P R A C T I C E E X A M # 1 Fall 2017
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1 1 Eonomis 101 Professor Turhi P R A C T I C E E X A M # 1 Fll 2017 Miterm Exmintion on Thursy, Septemer 21, 2017 in Clss ****Review Session: Mony, Septemer 18th, Crroll 111: 7:00 p.m. For Exm: Stuents re responsile for text mteril (Chpters 1-6, [inluing ll ssigne ppenixes] n Ch. 9, relevnt leture mteril, n ll hnouts.) There re more multiple hoie questions here thn will e on the exm. Expet to see roun 20 m questions on the tul exm. Bring to Exm: (1) #2 penil with funtioning erser, (2) lultor (for numeril lultions only). No other eletroni evies re permitte. Bring 4 Blnk Sntrons 1. Suppose frmer proues 50 ushels of orn n 10 ushels of penuts. Aoring to the tle elow, wht is the opportunity ost of 10 more ushels of penuts? Penuts (Bushels) Corn (Bushels) ushels of orn.. 50 ushels of orn.. 42 ushels of orn.. Impossile to etermine from the informtion given. 2. Opportunity ost is the. ost inurre when one fils to tke vntge of n opportunity.. ost inurre in orer to inrese the vilility of ttrtive opportunities.. ost of the est option foregone s result of hoosing n lterntive.. rugery of the unesirle spets of n option. 3. All of the points insie proution possiilities frontier re ; ll of the points outsie the proution possiilities frontier re.. effiient; ineffiient. optiml; irrtionl. ttinle; unttinle. unttinle; effiient 4. The emn urve for goo onnets points esriing how muh onsumers. tully ought t ifferent pries uring prtiulr perio.. tully ought t ifferent pries in ifferent perios.. woul hve een willing n le to uy t ifferent pries uring prtiulr perio.. woul hve een willing n le to uy t ifferent pries in ifferent perios. 5. The slope of emn urve is lmost lwys, euse. positive; when people uy more of goo the ost of prouing it will rise.. positive; the more money person hs, the more of prtiulr goo will e ought.. negtive; when people uy more of goo, the ost of prouing it will fll.. negtive; with everything else equl, people will uy more of goo when its prie is lower. 6. Whih of the following sttements orretly esries mrket equilirium?
2 . At equilirium, emn equls supply.. At equilirium, quntity emne equls quntity supplie.. At equilirium, mrket fores re no longer t work.. Equilirium is the est omintion of prie n quntity. 7. An inrese in supply n n inrese in emn will. inrese prie n inrese the quntity exhnge.. erese prie n erese the quntity exhnge.. ffet prie in n ineterminte wy n erese the quntity exhnge.. ffet prie in n ineterminte wy n inrese the quntity exhnge. 8. The mjor rwk of n effetive prie eiling is:. it uses surplus.. it uses overinvestment in the inustry.. it uses shortge.. there is no rwk. 9. A rise in the prie of hmurger uns will use whih of the following hnges in the mrket for hmurger ptties?. erese in equilirium quntity, inrese in equilirium prie.. inrese in equilirium quntity, inrese in equilirium prie.. erese in equilirium quntity, erese in equilirium prie.. inrese in equilirium quntity, erese in equilirium prie. 10. Whih of the following will not shift the emn urve for Spm to the left («)?. inrese mei ttention pi to holesterol. inrese populrity of vegetrinism. rise in the prie of hmurger. flling onsumer inomes 11. A rise in the prie of ink will. erese the quntity emne n the supply of pens. erese emn n the quntity supplie of pens. erese the quntity supplie n the quntity emne of pens. erese the emn n supply of pens In the figure ove, there woul e n exess supply of T-shirts if. the prie ws $10.. the prie ws $6.. the prie ws $8.. the quntity supplie ws In Jnury, 2,500 qurts of ie rem re sol in Boston t $2 qurt. In Ferury, 3,000 qurts of ie rem re sol t $2.50 qurt. This hnge in quntity sol n prie my hve een use y. reution of the popultion in the Boston re.. the introution of lor-sving utomte ie rem-pking mhinery.
