Economics 120 Kansas State University Professor Da Silva Fall 2013 Arts & Sciences Midterm Exam IIC Student: ___________________________________________________________________________ 1. Refer to the graph shown. The difference between total surplus in equilibrium and total surplus when price is $8.15 and quantity is 220 is: A. 405. B. 423.5. C. 600. D. 800. 2. The following table describes utility for consuming cans of soda. At what point does the law of diminishing marginal utility set in? A. Between three and four cans B. Between four and five cans C. Marginal utility diminishes everywhere. D. Marginal utility never diminishes. 3. Refer to the graph shown. When price rises by 20 percent, quantity supplied rises by 25 percent. Which curve best demonstrates elasticity in this example? A. A B. B C. C D. None of the curves 4. Refer to the graph shown. Initial market equilibrium is at the intersection of D and S0. When government imposes a per-unit tax, supply shifts from S0 to S1. The effect of this tax is to: A. raise the price consumers pay from C to B. B. raise the price consumers pay from C to A. C. raise the equilibrium quantity sold from E to F. D. reduce the price sellers charge from C to D. 5. The demand for a good is elastic. Which of the following would be the most likely explanation for this? A. The good is a necessity. B. The good is broadly defined. C. The good costs a large portion of one's total income. D. The time interval considered is short. 6. Refer to the graph shown. Demand is unit elastic when revenue is: A. $4,000. B. $6,000. C. $8,000. D. $10,000. 7. Refer to the following table. Assume that the price of McBurgers is $1. If the price of Alpo increases from $0.50 to $1, Mr. Tightwad, a utility-maximizing consumer, would spend his $4 on which of the following? A. 4 McBurgers B. 3 McBurgers and 1 can of Alpo C. 2 McBurgers and 2 cans of Alpo D. 1 McBurger and 3 cans of Alpo 8. Refer to the graph shown, which shows total product. At point A: A. marginal product is at its minimum point. B. marginal product is at its maximum point. C. marginal product is zero. D. average product per worker is at its maximum point. 9. Duties ranging from 28 percent to 113 percent on Chinese frozen and canned shrimp are an example of: A. a policy to protect American fisheries from overfishing. B. a policy using regulations and taxes to protect American consumers. C. a policy of protecting domestic producers from foreign producers. D. a policy of protecting American consumers from foreign producers. 10. When a country runs a trade deficit, it does so by: A. borrowing from foreign countries or selling assets to them. B. borrowing from foreign countries or buying assets from them. C. lending to foreign countries or selling assets to them. D. lending to foreign countries or buying assets from them. 11. A per-unit tax will result in a deadweight loss unless the tax causes no change in: A. the price consumers pay. B. the price producers receive after paying it. C. equilibrium quantity sold. D. either equilibrium price or equilibrium quantity. 12. Duties imposed by the U.S. government on imported Chinese frozen and canned shrimp are an example of: A. tariffs. B. quotas. C. voluntary restrictions. D. regulatory trade restrictions. 13. Refer to the graph shown. Between points C and D, marginal utility is: A. decreasing, and so total utility is falling. B. positive, and so total utility is increasing. C. positive, and so total utility is falling. D. decreasing, and so total utility is at its maximum. 14. Tom is maximizing utility by buying three packs of bubble gum and four packages of Skittles. Given diminishing marginal utility, if the price of Skittles rises, the principle of rational choice tells us that Tom will buy: A. more Skittles, raising the opportunity cost of not consuming Skittles. B. fewer Skittles, raising the opportunity cost of not consuming Skittles. C. more Skittles, lowering the opportunity cost of not consuming Skittles. D. fewer Skittles, lowering the opportunity cost of not consuming Skittles. 15. Refer to the following graphs. In the early 1990s, mounds of newspapers and worthless plastic piled up at recycling centers. As the nation's economy continued to grow, increased demand eliminated the mounds and turned them into shortages. In the mid-1990s, as recycling became more popular, the mounds of recycled materials returned. What graph best depicts these events on the market for recycled materials? A. Price remained constant at P0. Quantity demanded first rose, while supply remained constant; quantity supplied then rose, while demand remained constant. B. Price remained constant at P0. Supply first shifted from S1 to S0 and then back to S1. C. Price remained constant at P0. Demand shifted from D0 to D1 then supply shifted from S0 to S1. D. Price remained constant at P0. Demand shifted from D0 to D1 and then back to D0. 16. Refer to the graph shown. If price is increased from $3 to $4, consumer surplus will fall by: A. 25. B. 50. C. 100. D. 125. 17. Refer to the following graph. Elasticity is greatest at point: A. A. B. B. C. C. D. It is the same everywhere along this supply curve. 