Class: Microeconomics (Syn 46931(Sec 018).Syn 46932(Sec019) and Syn 46934(Sec 021);
Times MWF 10:00 am, MW 1:25 pm and TTh 9:10 am)
Comprehensive Final Exam Version A
Exam Dates: Wednesday through Friday, May 7th through 9th, 2003.
Read these Instructions carefully! You must follow them exactly!
I) On your Scantron card you must print three things:
1) Print your full name clearly;
2) Print the day and time of your section (for example MW 1:25);
3) Print the number I have written in ink on the upper right corner of
your copy of this test. (This number tells me which version of the
test you have. Without it your test cannot be graded properly and
you get no credit for your answers.)
II) Answer on your Scantron card, using a #2 pencil.
III) Warning: SOME QUESTIONS MUST BE ANSWERED SEVERAL
TIMES! Such questions will begin with a phrase such as this:
(Repeat answer on Scantron lines 37, 38 and 39)
Remember to do it!
IV) You must turn in this printed exam along with your Scantron card, otherwise
your score on this exam is "F".
V) Please print your name on this copy of the test also.
Questions:
1. (Repeat your answer on Scantron lines 26 and 27.) Based on the discussion in lecture, "perfect price discrimination" would exist if:
A) Members of minority groups were all paying a discriminatory high price for the good (higher than the regular price).
B) Buyers of goods which are bad for your health, such as cigarettes, pay a higher price which reflects the costs of providing them with extra medical care.
C) Some buyers of the good are permitted to purchase the good at a price which is lower than the regular monopoly price.
D) Each purchaser of the good was paying as much as s/he was willing to pay and no purchaser could resell to any other buyer.
E) No other answer is correct.
2. (Repeat your answer on Scantron lines 28 and 29.) A(n) ________ is defined as the effect of a decision on a third party that is not taken into account by the decision maker.
A) externality
B) public good
C) public bad
D) free rider
3. Which of the following best describes state socialism?
A) Government sees to it that people work for the common good until they could be relied upon to do that on their own.
B) The invisible hand insures that individual decisions are made for the common good.
C) Government owns the means of production, but individual self-interest determines how production is organized.
D) Individuals are able to act in the best interest of everyone without direction from government or the invisible hand.
4. What are the two largest sources of revenue for the federal government?
A) Excise taxes and social insurance taxes and contributions
B) Corporate income taxes and excise taxes.
C) Individual income taxes and corporate income taxes.
D) Individual income taxes and social insurance taxes and contributions.
5. The foreign exchange market is the market in which foreign __________ are traded.
A) goods
B) services
C) assets
D) currencies
6. (Repeat your answer on Scantron line 30.) The distinction between a change in demand and a change in quantity demanded is best made by saying that:
A) a change in quantity demanded is caused by a change in price and a change in demand is caused by a change in other factors.
B) a change in demand is caused by a change in price and a change in quantity demanded is caused by a change in other factors.
C) a change in quantity demanded causes a change in demand.
D) a change in both quantity demanded and demand is caused by a change in price.
7. (Repeat your answer on Scantron line 31.) The supply curve is likely to be most elastic in which period?
A) The instantaneous period.
B) The short run.
C) The long run.
D) The momentary period.
8. (Repeat answer on Scantron lines 32 and 33.) Consider each of the following statements about international economics.
1) Based on what was said in lecture, if a small country trades with a large country, the small country will capture a larger share of the pareto gains from trade than the large country, because prices change more in the small country.
2) Even if a country is experiencing pareto gains from international trade, this does not mean that everyone in that country is in fact benefiting from the international trade.
3) If some event occurs which causes no changes except that Joe gains $100, Fred loses $50 and Suzy loses $40, then an economist would say the event has created a pareto gain even though more people have lost than have gained.
Consider each of the following statements about international economics.
A) None of the statements 1, 2 or 3 are true.
B) All of statements 1, 2 and 3 are true.
C) Only 2 is true.
D) Only 3 is true.
E) Only 2 and 3 are true.
Use the following to answer question 9:
9. Refer to the graph above. Initially, the market is in equilibrium with price equal to $12.50 and quantity equal to 200. As a result of a per unit tax imposed by the government, the supply curve shifts from S0 to S1. The effect of the tax is to:
A) raise the price consumers pay from $12.50 to $15.
B) lower the price consumers pay from $15 to $12.50.
C) raise the price sellers keep after paying the tax from $12.50 to $15.
D) lower the price sellers keep after paying the tax from $12.50 to $10.
10. (Repeat your answer on Scantron line 34.) Richard Voith has estimated elasticity of demand for commuter rail transportation to be 0.6 in the short-run and 1.6 in the long run. A decrease in rail fares would:
A) lower revenue in both the short and long run.