3 . the relese of meil stuy showing tht ie rem onsumption improves mentl helth.. erese in the prie of flvorings use in the proution of ie rem. 14. The government of Eonomi nnounes tht it will purhse its frmers' surplus of milk. From this nnounement, you n infer tht Eonomi hs. prie eiling elow the equilirium prie for milk.. prie floor ove the equilirium prie for milk.. prie eiling ove the equilirium prie for milk.. prie floor elow the equilirium prie for milk. 15. Whih of the following will use shift in emn for Toyot Cmrys?. hnge in the prie of steel.. new Toyot elership opening in town.. hnge in the prie of Hon Aors ( similr moel).. more effiient weling proess. 16. The si prolem of eonomis is to:. resolve the esire for mening. eliminte the teneny of the eonomy to stgnte. resolve the prolem of srity. equilirte wnts n nees 17. Opportunity ost is the vlue of:. ll other possile options the eision mker oul hve hosen. wht is gine from the lterntive whih is hosen. the next est lterntive tht the eision fores one to give up. the lterntive ost whih the eision mker woul hoose if more resoures were ville Using the PRODUCTION POSSIBILITY FRONTIER ove, wht is the optiml unle. point y. point p. point x. nnot e etermine 19. Aoring to the ove piture, the opportunity ost of one more poun of pottoes is. higher t y thn t p. equl t y n p. lower t y thn t p. impossile to etermine 20. The shpe of the PRODUCTION POSSIBILITY FRONTIER ove implies tht. some resoures re etter suite for prouing whet thn pottoes. the opportunity ost of prouing whet flls s whet proution rises. the frmer s tehnology is not sujet to the prinipl of inresing osts. the finnil ost of prouing whet is higher thn the finnil ost of prouing pottoes
4 4 21. A shift from to suh s tht illustrte in the ove PRODUCTION POSSIBILITY FRONTIER oul e ue to. eline in onsumers esire to hve len reth fter they et their Tun fish. reution in the supply of Fluorie ( ruil ingreient in toothpste). plgue whih kills mny workers. none of the ove 22. At prie of $15, 200,000 hlogen lmps re emne. At prie of $5, 800,000 hlogen lmps re emne. The r prie elstiity of emn for hlogen lmps is ineterminte 23. Two goos re sustitutes if their. inome elstiity is less thn one.. r prie elstiity is greter thn one.. ross prie elstiity is greter thn zero.. ross prie elstiity is less thn zero. 24. Attempts to generte revenue y txing "luxury goos" re rrely suessful euse. luxury goos re ssoite with elsti emn urves.. they re sno goos.. this les to exess emn.. it is iffiult to enfore the lw of supply n emn. 25. If "typil" househol (s esignte y the Bureu of Lor Sttistis) spens 80% of its inome on housing n 20% on foo, lulte the CPI if the nnul infltion rte for housing is 2% n for foo is 2.5%.. 2.1%. 2.0%. 2.5%. 2.25% 26. The mrket emn urve is the. vertil sum of iniviul emn urves.. sum of prllel iniviul emn urves.. horizontl sum of iniviul emn urves.. sum of the slopes of iniviul emn urves. 27. If Elizeth's totl utility from onsuming pizz n so is mximize fter eting three slies n rinking two ols, then. the thir slie of pizz h negtive mrginl utility.. her inifferene urves lk the property of non-stition.. Jerry's totl utility woul neessrily e mximize y eting three slies of pizz n rinking two ols.. Elizeth, therefore, will neessrily onsume three slies of pizz n two ols. The following four questions refer to the igrm elow. Given the onsumer s inome (M) n mrket pries for housing (P h ) n foo (P f ) :
5 5 28. Wht is the slope of the househol s uget line (lele xx )? ) -P h/ P f ) -P f/ P h ) -M/ P h ) -M/ P f 29. If the prie of foo (P f) inreses holing inome onstnt, the onsumer will hieve n optimum t ) higher inifferene urve. ) the sme inifferene urve ut t point to the left of point E. ) lower inifferene urve. ) the sme inifferene urve ut t point to the right of point E. 30. Suppose the househol s ugetry sitution hs hnge s shown y line zz. Then ) The prie of foo hs risen n the prie of housing hs fllen, with inome onstnt. ) The prie of foo hs fllen, the prie of housing hs risen n inome hs fllen. ) The prie of foo hs risen, the prie of housing hs fllen n inome hs fllen. ) Insuffiient informtion to nswer. 31. Compring the ol uget line xx with the new uget line zz, we n sy tht ) The househol s purhsing power hs risen n its welfre hs risen. ) The househol s purhsing power is the sme n its welfre hs risen. ) The househol s purhsing power hs fllen n its welfre hs risen. ) The househol s purhsing power n its welfre re onstnt.
6 6 ESSAY QUESTIONS 32. Lst month the Temster's Union rivers t Unite Prel Servie (UPS) struk for higher wges. Answer the following questions out the strike. Explin your nswers n use well-lele grphs to illustrte your points. (6 points) Show how onitions in the mrket for prel elivery woul hnge uring the strike. Wht woul hppen to equilirium prie n quntity, rememering tht UPS ontrolle something like 80 perent of the mrket efore the strike? 33. (7 points) During the strike, mny of UPS's ustomers use ompeting servies. After the strike ene oul we expet to see the equilirium mrket prie n quntity restore for UPS to their pre-strike levels? Why/Why Not? Wht woul hve hnge their sitution? Explin your nswer using grphs if neessry. 34. (7 points) Suppose "typil" househol onsumes only 2 goos: (i) "UPS prel elivery servies", n (ii) n inex of "ll other goos." Show grphilly the househol's equilirium onsumption of oth goos efore n fter the strike ssuming (for this question only) tht the prie of UPS prel elivery servies rose, ll other pries n inomes onstnt. () Wht hppens to the rtio of the two goos onsume? Why? () Does the househol's purhsing power rise, fll, or sty the sme? Why? (illustrte grphilly) () Does the househol's stisftion rise, fll, or sty the sme? Why? (illustrte grphilly)
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