18. Suppose that a haircut will give Dawn 2,000 units of utility and cost her $40, whereas a set of acrylic nails costs $25 and yields 1,000 units of utility. Most likely Dawn should: A. choose the haircut because each unit of utility will cost her $0.2 compared with $0.2.5 for the nails. B. choose the nails because she will obtain 50 units of utility per dollar compared with 40 units of utility per dollar for the haircut. C. be indifferent between the two choices. D. choose the haircut because she will receive 50 units of utility per dollar compared with 45 units of utility per dollar for the nails. 19. Refer to the graph shown that depicts a third-party payer market for prescription drugs. If the co-payment is $2 per pill, what will be the total market expenditures on prescription drugs? A. $30 B. $90 C. $270 D. $540 20. Refer to the following table. If the price of one Weight Watcher's frozen dinner is $2 and the price of one dozen jelly doughnuts is $3, which of the following would Kent, a utility maximizing consumer, buy with his $6? A. Three frozen dinners. B. Two frozen dinners. C. One frozen dinner and one dozen jelly doughnuts. D. Two dozen jelly doughnuts. 21. If elasticity of demand is .2, elasticity of supply is .5, and a 10 percent excise tax is levied on the good: A. the tax burden on suppliers will be greater. B. the tax burden on consumers will be greater. C. the tax burden will be the same for both. D. one cannot say who will bear the greater burden without knowing the tax. 22. Refer to the graph shown. If government establishes a minimum wage at $7.25 per hour: A. employers will be unable to find enough qualified applicants to fill the available positions. B. the number of job seekers will exceed the number of job vacancies, resulting in some unemployment. C. employers will be forced to hire 900 workers, resulting in reduced profits. D. there will be a shortage in this labor market. 23. Refer to the graph shown. Total utility is at its maximum at point: A. A. B. B. C. C. D. D. 24. A business owner makes 50 items by hand in six hours. She could have earned $10 an hour working for someone else. If each item sells for $5 and the explicit costs total $14, economic profit equals: A. $0. B. $64. C. $176. D. $236. 25. It has been estimated that the price elasticity of demand for attending baseball games is 0.23. Other things held constant, a 10 percent increase in attendance can be explained by a: A. 43.48 percent fall in the price of a ticket. B. 43.48 percent rise in the price of a ticket. C. 23 percent fall in the price of a ticket. D. 23 percent rise in the price of a ticket. 26. For complements: A. cross-price elasticity of demand is negative. B. cross-price elasticity of demand is positive. C. price elasticity of income is negative. D. price elasticity of income is positive. 27. When government imposes a per-unit tax on a product, the net price producers actually receive for the product (after all taxes) typically: A. increases by the amount of the per-unit tax. B. increases by less than the amount of the per-unit tax. C. decreases by the amount of the per-unit tax. D. decreases by less than the amount of the per-unit tax. 28. Refer to the graph shown. Assume the market is initially in equilibrium at point b in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S0 to S1. The welfare loss triangle from this tax is represented by area: A. cfg. B. beg. C. abc. D. bcd. 29. It is estimated that a 5 percent decline in income will reduce health care purchases by 2.5 percent and reduce dental service purchases by 8 percent. From this information, one can conclude that: A. health care is a necessity and dental services are a luxury. B. health care is a luxury and dental services are necessities. C. both health care and dental services are necessities. D. both health care and dental services are luxuries. 30. An import quota does which of the following? A. Decreases the price of the imported good for the consumer B. Increases the price of the domestic good for the consumer C. Redistributes income from domestic producers to domestic consumers D. Decreases the price received by foreign producers 31. Technological changes in telecommunications have: A. reduced the importance of services in the world economy. B. allowed increased foreign trade in many services. C. reduced the need for foreign trade in many services. D. profoundly affected trade in manufactured goods with little effect on trade in services. 32. As the price of samosas (a kind of food in India) was raised from 2 to 3 rupees (Indian currency), their quantity demanded fell from 15,000 to 12,000. Rounding to the nearest tenth, the elasticity of demand of samosas is: A. 4. B. 0.6. C. 1.8. D. impossible to determine because we don't know the exchange rate of the rupee. 33. Refer to the following graph. Elasticity is greatest at point: A. A. B. B. C. C. D. It is the same everywhere along this supply curve. 