Exam #1 2/24/16. 9AM 10 : 25AM 10 : 25AM 10 : 25AM 11 : 50AM Hylan101 LCHAS148 Hylan305 Hylan201 M orey501

Transcription

1 Exam #1 2/24/16 Economics 108 Landsburg NAME: RECITATION (CIRCLE ONE): 9AM 10 : 25AM 10 : 25AM 10 : 25AM 11 : 50AM Hylan101 LCHAS148 Hylan305 Hylan201 M orey : 50AM 2P M 3 : 25P M 4 : 50P M 6 : 15P M M orey502 Harkness210 Hylan203 Hylan203 M eliora205 There are 8 problems, with the following point values: Total Points: 125 Problem Number Points

2 1. For each scenario below, enter the LETTER corresponding to one of the following statements about the demand and supply for hardcover books: Z. This causes demand to increase but does not affect supply. W. This causes demand to decrease but does not affect supply. C. This causes supply to increase but does not affect demand. F. This causes supply to decrease but does not affect demand. L. This causes both the supply and demand curves to change. I. This does not cause either supply or demand to change. a) It is discovered that people who read a lot often go blind. b) The price of paper falls. c) The price of hardcover books falls.

3 2. In each of the scenarios below, determine what happens to the price and quantity of peanuts, and enter the appropriate LETTER from the following list: Z. The price of peanuts rises and more peanuts are sold. W. The price of peanuts rises and fewer peanuts are sold. C. The price of peanuts falls and more peanuts are sold. F. The price of peanuts falls and fewer peanuts are sold. L. The price of peanuts changes, but the quantity sold remains unchanged. I. The price of peanuts remains unchanged, but the quantity sold changes. T. Neither the price nor the quantity of peanuts changes. a) A sales tax on peanuts is imposed. b) An excise tax on peanuts is imposed. c) A sales tax on cashews is imposed. d) An excise tax on cashews is imposed. NOTE: As always in this class, the price refers to the amount the demander pays to the supplier.

4 3. In the market for widgets, there are two producers and many consumers. The producers names are Ralph and Alice. Here are Ralph and Alice s marginal cost curves, and here is the market demand curve: Ralph Quantity MC 1 $ Alice Quantity MC 1 $ Market Demand Quantity Price 1 $ Answer the following questions by entering LETTERS according to the following scheme: E) 0 D) 1 F ) 2 G) 3 I) 4 H) 5 C) 6 B) 7 A) 8 CC) ZZ) 9 N) 10 M) 11 O) 12 P ) 13 R) 14 Q) 15 L) 16 K) 17 J) 18 P P ) 19 W ) 20 V ) 21 X) 22 Y ) 23 XX) 24 Z) 25 U) 26 T ) 27 S) 28 Some other number not on this chart. a) What are the equilibrium price and quantity of widgets? PRICE (enter a LETTER): $ BB) 29 W W ) 30 V V ) 31 MM) 32 NN) 33 AA) 34 RR) 35 UU) 36 T T ) 37 SS) 38 QUANTITY (enter a LETTER): b) What is the social variable cost of producing those widgets? c) What would be the social variable cost if Alice produced all of those widgets (and Ralph produced none)? d) In equilbrium, how much producer surplus do Ralph and Alice earn? Ralph s PS (enter a LETTER): $ Alice s PS (enter a LETTER): $ e) In equilibrium what is the consumer surplus? You must enter LETTERS, not numbers!!!

5 4. This problem is about the same widget market as the previous problem. Once again, here are Ralph and Alice s marginal cost curves and here is the market demand curve. Ralph Quantity MC 1 $ Alice Quantity MC 1 $ Market Demand Quantity Price 1 $ For this problem, assume that widgets are subject to a sales tax of $7 per widget. Answer the following questions by entering LETTERS according to the following scheme: E) 0 D) 1 F ) 2 G) 3 I) 4 H) 5 C) 6 B) 7 A) 8 CC) ZZ) 9 N) 10 M) 11 O) 12 P ) 13 R) 14 Q) 15 L) 16 K) 17 J) 18 P P ) 19 W ) 20 V ) 21 X) 22 Y ) 23 XX) 24 Z) 25 U) 26 T ) 27 S) 28 Some other number not on this chart. a) Fill in the blank with a LETTER: The new price of a widget is $ b) Fill in the blank with a LETTER: The new quantity of widgets is BB) 29 W W ) 30 V V ) 31 MM) 32 NN) 33 AA) 34 RR) 35 UU) 36 T T ) 37 SS) 38 c) Fill in the blank with a LETTER: For Ralph, the sales tax is as painful as losing $ d) Fill in the blank with a LETTER: For Alice, the sales tax is as painful as losing $ e) Fill in the blank with a LETTER: For the consumers, the sales tax is as painful as losing a total of $ f) How much tax revenue is collected? g) What is the amount of the deadweight loss due to the tax? You must enter LETTERS, not numbers!!! NOTE: As always, price means price NOT including sales tax.

