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Micro Econ 1101 exam

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**Econ 1110-INTRODUCTORY MICROECONOMICS
**

MAKEUP Wissink-S2014-March 5-PRELIM#1

PRINT YOUR NAME: _______________________________________________________________

YOUR NetId:______________________ YOUR STUDENT NUMBER:________________________________

**INSTRUCTIONS and EXAM TAKING POLICY:
**

There are two sections in this exam. Answer all questions.

Part I: 16 multiple choice questions @ 3.5 points each

Part II: 2 problem @ 22 points each

TOTAL POINTS = 100, TOTAL TIME = 90 minutes.

NO QUESTIONS CAN BE ASKED DURING THE EXAM ABOUT EXAM CONTENT: If you

need to use the restroom, or you need a pencil or scratch paper, or some other supply that we might have,

raise your hand and wait for the proctor to come to you. Only one person can be out of the examination

room at a time, and the proctor will hold onto your exam papers while you are out at the restroom.

NO CELL PHONES, NO IPODS OR SIMILAR DEVICES WITH CALCULATOR “APPS”.

NO GRAPHING CALCULATORS.

NO BOOKS. NO NOTES. NO HELP SHEETS.

NO TALKING TO EACH OTHER.

**Check the SECTION you regularly attend (that is where you will pick up your prelim):
**

Daniel Chin Lay Lau (dcl253)

____________6545 DIS 210 T 08:00AM - 08:50AM URH 202

____________6546 DIS 211 T 09:05AM - 09:55AM URH 202

____________6547 DIS 212 T 10:10AM - 11:00AM URH 202

Yanan Li (yl2294)

____________6548 DIS 213 T 12:20PM - 01:10PM RCK 112

____________6549 DIS 214 T 01:25PM - 02:15PM RCK 112

____________6550 DIS 215 T 02:30PM - 03:20PM RCK 112

Todd Jones (trj25)

____________6551 DIS 216 R 08:00AM - 08:50AM RCK 122

____________6552 DIS 217 R 09:05AM - 09:55AM RCK 122

____________6553 DIS 218 R 10:10AM - 11:00AM RCK 122

Zhenda Yin

____________6554 DIS 219 F 08:00AM - 08:50AM GSH G22

____________6555 DIS 220 F 09:05AM - 09:55AM GSH G22

____________6556 DIS 221 F 10:10AM - 11:00AM GSH G22

Mehreen Mookerjee

____________9603 DIS 222 T 08:00AM - 08:50AM IVS 219

____________9604 DIS 223 T 09:05AM - 09:55AM IVS 219

____________9605 DIS 224 T 10:10AM - 11:00AM IVS 219

please… PRINT YOUR NAME: ____________________________________ YOUR NetId: _____________ YOUR STUDENT NUMBER: ____________________________ GRADING MC (out 56 points)=___________________ Q1 (out of 22 points)=_________________ Q2 (out of 22 points)=_________________ TOTAL SCORE: _____________________ .One more time.

E. Roger has a comparative advantage in nothing. Maeby.000 additional children have lost health care coverage. C. C. Derek and Roger would be unable to mutually benefit based on the theory of comparative advantage. In any given hour Derek can make 5 tennis balls or 5 baseballs or any linear combination of the two. Roger has both an absolute and comparative advantage in making tennis balls. CIRCLE the letter for your answer. Ima has allocated his workers efficiently. The price elasticity of cigarettes is -2. On average Americans pay $16. Roger has a comparative advantage in the production of tennis balls. Maeby is making no bananas. George Michael. _____________________________________________ 1. Ima Monkey manages a frozen banana stand. Which one of the following sentences is a normative statement? A. Everyone is making Milkshakes 3. George Michael and Gob are also producing some of both goods. . E. The table shows the maximum 20 40 George Michael number of frozen bananas or milkshakes that each 24 8 Gob employee can make during one hour. Bush took office and now it is 5%. Roger and Derek produce two goods. 40 20 Maeby Gob and Tobias. Which one of the following statements is TRUE? A. which one of the following statements is TRUE? A. Workers can 50 60 Tobias produce any linear combination of their extreme values. Derek has a comparative advantage in the production of tennis balls. Given that information. D. Each of them works eight hours per day. E. 2. B.000 a year for health insurance. tennis balls and baseballs. Do them ALL.1. B. B. The unemployment rate was 3% when George W. Gob is making only bananas. In any given hour Roger can make 2 tennis balls or 1 baseball or any linear combination of the two. Congress and the president should increase taxes on employed persons in order to provide more health care to the poor. Suppose Tobias is making both bananas and milkshakes. In the last 5 years 400. D. D. Bananas Milkshakes He has four employees: Maeby. George Michael is making only bananas.mupe1_1110_s2014_OV Part I: Multiple Choice. C.

