Midterm 1 - Version A through Answers in BoldECN 201, Spring 1997NAME:__________________________Prof. Bruce BlonigenSS#:__________________________ MIDTERM 1 - Version A Tuesday, April 22****************************************************************************Directions: This test is comprised of 2 components for a full of 100 points.The first component is 30 multiple alternative questions, through each question worth2.5 points for a complete of 75 points. The second component is short answerdifficulties worth a complete of 25 points. Mark your multiple option answers ona Scantron via a #2 pencil. Put your name and also student ID number on boththe Scantron and this test. Then hand in both the Scantron and the testwhen you are finiburned.PART 1: MULTIPLE CHOICE1) If the government imposes a price ceiling that is above the equilibriumprice,a) this price ceiling will have no economic influence.
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b) quantity demanded will be less than quantity offered.c) demand also will be higher than supply.d) the easily accessible supply will have to be rationed via a nonprice rationing device.2) People scalping tickets for a rock concert will be successfula) any time the rock team is famous.b) when the price set by the concert hall is much less than the marketequilibrium price.c) once prices are as well high.d) only once there is excess supply.3) Price and total revenue are inversely connected once demand isa) elastic.b) inelastic.c) unitarily elastic.d) perfectly inelastic.4) A readjust in the price of a good or business leads to a ________ whichleads to a _______.a) change in demand; motion along the demand curveb) change in amount demanded; motion alengthy the demand curvec) change in demand; change in the demand also curved) change in quantity demanded; change in the demand curve5) A change in which of the following will not alter the demand also curve forrental housing?a) rental real estate prices.b) wood prices.c) population of the economic situation.d) a increase in residence prices.6) Which of the complying with is not portrayed by a production possibilitiesfrontier?a) scarcity.b) opportunity price.c) requirement for alternative.d) prices.7) Which of the adhering to statements is the majority of constant with the efficientsectors hypothesis?a) "It is not difficult to make money because profitable methods abound."b) "Hot tips from your stock broker have to be acted on bereason the profit methods will be incredibly resilient."c) "Profit opportunities are rare because there are many peoplesearching for such methods."d) "The bond industry, but not the stock market, is incredibly most likely to be a source of profit avenues."8) A retired individual decides to spfinish the day golfing. The opportunitycost of this decision a) is zero, given that the individual is retired and is not forgoing any income to spfinish the day golfing. b) is equal to expense of the golf outing. c) equals the price of the golf outing plus the value of theindividual"s different usage of time. d) is ideal measured by using the wage price this individual earned before retirement. 9) A light rail device connecting two cities was initially thought toexpense $20 million. After building component of the device at a cost of $15million, the government realized that the complete expense of the system wouldbe $26 million, not $20 million. At this suggest, the MARGINAL expense ofcompleting the light rail device is ideal estimated asa) $5 million.b) $6 million.c) $11 million.d) $26 million.10) The Setrite Corporation produces chairs. An economist functioning for thefirm predicts that "if people"s incomes climb following year, then the demandfor our chairs will certainly increase, ceteris paribus." The accuracy of theeconomist"s prediction relies on whether the chairs Setrite producesa) have many complementary products.b) have actually few substitutes.c) have few complementary goods.d) are normal items.