6 5. Albert is a price-taking widget producer. Answer each question below by entering one of the following letters: Z.. Albert sells a higher quantity. W.. Albert sells a lower quantity. C.. Albert continues to sell the same quantity. F. Albert goes out of business. L. Either Z.or C.could happen. I. Either W.or C.could happen. T. Either Z.or F.could happen. Q. Either W.or F.could happen. M. Either C.or F.could happen. a) What happens if Albert s fixed costs rise? b) What happens if Albert s marginal cost curve shifts (vertically) downward? c) What happens if the going price of widgets increases?

7 6. The following charts show the supply and demand for gizmos: DEMAND Price Quantity $ SUPPLY Price Quantity $ Answer the following questions by entering the appropriate LETTERS in the blank spaces, according to the following scheme: ZZ) 9 P P ) 19 BB) 29 E) 0 N) 10 W ) 20 W W ) 30 D) 1 M) 11 V ) 21 V V ) 31 F ) 2 O) 12 X) 22 MM) 32 G) 3 P ) 13 Y ) 23 NN) 33 I) 4 R) 14 XX) 24 AA) 34 H) 5 Q) 15 Z) 25 RR) 35 C) 6 L) 16 U) 26 UU) 36 B) 7 K) 17 T ) 27 T T ) 37 A) 8 J) 18 S) 28 SS) 38 CC) Some other number not on this chart. a) What is the equilibrium price of a gizmo? For the remaining questions, suppose that the government institutes a price ceiling of $3 per gizmo, and that everyone s time is worth $2 per hour. b) How many gizmos are now supplied? Enter a LETTER: c) How many hours must you wait in line to get a gizmo? Enter a LETTER: d) How much consumer surplus is lost due to the price ceiling? e) How much producer surplus is lost due to the price celing? f) What is the deadweight loss due to the price ceiling? g) How much of that deadweight loss is due to the value of time wasted in line? You must enter LETTERS, not numbers!!!

8 7. Each day, Alice is willing to pay up to $20 for a first cup of coffee, up to $18 for a second, and up to $15 for a third. Each day, it costs Bob $20 to produce a first cup of coffee, $24 to produce a second, and $27 to produce a third. Answer the following questions, using LETTERS to represent numbers according to the following scheme: ZZ) 9 P P ) 19 BB) 29 E) 0 N) 10 W ) 20 W W ) 30 D) 1 M) 11 V ) 21 V V ) 31 F ) 2 O) 12 X) 22 MM) 32 G) 3 P ) 13 Y ) 23 NN) 33 I) 4 R) 14 XX) 24 AA) 34 H) 5 Q) 15 Z) 25 RR) 35 C) 6 L) 16 U) 26 UU) 36 B) 7 K) 17 T ) 27 T T ) 37 A) 8 J) 18 S) 28 SS) 38 CC) Some other number not on this chart. a) How many cups does Alice buy from Bob each day? At what price? QUANTITY: PRICE: Now suppose that the government offers Alice a subsidy for each cup of coffee she buys. As a result, she now buys 3 cups per day. b) What is the amount of the subsidy per cup of coffee? c) What is the amount of the deadweight loss due to the subsidy? You must enter LETTERS, not numbers!!!

9 8. The following graph shows the U.S. demand and supply for cameras. Identical cameras can be purchased from abroad for $8 apiece. Price Supply US A B $12 $8 H C D E F G J Quantity Demand US Now the U.S. government imposes a tariff of $4 per foreign camera. Fill in the chart below with letters or numbers as appropriate. Without tariff With tariff Quantity Imported Consumer Surplus Producer Surplus Tariff Revenue Social Gain Deadweight Loss Despite their appearance, please do NOT assume that the demand and supply curves are straight lines.

10 THIS PAGE IS FOR THE GRADERS. PLEASE DO NOT WRITE ON IT. Problem Number Score 1 /9 2 /12 3 /21 4 /21 5 /9 6 /21 7 /12 8 /20 Total /125