D. Mariana’s=$675 and Greg’s=$890. demand and supply both increase. Price-taking behavior by buyers and sellers. Which one of the following is inconsistent with the model of perfect competition? A. demand increases and supply decreases. B. C.600 $375 $2. decrease.17A + 1/2B + 45C. C. E. E. 6. B.4. demand decreases and supply increases. 5.265 . Which one of the following is a plausible best guess? A. B. If the current market price of a ticket is $800. The professor then spends numerous hours trying to figure out what the equation represents. It is a demand function where A represents the number of consumers in the market. what is the total producers’ surplus over these four people in this situation? A. B. Unrestricted or “free” entry and exit. D. E. Suppose the following reservation selling price for each person: Jenny’s=$1. Dave’s=$550. Fully and symmetrically informed buyers and sellers. A large number of incumbent or potential firms. $3. It is a supply function where A represents the price of sun tan lotion. C. It is a supply function where C represents the price of sunglasses. E. It is a supply function where C represents the cost of the sunglass components to the manufacturer. C. A careless research assistant has presented his professor with the following unlabeled equation representing the market for sunglasses: Q=50 . or stay the same when A. Four sellers are in the market willing to sell their tickets to see the NCAA Final Four Basketball Championships.000.115 $-85 $1. D. supply increase while demand stays constant. A single seller of a product with the ability to influence market price by his or her actions. It is a demand function where A represents a sun umbrella (sometimes known as a parasol). D. Market equilibrium price will rise and the equilibrium quantity may increase. 7. demand and supply both decrease.

25 Quantity Demanded (Ice Creams) 4000 3500 3000 2500 2000 1500 1000 500 0 Quantity Supplied (Ice Creams) 1000 1100 1200 1300 1400 1500 1600 1700 1800 9. B.00 $2. Suppose that the only effect that migrants have is to increase the amount of labor supply in the economy.50 $2.25 $1. Given that each ice cream stall can produce 50 ice creams per day.8. $1. The equilibrium market price of labor (wages) will definitely increase and the equilibrium quantity traded (employment) could go up or down. Employment will definitely increase but wages could go up or down. Price ($/Ice Cream) $1.50 $2. Consider the supply and demand schedules for ice creams. They do this by issuing 20 “permits” which allows the owner of the permit to set up and sell ice cream on the boardwalk. Wages will definitely decrease and employment will definitely increase. D.00 $3. E. Both wages and employment will definitely decrease.25 $2.50 $2. International migration is a politically sensitive topic at the moment.75 $3. E. D. Suppose country X decides to relax its quotas on the number of migrants allowed to enter country X each year. B. The local government therefore imposes a quota on the number of ice cream stalls allowed on the boardwalk per day. C. C. Both wages and employment will definitely increase.25 $1. Which one of the following predictions is most correct? A. what price will ice creams sell for after the permit policy goes into effect? A.75 $2. Much of the discussion is centered around the effect of migrants on local labor markets.00 $2.75 . Locals complain that there are too many ice cream vendors on the Seaside Heights boardwalk.50 $1.