11) Rank the demand curves A,B, and also C(pictured to above) in order of greatestto leastern elasticity at P*.a) A, B, C.b) C, B, A.c) B, C, A.d) indeterminate from information provided.12) Suppose assets A and B are substitutes for one an additional inconsumption and also that the price of B rises. Which of the complying with willoccur?a) Both the equilibrium price and also quantity demanded of A willtfinish to increase.b) Both the equilibrium price and quantity demanded of A will tfinish to fall.c) The equilibrium price of A will fall, while the equilibrium amount demanded will certainly climb.d) The equilibrium price of A will certainly climb, while the equilibrium quantity demanded will fall.13) One of the adhering to will not reason the supply curve to shifta) The increase in the price of inputs.b) An rise in the variety of companies.c) An increase in demand.d) A change in technology.14) If tbelow is a huge increase in the amount of potatoes exchanged,but little bit or no change in price, the the majority of likely explanation is that:a) supply has actually raised and demand has actually reduced.b) both supply and demand also have increased.c) only supply has increased.d) supply has diminished and demand also has raised.15) Which of the adhering to statements would you expect to be true aboutcheese and also food?a) Contrasted via food, cheese has actually a lower price elasticity of demand bereason it is particularly identified.b) Food has actually a reduced price elasticity of demand also bereason it iscommonly identified.c) Because cheese is food, cheese and food have actually the same price elasticity of demand.d) The supply of cheese depends on people"s purchases of food.16) Which of the complying with is not most likely to outcome if rent manage isimposed in Eugene at a price ceiling listed below the equilibrium price ?a) excess demand for rental units.b) negative maintenance in existing rental devices.c) an increase in construction of new rental devices in response tothe excess demand.d) raised rental prices in Springfield wbelow tright here is no rent manage.17) A change in customer preferences from pork to chicken might be predictedto causea) a shift in the supply of chicken products.b) a autumn in the equilibrium price of chicken products.c) a climb in the price of pork assets.d) none of the over.18) Which of the adhering to is a positive statement?a) Unemployment is not so important a trouble as inflation.b) None of the heroin intake in the USA is byinner-city blacks.c) Unemployment and inflation are equally essential problems.d) Namong the above are positive statements.19) The price of good X is $1.50 and also the price of great Y is $1.00. If acustomer has actually skilled a marginal energy of 30 systems with the lastconsumption of excellent Y, then what have to be the marginal utility of theconsumer"s last usage of X if the consumer is optimizing correctlythroughout these goods?a) 30 units.b) 15 units.c) 45 systems.d) namong the above.
20) Refer to number 1. If the consumer"s initial budgetconstraint is AC, what is their budgain constraint afterthe price of Jelly Beans declines?a) ABb) ADc) ACd) Namong the above21) Refer to number 1. Which of the adhering to could bring about a consumer"sbudacquire constraint to shift from AC to ED? a) A decrease in earnings.b) An boost in supply of Gum.c) A decline in both the price of Gum and Jelly Beansd) A decline in the price of Gum and a rise in the price of Jelly Beans.22) Refer to figure 1. If the consumer"s budobtain constraint is AC and theprice of Gum is $0.25, what is the income of the consumer?a) $7.50b) $30.00c) $120.00d) Indeterminate from the information provided.23) Refer to figure 1. If the consumer"s budget constraint is AC and thecustomer has an earnings of $60, what is the price of Jelly Beans? a) $3.00b) $2.00c) $0.50d) Indeterminate from the information provided.24) Refer to figure 1. If the consumer"s initial budget constraint is AD,what is their budacquire constraint after the price of Gum declines?a) ABb) EDc) ACd) None of the above25) Marge Simpkid is buying shirts and also shoes such that the marginalenergy of shirts is 12 and also the marginal utility of shoes is 3. Shirtsand also shoes are priced at $8 and also $2 respectively. It can be concluded thatMarge isa) spending also a lot on shirts and not sufficient on shoes.b) spfinishing as well much on shoes and also not sufficient on shirts.c) spfinishing her revenue on shirts and also shoes in such a way as tomaximize her satisfactivity.d) indeterminate from the indevelopment offered.26) If I discover that MUPIZZA / PPIZZA > MUBEER / PBEER , this impliesthata) switching some funds from pizza to beer will certainly increase my energy.b) switching some funds from beer to pizza will