ECON 201 Fall Midterm 1 with solutions.docx

ECON 201 Fall Midterm 1 with solutions.docx

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ECON201FallMidterm1withsolutions

ECON201:

IntroductiontoMacroeconomics

MidtermExam1:

AnswerPacket

October18,2010

NAME:

_________________________________

CircleyourTA’sname:

BrianMeysamTravisYaron

Circleyoursectiontime:

9a.m.4p.m.

Directions:

Thistestisintwoparts,amultiplechoicequestionpartandashort-answerpart.Usethisanswerpackettocompletetheexam.Calculatorsarepermitted.Books,notes,referencematerials,etc.areprohibited.Goodluck!

Part1:

ReferringtothequestionsintheMultipleChoiceQuestionsPacket,choosetheonealternativethatbestcompletesthestatementoranswersthequestion.Eachquestionisworthonepoint.Thereisnopenaltytoguessing,sobesuretoanswerallofthem.Writeyouranswersinthefollowingtableusingcapitalletters.

1

6

11

16

21

26

2

7

12

17

22

27

3

8

13

18

23

28

4

9

14

19

24

29

5

10

15

20

25

30

Part2:

Solvethefollowingfourproblemsinthespacesprovided.Showallyourwork!

PROBLEM1:

10points:

1pointperblank

Usethefollowinggraphstofillintheblanksforthefollowingquestions.

1.AssumetheUSAproduces200bushelsofcorn.Ofallthequantitiesofcarsitcouldproduce,whichquantityisefficient?

__________.

160

2.FortheUSA,whatistheopportunitycostofcornintermsofcars?

__________.ForJapan,whatistheopportunitycostofcornintermsofcars?

__________.Whohasthecomparativeadvantageintheproductionofcars?

_______________

0.4,2/3,Japan

3.AssumetheUSAisproducing100bushelsofcornand200cars,andJapanisproducing120bushelsofcornand220cars.IftheUSAgives50bushelstoJapaninexchangefor25cars,howmanybushelsofcornwillithave?

__________.Howmanycars?

__________.Wouldbothcountriesagreetothistrade?

__________.

50,225,Yes

4.NowassumetheUSAisproducing475bushelsofcornand50cars,andJapanisproducing300bushelsofcornand100cars.IftheUSAgives30bushelstoJapaninexchangefor10cars,howmanybushelsofcornwillithave?

__________.Howmanycars?

__________.Wouldbothcountriesagreetothistrade?

__________.

445,60,No

PROBLEM2:

2points:

1pointsperblank

Assumethatdemandandsupplyarelinear.Usethefollowingtabletodeterminethedemandandsupplyequations.

Price

QuantityDemanded

QuantitySupplied

10

150

0

50

145

100

1.ThedemandequationisP=______________________________.

P=1210-8Qd

2.ThesupplyequationisP=______________________________.

P=0.4Qs+10

PROBLEM3:

4points:

1pointperblank.

AssumethatdemandisgivenbyP=43–4Qd

AssumethatsupplyisgivenbyP=0.5Qs+7

Completethefollowingstatement.

1.Thefree-marketcompetitiveequilibriumisataquantityof__________,andapriceof__________.Inthissituation,consumersurplusis__________andproducersurplusis__________.

8,11,128,16

PROBLEM4:

14points:

1pointperblank

AssumethatdemandisgivenbyP=100–2Qd

AssumethatsupplyisgivenbyP=10+4Qs

Giventheseequations,thefree-marketcompetitiveequilibriumisatP=70andQ=15.Consumersurplusis225,producersurplusis450,andtotaleconomicsurplusis675.

Completethefollowingstatements.

1.Supposethatthegovernmentwantstolimitquantityboughtandsoldto10usingapricefloor.Todoso,thegovernmentshouldsetthepriceflooratapriceof__________.Inthissituation,consumersurplusis__________,producersurplusis__________,anddeadweightlossis__________.

80,100,500,75

2.Supposenowthatthegovernmentwantstoimposeaper-unittaxof48.Thenthequantityboughtandsoldwillbe__________.Totaltaxrevenueswillbe_________andproducersurpluswillbe__________.Deadweightlosswillbe__________.Producerswillpay__________ofthetaxoutof$48.Hint:

CompareyourPswiththeoriginalequilibriumpriceprovidedtoyouatthebeginning ofthisproblem.

7,336,98,192,32

3.Supposenowthatthegovernmentwantstoprovideaper-unitsubsidysuchthatquantityboughtandsoldwillbe20.Toachievethis,theper-unitsubsidyamountmustbe__________.Underthissubsidy,consumersurplusincreasesby_________,producersurplusincreasesby__________,andtotalgovernmentcostforprovidingsubsidyis__________.Therefore,thedeadweightlossis_________.Hint:

Youarebeingaskedtocalculatethechangeinconsumersurplusandproducersurplus,fromthestartingcaseofafree-marketcompetitiveequilibrium,whereCS=225andPS=450.

30,175,350,600,75

ECON201:

IntroductiontoMacroeconomics

Midterm1:

MultipleChoiceQuestionsPacket

October18,2010

NAME:

_________________________________

CircleyourTA’sname:

BrianMeysamTravisYaron

Circleyoursectiontime:

9a.m.4p.m.

