and its output is 100 units. Itstotal variable cost is

A) less than $10.

B) between $11 and $101.

C) between $102 and $401.

D between $402 and $501.E) more than $501.

24) JCPenney guarantees to refund a customers money if the customer returns poorlymade clothing. This guarantee on clothing is an example of

A) the adverse selection problem.

B) the moral hazard problem.

C) the cost of risk.

D) the principal/agent problem.

E) a signal.

Output(frijoles)

Total cost (dollars)

0 1,0001,000 3,0003,000 5,0004,000 7,000

25) The above table gives some cost information for Flaming Fernandos, a restaurantthat sells Fiery Frijoles. What is the average total cost of producing 1,000 frijoles?

A) $1

B) $2

C) $3D) More information is needed to determine the answer.

26) The above table gives some cost information for Flaming Fernandos, a restaurantthat sells Fiery Frijoles. What is the average fixed cost of producing 1,000 frijoles?

A) $1

B) $2

C) $3

D) More information is needed to determine the answer.

27) (This is an out-of-the-book question from Chapter 20.) Private information

A) creates moral hazard but eliminates adverse selection.

B) creates adverse selection but eliminates moral hazard.

C) creates both moral hazard and adverse selection.

D) eliminates both moral hazard and adverse selection.


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28) Which of the following would cause Leonardos ATCcurve to shift upward?

A) An increase in the hourly wage that Leonardos pays its workers.

B) A decrease in the hourly wage that Leonardos pays its workers.

C) An increase in the fixed amount of liability insurance premiums that Leonardos

pays.

D) Both answers A and C are correct.E) None of the above answers are correct.

Jeffersons CleanersLabor (workers) Total product

(suits cleaned per day)

0 01 122 263 464 60

5 736 847 94

29) Based on the above table, what is the marginal product of the 5th worker hired atJeffersons Cleaners?

A) 15 suits per day.

B) 14.6 suits per day.

C) 13 suits per day.

D) 73 suits per day.

30) The major disadvantage of the corporate form of business organization is itsA) limited liability for its owners.

B) unlimited liability for its owners.

C) ability to be run by professional managers.

D) tax liability (its profits are taxed twice).


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31) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copys

average total cost and marginal cost curves. If the price is 4 per page, then tomaximize its profit Fast Copy will sell ____ pages per hour.

A) 0

B) 32

C) 48

D) 64

E) More information is needed to determine how many pages Fast Copy will sell.

32) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copysaverage total cost and marginal cost curves. If the price is 4 per page, then FastCopy is

A) incurring an economic loss.B) making a zero economic profit, that is, its owners are making a normal profit.

C) making an economic profit.

D) More information is needed to determine how the profit or loss Fast Copy is

making.

33) 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 when he stepson the scales it says

A) one at a time, please.

B) to be continued.C) we dont do livestock.

summer+a+2012+midterm+2

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