25. B.80. D. is that demanders will now ultimately pay $30 per pound. The graph represents the Ithaca market for jelly beans this spring. P is price per pound. the own price elasticity of demand in this part of the lemon demand curve is approximately equal to A. Suppose the local government decides to levy a tax of $10 per pound on transactions in the jelly bean market. there will be a surplus of 40 pounds of jelly beans. -8. B. The graph represents the Ithaca market for jelly beans this spring.200 to 20. -0.50 per bushel raises the quantity demanded from 19. D. -1. there will be a surplus of 30 pounds of jelly beans. nothing happens. Using the midpoint arc formula. C.00. cannot be determined until we know how the tax revenue will be collected. E. P is price per pound. B. A fall in the price of lemons from $10. -1.50 to $9. Suppose the government imposes a price ceiling of $10 per pound. is that the economic price incidence of the tax will be shared equally between demanders and suppliers. The consequence of this tax A. there will be a dead weight loss of $200 D. The consequence of this is that A.20. Q is number of pounds. 11.800 bushels. C. is that the economic price incidence of the tax will be borne completely by demanders if the tax is collected from demanders. 0 . since the price ceiling is not binding. E. Q is number of pounds. E. C. 12. there will be a shortage of 30 pounds of jelly beans. is that demanders will now ultimately pay $15 per pound.10.

D. 14. Demand for tires is currently unitary elastic and the price falls slightly. . The government plans to place a tax of $t/unit on one of these markets. None of the above. B. Y and Z as illustrated. Demand for tires is currently price elastic and the price rises slightly. B. E. Which of the following results in an increase in total consumer expenditures on tires? A. Demand for tires is currently price inelastic and the price falls slightly. C. Assume the demand curve for tires is linear. Market X Market Y Market Z We do not have enough information to know. D.13. The same amount of dead weight loss is generated in each market. Demand for tires is currently price inelastic and the price rises slightly. In which market would this tax create the least amount of dead weight loss? A. Consider the demand and supply graphs for X. E. C.

The market for Chobani Greek-style yogurt. The market for Greek-style yogurt. in which one of the following markets would economists expect market demand to be the most price inelastic? A. -1 -3 -3/4 -4/3 None of the above. The market for pomegranate Chobani Greek-style yogurt. B. KEEP GOING! Q 12 (units/wk) . The exact value of the own price elasticity of demand at point A in the diagram is P ($/unit) 8 6 A 3 A. The market for yogurt. E. B. D. (just choose an answer from A – D) 16. C. D. E.15. Using national data. C.

PLEASE DRAW YOUR GRAPH ON THE NEXT PAGE. b. Offer one reasonable explanation to what might have generated this change in supply. c. Assume the demand equation changes to: QD = 130 . Suppose the Ithaca Bagel Eaters Society gets the mayor to impose a price ceiling on bagels equal to the ORIGINAL bagel equilibrium price. QS = quantity of bagels supplied per day in Ithaca. and P = price per bagel. Using the information in (c) and (d) graphically show what occurs in the market for bagels. Graph the demand and supply curves. Write legibly and remember to label all graphs and axes in diagrams. Is this an increase in demand or a decrease in demand? Briefly explain. Illustrate and label the values of P* and Q* in the graph. Calculate the new equilibrium price and equilibrium quantity. Suppose the demand and supply curves for bagels in Ithaca are given by the following equations: QD = 100 .10P. Analyze the likely impact of this policy using your graphs and some calculations. Show us something.mupe1_1110_s2014_OV Part II: Make sure you read and do ALL parts of each question. f. that the supply of bagels changes to: QS = -30 + 30P. For full credit you must label intercept values on the vertical and horizontal axes.10P and QS = -20 + 30P where QD = quantity of bagels demanded per day in Ithaca. Make your graph BIG enough to play around with for the rest of the problem. TRY to get started on every question. d. Suppose. 1. What are the equilibrium price and quantity in this market? Illustrate and label the values in the graph. a. Show as much work as possible. adding to part c. e. .

Answer space .