1）Elviradecreasedherconsumptionofbananaswhenthepriceofpeanutbutterincreased.ForElvira,peanutbutterandbananasare

A）substitutesinconsumption.

B）bothinferiorgoods.

C）complementsinconsumption.

D）bothluxurygoods.

2）AsubsidyhasaDWLbecause

A）pricesarecontrolled

B）governmentspendingisinsufficienttocoverthelossofCSandPS

C）governmentspendingisgreaterthanthegainofCSandPS

D）apriceceilingisimposedasapartofthesubsidy

E）B）andD）

3）Itisnecessaryforalleconomicsystemstoprovidepeoplewithgoodsandservicesandalsorestrictthemfromgettingasmuchofthesegoodsandservicesastheywish,becausefailuretodothiscould________theefficiencyofthesystembyproducingsomegoodsandservicesthatare________.

A）reduce;notashighlyvaluedasothers

B）increase;notashighlyvaluedasothers

C）reduce;valuedmorethanothers

D）increase;valuedmorethanothers

4）If,inacompetitivemarket,marginalbenefitislessthanmarginalcost,

A）thenetbenefittoconsumersfromparticipatinginthemarketislessthanthenetbenefittoproducers.

B）thegovernment

mustforceproducerstoraisepricesinordertoachieveeconomicefficiency.

C）thequantitysoldisgreaterthantheequilibriumquantity.

D）thequantitysoldislessthantheequilibriumquantity.

5）Thegovernmentproposesataxonhalogenlightbulbs.Sellerswillbeartheentireburdenofthetaxifthe

A）supplycurveofhalogenbulbsishorizontal.

B）demandcurveforhalogenbulbsisvertical.

C）demandcurveforhalogenbulbsishorizontal.

D）demandcurveisdownwardslopingandthesupplycurveisupwardsloping.

6）Thetypeofmarketfailurewhichisnotcausedbygovernmentis

A）externalities

B）priceceilings

C）quotas

D）subsidies

E）C）andD）

7）AssumethatboththedemandcurveandthesupplycurveforMP3playersshifttotherightbutthedemandcurveshiftsmorethanthesupplycurve.Asaresult

A）boththeequilibriumpriceandquantityofMP3playerswillincrease.

B）theequilibriumpriceofMP3playerswillincrease;theequilibriumquantitymayincreaseordecrease.

C）theequilibriumpriceofMP3playersmayincreaseordecrease;theequilibriumquantitywillincrease.

D）theequilibriumpriceofMP3playerswilldecrease;theequilibriumquantitymayincreaseordecrease.

8）Voluntaryexchangebetweenbuyersandsellersgenerates________inamarketeconomy.

A）scarcity

B）allocativeefficiency

C）productiveefficiency

D）equity

E）liberty

9）Whenarecessionstrikes,whichofthefollowingdoesnotincrease?

A）applicantstobusinessschool

B）employmentoflawyers

C）unemploymentrate

D）applicantstolawschool

E）A）andD）

George

Jack

LawnsMowed

10

6

GardensCultivated

5

4

10）Refertothetableabove.Whichofthefollowingstatementsistrue?

A）Jackhasacomparativeadvantageinbothtasks.

B）Georgehasacomparativeadvantageinbothtasks.

C）JackhasacomparativeadvantageinlawnmowingandGeorgeingardencultivating.

D）JackhasacomparativeadvantageingardencultivatingandGeorgeinlawnmowing.

11）The________effectofapricechangereferstotheimpactofachangeinthepriceofagoodonaconsumer'spurchasingpower.

A）income

B）substitution

C）demographics

D）ceterisparibus

12）Economistsreasonthattheoptimaldecisionistocontinueanyactivityuptothepointwherethe

A）marginalbenefitiszero.

B）marginalbenefitisgreaterthanthemarginalcost.

C）marginalcostiszero.

D）marginalbenefitequalsthemarginalcost.

13）Thelecturechalkboarddiagramshowingthelossofconsumersurplusandthedeadweightlossforamonopolyindustryismostsimilartothetextbookdiagramfor

A）priceceilings

B）pricefloors

C）taxes

D）quotas

E）subsidies

14）________isdefinedasamarketoutcomeinwhichthemarginalbenefittoconsumersofthelastunitproducedisequaltothemarginalcostofproduction,andinwhichthesumofconsumersurplusandproducersurplusisatamaximum.

A）Economicefficiency

B）Consumerefficiency

C）Producerefficiency

D）Deadweightefficiency

15）Astudentcommentstohisroommatethattheonlywayhewillbeabletopasshisfinalexamsistonotsleepforthenextthreedays.Thisstatementsuggeststhat

A）studentsaremoreconcernedaboutgoodgradesthangoodhealth.

B）societyshouldvaluesleepmorehighlythangoodgrades.

C）thereisatrade-offbetweenstudyingandsleep.

D）societyshouldvaluegoodgradesmorehighlythansleepbecausestudentscancatchupontheirsleeponcefinalexamsareover.

16）WhenthePPFis___________,theOClinedrawnontheclassroomchalkboardis______________.

A）astraightline;downwardsloping

B）acurvedline;horizontal

C）acurvedline;upwardsloping

D）acurvedline;downwardsloping

E）A）andC）

17）Whichofthefollowingismotivatedbyanequity