34. Specialization according to comparative advantage means that a country is producing the goods: A. that it wants to consume. B. for which it has a relatively high opportunity cost. C. for which it has a relatively low opportunity cost. D. that it can produce at zero cost. 35. When the price of a good increases, we would expect to see ______________ in the markets for its substitutes. A. higher prices and increased sales B. higher prices and decreased sales C. lower prices and decreased sales D. lower prices and increased sales 36. Assume that in Canada the opportunity cost of producing one television set is two bushels of wheat. Assume that in the United States the opportunity cost of producing one bushel of wheat is two television sets. If these two countries specialize according to comparative advantage and then trade with each other: A. Canada will export both televisions and wheat. B. Canada will export wheat and import televisions. C. the United States will export wheat and import televisions. D. the United States will export both televisions and wheat. 37. Along a straight-line supply curve: A. elasticity rises as price rises. B. elasticity declines as price declines. C. elasticity is equal to slope. D. the change in elasticity depends on the supply curve in question. 38. The Honolulu tourism commission recently proposed a 7 percent tax on hotel rooms to pay for an outdoor amphitheater. A Purdue University economist estimates that the tax would result in a 6 percent increase in the price of hotel rooms. If the elasticity of demand is 1.33, what is the expected change in quantity demanded? A. 12.5 percent B. -12.5 percent C. 8 percent D. -8 percent 39. Patrick McCarthy has estimated that on average, for every 1 percent increase in income, the quantity of European cars demanded increases by 1.93 percent. From this information one can conclude that European cars are: A. a luxury. B. a necessity. C. an inferior good. D. a negative good. 40. Refer to the graph shown. In equilibrium, consumer surplus is equal to: A. 600. B. 1,200. C. 1,400. D. 2,000. 41. Refer to the graph shown for a small country that is a price taker internationally. Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic consumption to: A. increase from 2,400 to 7,400. B. increase from 2,400 to 3,600. C. decrease from 4,800 to 3,600. D. decrease from 7,400 to 6,100. 42. Refer to the following table. Fill in the table and answer the following question: What is the marginal utility of the ninth can of soda? A. -6 units of utility B. 0 units of utility C. 2 units of utility D. 54 units of utility 43. Refer to the graph shown. If the price of this product fell from $5.00 to $2.50 (because of a price ceiling or a shift in demand), producer surplus would fall from: A. 2,000 to 500. B. 1,000 to 500. C. 1,000 to 250. D. 500 to 250. 44. Kuo S. Huang estimates that with every 20 percent increase in income, the quantity of grapes purchased rises by 11.2 percent. From this information one would conclude that grapes are: A. a luxury. B. not demanded. C. an inferior good. D. a normal good. 45. Refer to the table shown. From this table we can conclude that: A. France has a comparative advantage in both goods. B. France has a comparative advantage in wine and Germany has a comparative advantage in electric generators. C. Germany has a comparative advantage in wine and France has a comparative advantage in electric generators. D. Germany has a comparative advantage in both goods. 46. The demand for a good is inelastic. Which of the following would be an explanation for this? A. The good is a necessity. B. The good is specifically defined. C. The good costs a large portion of one's total income. D. The time interval considered is long. 47. Suppose the equilibrium price of CDs is $10 a CD. At that price, quantity of CDs demanded and supplied is 100,000. If a $6 tax per CD paid by suppliers increases the equilibrium price to $14 per CD and reduces the equilibrium quantity sold to 90,000: A. suppliers pay a greater portion of the tax because they are more price elastic. B. consumers pay a greater portion of the tax because they are less price elastic. C. suppliers pay a greater portion of the tax because the tax is levied on them. D. suppliers pay a greater portion of the tax because they are less price elastic. 48. Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fishermen to fuel their boats, falls. What is the effect on the market for fish? A. A decrease in demand and a fall in price and quantity sold B. A decrease in demand and supply; price and quantity sold falls C. A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous D. A decrease in demand and supply; price and quantity sold rises 49. Crackerjacks cost twice as much as Doritos. Fred maximizes utility by buying eight boxes of Crackerjacks and some number of bags of Doritos. If the last box of Crackerjacks gives Fred 100 units of utility, you can conclude that: A. Fred has also bought 16 bags of Doritos. B. the marginal utility of the last bag of Doritos Fred bought is 50 units. C. the total utility of the bags of Doritos Fred bought is 200 units. D. Fred has also bought four bags of Doritos. 50. Refer to the graph shown for a small country that is a price taker internationally. Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. If government imposes a tariff in the amount of $2 per unit, it will collect revenue in the amount of: A. $0. B. $2,400. C. $5,000. D. $10,000. Peri da Silva Mega Quiz 2 -- Fall 2013
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