The PPF for each bear is illustrated below.2. or any linear combination between these two points. or 3 bowls of porridge and no beds. Baby Bear can make 3 beds and no porridge. sketch out the efficient joint production possibilities frontier. Momma Bear. or any linear combination. In a week’s time Poppa Bear can make 15 beds and no porridge. a. Who has the absolute advantage in porridge? Defend your position. or 5 bowls of porridge and no beds. PLEASE DRAW YOUR GRAPH ON THE NEXT PAGE. She can also make 8 beds and 8 bowls of porridge and no beds and 12 bowls of porridge. Momma Bear is different. or any linear combination between these two points. The Bear family wants to determine the efficient joint production possibilities frontier. or any linear combination. who has the comparative advantage in the production of porridge? Defend your position. c. . 8 beds and 8 bowls of porridge. Between Baby Bear and Poppa Bear. Also label the endpoints of the PPF. how many beds are they making? Explicitly tell us how many units of each activity each bear is doing. If the Bear Family is efficiently making 10 bowls of porridge. d. She can make 12 beds and no porridge. if there are any kink points in your graph label the number of units of each task at any/all kink points. For full credit. Poppa Bear and Baby Bear make two goods: beds and porridge. b. Putting BEDS on the VERTICAL.

Answer space .

Answer space .

parts A. The other answers are all “positive” predictions that do not address the appropriateness of the policy 2 B Draw each person’s PPF and notice the following with respect to the marginal opportunity cost of milkshakes in terms of bananas: George Michael’s = ½. So Roger has a comparative advantage in making tennis balls. 11 C With the price ceiling. C and E are characteristics of perfect competition. By definition. Thus there will be a shortage of 40. 9 E The quota is 1000 (=20*50) ice creams per day. An increase in its price will increase demand for sunglasses. the effect on the equilibrium quantity is uncertain. Increase in input prices will decrease supply. quantity demanded is 60 and quantity supply is 20. B. Depending on the relative degree of shift in the demand curve and the supply curve. They would be mutually benefit if they specialize and trade. equilibrium quantity may increase. The DWL=1/2*(30-10)*(40-20)=$200 . A parasol is a substitute to sunglasses. Tobias’s=5/6.75 while the supply price is $1. since they are going in the opposite direction (in terms of going right and left. by now you have George Michael doing only milkshakes. So if Tobias is doing some of both. 5 E Sun tan lotion is a complement to sunglasses. This moves the equilbrium point down the demand curve so that wages fall and employment increases. Maeby’s=2 and Gob’s=3. which measure quantity).Econ 1110 S2014 PRELIM 1 MAKEUP Answers to multiple choice questions 1 E This is the only answer that involves making a judgment about the “right” thing to do. decrease. whose price impacts demand not supply. Demand increases with the number of consumers in the market. 60}=20 pound of jelly bean. However. the tax is equally shared. 7 D Only Dave and Mariana will sell their tickets. 10 D Since the demand and supply curves have the same steepness. The opportunity cost of make one tennis ball is 1 baseball for Derek. 6 B When demand increases and supply decreases at the same time.25. 4 D This would be MONOPOLY. and ½ baseball for Roger. The demand price for this quantity is $2. not decreasing. Producers’ surplus=$(800-550)+$(800-675)=$375 8 E The increase in supply shifts the supply curve to the right. or stay the same. and Maeby and Gob doing only bananas. 3 C Derek has an absolute advantage in both tennis ball and baseballs. price rises unambiguously. The quantity sold will be min{20.

15 D When there are more substitutes of a good available. so demand is Q = 12 – 3P/2. 14 D We know that firm can earn more (i. where a is the decrease of quantity traded. Therefore. B C: wrong. a<30. portion above it is elastic. and below it inelastic. Similarly. while Market X has a DWL of ½*t*a. So the demand for yogurt would be relatively more price inelastic than for some narrower definition like a particular flavor of yogurt. consumers are more able to switch to other goods when the price of the good increases.80 13 B Market Y has a DWL of $30*t. the DWL of Market Z is ½*t*b.50-9.12 C Set it up as [(19200-20800)/20000]/[(10. which is less than 30. demand is more inelastic for a broadly defined market and more elastic for a narrow market definition. so D is correct. 16 B From the diagram we get inverse demand: P = 8 – 2Q/3. elasticity = dQ/dP X P/Q = -3/2 X 6/3 = -3 . So DWL of Z is smaller than Y.50)/10] = 0. where b is the decrease of quantity traded. consumers spend more) by increasing price when demand is inelastic. dQ/dP = -3/2.e. so DWL of X is smaller than Y. Also note for linear demand curve (typically shaped) when demand is unitary elastic. or by decreasing price when demand is elastic.

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