summer+b+2013+midterm+2

Professor: M. Rush ECO 2023 SUMMER B 2013 MIDTERM 2

Read all instructions on this page This test is governed by UF’s academic honesty code. It is intended to have 30 multiple choice questions. Please check to be sure your copy has all 30. Choose the best answer for each question.

♦ The next is important: Unless you are specifically told otherwise, on this test do not assume 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 3. Test form: A 4. Sign your name on the bubble sheet.

Check that the test form and UF ID number you bubbled-in are correct now. Also check to be sure your name is correct—do it now. As I said on the last exam, I heard rumors that the ability to correctly record the test form 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 test form and UF ID is not too difficult to acquire. CHECK YOUR TEST FORM AND UF ID. IF YOU GET EITHER OF THESE WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED, YOU WILL LOSE 2 QUESTIONS!

TURN OFF ALL CELL PHONES AND OTHER COMMUNICATION DEVICES

You may not use a cell phone, a Blackberry, or any other sort of device that allows for communication as your calculator.

E C O 2 0 2 3 M I D T E R M 2 S U M M E R B 2 0 1 3

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 all questions during the test. I don’t like this policy, but it seems the fairest policy.

Do not ask questions of me or the TA’s; 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 and bubble in all your answers. When the TAs say that time is up, you must hand 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. 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 grade card 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 you—you MUST email 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 reports what 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) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy’s

cost curves. If the market price is 3 cents per page, what is Fast Copy’s profit maximizing level of output?

A) 16 pages per hour B) 32 pages per hour C) 42 pages per hour D) 48 pages per hour E) 64 pages per hour

2) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy’s cost curves. If the market price is 3 cents per page, what is Fast Copy’s economic profit?

A) zero. B) Between 0 and $0.50 per hour C) Between $0.51 and $1.00 per hour D) More than $1.00 per hour

3) Currently the United States imports tomatoes from Mexico. These imports ____ the consumer surplus of U.S. tomato consumers, ____ the producer surplus of U.S. tomato producers, and ____ U.S. total surplus.

A) increase; increase; increase B) increase; decrease; decrease C) decrease; increase; increase D) increase; decrease; decrease E) increase; decrease; increase

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4) Currently Mexico exports tomatoes to the United States. These exports ____ the consumer surplus of Mexican tomato consumers, ____ the producer surplus of Mexican tomato producers, and ____ Mexican total surplus.

A) increase; increase; increase B) increase; decrease; decrease C) decrease; increase; increase D) increase; decrease; decrease E) increase; decrease; increase

5) (This is an out-of-the-book question.) You have just been named President and Chief Executive Officer at Intel Corporation. This appointment places you in the role of ____ to lower managers and ____ to the shareholders.

A) principal; principal B) principal; agent C) agent; principal D) agent; agent

6) Homer’s Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer’s earns $12,000 in revenue from the sale of those donuts. Homer’s has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer’s shut down in the short run?

A) Yes, because he is incurring an economic loss. B) Yes, because his revenue cannot cover all of his fixed costs. C) No, because is making a positive economic profit. D) No, because his revenue can cover all of his variable costs.

7) Because of an advance in technology, a perfectly competitive firm finds that its MC curve has shifted downward. The technological advance affects only the one firm. The firm will ____ its price and ____ the quantity it produces.

A) raise; increase B) raise; decrease C) lower; increase D) lower; decrease E) None of the above answers are correct.

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8) Wheat farming is a perfectly competitive industry and wheat farmers currently are making a profit of $200,000 when the normal profit is $150,000. Then

A) new wheat farmers will enter the market. B) some wheat farmers eventually will close down. C) there won't be any entry or exit from the market. D) we can't make a prediction based on the information in the question

9) Bobby eats hamburgers and hot dogs. At his consumer equilibrium he eats the same number of hot dogs and hamburgers. Thus

A) his total utility from hot dogs must be the same as his total utility from hamburgers.

B) his marginal utility from hot dogs must be the same as his marginal utility from hamburgers.

C) the price of a hot dog and the price of a hamburger must be the same. D) None of the above are necessarily correct.

10) Nancy’s utility of wealth curve is given in the above figure. She can pay $100

for an investment that gives her $50 one third of the time and $150 the other two thirds of the time. She

A) definitely will make the investment. B) definitely will not make the investment. C) might or might not make the investment because her utility is the same if

she makes it or does not make it. D) More information is needed to answer the question.

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11) A person’s indifference curves will shift, so that each indifference curve moves to a new location, when there is a change in

A) income but not prices. B) prices but not income. C) neither prices nor income. D) both prices and income.

12) If a minimum wage is set above the equilibrium wage rate, most economists believe that

A) employment will increase. B) employment will not change. C) employment will decrease. D) employment may increase, decrease or not change depending on how the

supply of labor is affected by the minimum wage.