boost myenergy.c) pizza is even more expensive than beer.d) I have maximized my energy if I prefer pizza to beer.27) The demand for great A has been raising the previous year. You wouldconclude that excellent A is an inferior excellent which of the adhering to is true?a) Good B, a substitute for good A, has actually reduced its price over the last year.b) Good B, a match to good A, has cut its price over the last year.c) An financial slowdown has decreased earnings of consumers in theeconomic situation.d) Houseorganize riches has actually enhanced. SITUATION 1: Suppose that the equilibrium wage for high institution students inOregon is $4, yet the state passes a law that the minimum wage should be$5.50.28) Situation 1 is an instance of a) a price ceiling.b) a price floor.c) the law of demand also.d) enhancing chance costs.29) Which of the complying with would be a likely consequence of situation 1?a) Less high institution students using for jobs.b) Excess demand also for high college workers.c) Less tasks for high school students at the brand-new minimum wage of$5.50. d) Rapid food restaurants will certainly hire more managers.30) Refer to instance 1. Suppose rather that the state sets the minimumwage at $3.50, once the equilibrium wage is $4. Which of the followingwill certainly most likely occur?a) Excess demand for high institution student workers.b) Excess supply of high college student employees.c) Worse maintenance at quick food restaurants.d) Namong the over. PART 2: SHORT-ANSWER PROBLEMBecause of Meacertain 47, the University of Oregon requirements to rise totalrevenue. The president of the University of Oregon argues that raisingtuition by a $1000 for both in-state and also out-state students will raisetotal revenue. You estimate the demand for a UO education as shown bythe adhering to graphs. Panel 1 mirrors demand by in-state students and also panel2 shows demand for out-state students. Point A in panel 1 shows thetuition and enrollment before the $1000 boost, and point B in panel 1shows the tuition and also enrollment after the boost. Point Y on panel 2reflects the tuition and enrollment for out-state students before the $1000increase, and allude Z shows the values of these variables afterward.
Price elasticity of demand also over range A to B=percent readjust in quantity demanded separated by the percentagereadjust in price= ((11-12)/11.5) / ((6-5)/5.5)= (-0.087) / (0.182)= -0.478Absolute value is less than one, so demand also is INELASTIC over thisvariety.Calculate the price elasticity of demand for out-state students over thevariety from allude Y to Z. Is demand elastic, unit elastic, or inelastic?Show your occupational to obtain full credit and also usage the midsuggest formula tocalculate the elasticity.Price elasticity of demand over array Y to Z=percent adjust in quantity demanded split by the percentagereadjust in price= ((3-4)/3.5) / ((11-10)/10.5)= (-0.286) / (0.095)= -3.011Absolute worth is better than one, so demand is ELASTIC over thisvariety. Calculate the complete revenue readjust (in dollars) we can suppose from the$1000 boost on in-state students. How does this relate to the priceelasticity of demand also for these students? (Hint: remember that totalrevenue = price*quantity) Sexactly how your job-related to acquire complete crmodify.TR = P*QAs such at suggest A: TR = $5,000 * 12,000 = $60 million At suggest B: TR = $6,000 * 11,000 = $66 millionThus the readjust in total revenue is +$6 million. Total revenue goesup once we raise tuition on in-state students which provides sense becausewe calculated that the demand also by in-state students is inelastic over thisrange of the tuition (i.e., the price) increase.Calculate the total revenue readjust (in dollars) we can intend from the$1000 boost on out-state students. How does this relate to the priceelasticity of demand also for these students? Sjust how your job-related to get full credit.TR = P*QTherefore at point Y: TR = $10,000 * 4,000 = $40 millionAt point Z: TR = $11,000 * 3,000 = $33 millionThus the change in full revenue is -$7 million. Total revenue goesdown once we raise tuition on out-state students which provides sense becausewe calculated that the demand also by out-state students is elastic over thisarray of the tuition (i.e., the price) rise.
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What"s your reference to the president, offered the demand features inpanel 1 and 2 above and your calculations? We must raise tuition on in-state students, yet not on out-statestudents if our goal is to raise tuition revenue. In reality, we may have the ability to raise revenues by lowering tuition on out-state students if theirdemand also is elastic over the selection of a tuition decrease (we would have actually tocalculate this).