Output (frijoles)

Total cost (dollars)

0 1,000 1,000 3,000 2,000 5,000 3,000 8,000 4,000 13,000

13) The above table gives some production and cost information for Flaming Fernando’s, a restaurant that sells Fiery Frijoles. What is the average fixed cost of producing 4,000 frijoles?

A) $1.00 B) $2.00 C) $3.00 D) $3.25 E) None of the above answers are correct.

14) The above table gives some production and cost information for Flaming Fernando’s, a restaurant that sells Fiery Frijoles. What is the marginal cost of a frijole when production is increased from 2,000 frijoles to 3,000 frijoles?

A) $2.50 B) $5,000 C) $8,000 D) $3.00 E) $2.67.

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15) All points above a consumer’s budget line are A) inferior to every point on the budget line. B) preferred to every point on the budget line. C) affordable. D) unaffordable. E) Both answers B and D are correct.

16) Because each perfectly competitive firm sells a product identical to that of the other firms,

A) each firm will try to cut prices to increase its market share. B) each firm’s output is a perfect substitute for the output of any other firm. C) each firm can expect to earn some economic profit. D) the demand for each firm’s product is perfectly inelastic.

17) Jane’s Garage Cleaning is a perfectly competitive firm that currently cleans 50 garages a week. Jane’s marginal cost is $40, her price is $40, and her average total cost is $45. 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) maximizing her profit and is incurring an economic loss. E) not maximizing her profit but is earning a normal profit anyway.

18) If the ATC curve has a positive slope, then the MC curve must be A) horizontal. B) vertical. C) above the ATC curve. D) below the ATC curve. E) More information is needed to answer the question.

19) A perfectly competitive firm incurs an economic loss but continues to operate if

A) P > ATC. B) P < ATC and P < AVC. C) P < ATC and P > AVC. D) P > ATC and P < AVC. E) None of the above because whenever a perfectly competitive firm incurs

an economic loss, it closes.

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20) The equilibrium rent for an apartment is $600 per month and the government imposes a rent ceiling of $700 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 this question.

21) If more than the efficient quantity of pizza is produced, then for the last pizza 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) A corporation has ____ liability and pays taxes ____ on its profit. A) limited; once B) limited; twice C) unlimited; once D) unlimited; twice

23) A perfectly competitive firm initially is making no economic profit. Then, a decrease in demand for the firm’s product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

A) Increase the quantity it produces. B) Increase its advertising to increase the demand for its product. C) Exit the market. D) Increase the price it charges for its product.

24) Your marginal utility from hamburgers A) is always greater than your total utility from hamburgers. B) is always greater than your average utility from hamburgers. C) is always greater than the price of hamburgers. D) depends on how many hamburgers you’ve already eaten.

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25) A firm’s total cost is $600, its fixed cost is $200, and its output is 10 units. Its average variable cost is

A) less than or equal to $2.00. B) more than or equal to $2.01 and less than or equal to $20.00. C) more than or equal to $20.01 and less than or equal to $40.00. D more than or equal to $40.01 and less than or equal to $100.00. E) more than $100.01.

26) Bobby is offered a job as a salesperson in which there is a 50 percent chance

that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby’s utility of wealth curve is shown in the figure above. What is Bobby’s expected income from taking this job?

A) $4,000. B) $6,000. C) $2,000. D) $10,000. E) None of the above answers is correct

27) Bobby is offered a job as a salesperson in which there is a 50 percent chance that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby’s utility of wealth curve is shown in the figure above. What is Bobby’s expected utility from taking this job?

A) 40 B) 50 C) 60 D) 70 E) None of the above answers is correct

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28) As long as it does not shut down, a perfectly competitive firm earns the maximum profit possible as long as it operates so that

A) its price exceeds its average total cost. B) market demand is inelastic. C) its price exceeds its marginal revenue. D) its marginal revenue exceeds its marginal cost by as much as possible. E) its marginal revenue equals its marginal cost.

29) At the quantity of 20 million bushels of apples, the marginal benefit of a bushel of apples is $10 and the marginal cost is $15. To produce the efficient quantity of apples, then

A) more apples should be produced. B) fewer apples should be produced. C) more information only on the willingness of consumers to purchase

apples is needed to determine the efficient quantity of apples. D) more information only on the willingness of suppliers to produce apples

is needed to determine the efficient quantity of apples E) more information on the willingness of consumers to purchase apples

and on the willingness of suppliers to produce apples is needed to determine the efficient quantity of apples.

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

A) when he goes to the beach the tide comes in. B) the last time he was lying on the beach, Greenpeace tried to haul him

back into the ocean. C) instead of wearing Levi’s 501s he wears Levi’s 1002s. D) he doesn’t take pictures, he takes posters.

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summer+b+2013+midterm+2

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