B) raise revenue in both the short and long run.
C) raise revenue in the short run but lower revenue in the long run.
D) lower revenue in the short run but raise revenue in the long run.
11. Joan is deciding where to spend her spring break. If she goes to Cancun, Mexico, the trip will give her 9,000 units of utility of satisfaction and will cost her $300. If, instead, she travels to Florida, the trip will give her 5,000 units of utility of pleasure and will cost her only $200. Joan will be best off:
A) going to Mexico because her total cost will be lowest.
B) going to Florida because her total cost will be lowest.
C) going to Mexico because her pleasure per dollar will be greatest.
D) going to Florida because her pleasure per dollar will be greatest.
Use the following to answer question 12:
12. (Repeat your answer on Scantron line 35.) The marginal cost curve is labeled:
A) I.
B) II.
C) III.
D) IV.
13. (Repeat your answer on Scantron lines 36 and 37.) If _________ cost is as low as possible economic efficiency is achieved.
A) marginal
B) average variable
C) average fixed
D) average total
14. Which of the following is most likely to generate a positive externality?
A) roller coaster rides
B) pollution
C) alcoholic beverages
D) education
Use the following to answer question 15:
15. (Repeat your answer on Scantron lines 38 and 39.) Refer to the graph above. The most efficient way for a firm to produce 300 units of output is to use the plant size represented by:
A) SATC1.
B) SATC2.
C) SATC3.
D) SATC4.
16. (Repeat your answer on Scantron lines 40 and 41.) If the selling price of a perfectly competitive firm is below the average variable cost, the firm should:
A) expand operations.
B) stay in business in the short run, but shut down in the long run.
C) shut down in the short run.
D) stay in business in the short run and in the long run.
Use the following to answer question 17:
17. Refer to the graph above. When the industry is in long-run competitive equilibrium:
A) the price of the product will be $6.
B) the price of the product will be $4.
C) the firm will earn economic profit of $300 per day.
D) the marginal cost of production will be $8.
Use the following to answer question 18:
18. (Repeat your answer on Scantron lines 42 and 43.) Refer to the graph above. Assuming that the firm maximizes profit, the marginal cost of its last unit of output will be:
A) $8.
B) $6.
C) $5.
D) $4.
19. (Repeat your answer on Scantron line 44.) As you slide down a straight line demand curve:
A) The own price elasticity of demand definitely rises.
B) Both A) and E) are correct.
C) The elasticity of supply definitely rises.
D) No other answer is correct.
E) The income elasticity of demand definitely falls.
20. Implicit collusion is more likely to occur if:
A) cheating is difficult to identify and firms play the same game against one another repeatedly.
B) cheating can be easily identified and firms play the same game against one another repeatedly.
C) cheating is difficult to identify and firms play the game only once.
D) cheating can be easily identified and firms play the game only once.
21. (Repeat your answer on Scantron lines 45 and 46.) Evaluate the following statements having to do with the "Fundamental Theorem of Welfare Economics" and then select the best answer from among A) through E) below.
1) It implies that if society's goal is to have a just and fair society, then monopolies must be regulated.
2) Roughly, it says that if all markets are competitive markets (each with many buyers and sellers), then the economy will be efficient.
3) Roughly, it says that monopoly pricing, taxes, price ceilings, price floors and quotas all create welfare costs.
4) It says that perfect competition will create a just and fair society.
A) Statements 1) and 3) are correct.
B) Statement 4) is correct, and all the others are misleading or wong.
C) None of A), B), D) or E) are good answers.
D) Statement 2) is correct and all the others are misleading or wrong.
E) Statements 2) and 4) are correct and all the others are misleading or wrong.
22. The law of demand states (everything else unchanged)
A) that goods will be supplied to just equal consumer demand.
B) that consumer demand will determine the level of firm supply.
C) that consumers will buy more of a good if its price rises.
D) that consumers will buy more of a good if its price falls.
23. (Repeat your answer on Scantron lines 47 and 48.) If there is an increase in the supply of a good,
A) the demand for the good will increase.
B) the price of the good will fall and the quantity purchased will decrease.
C) the price of the good will fall and the quantity purchased will rise.
D) the price of the good will rise and the quantity purchased will rise.
24. An increase in the price of Ford cars will have what likely effect in the market for Honda cars?
A) It will have no effect.
B) The demand for Hondas will increase.
C) The demand for Hondas will decrease.
D) The supply of Hondas will increase.
25. (Repeat your answer on Scantron lines 49 and 50.) If rent controls for apartments were established in Austin below the present going rental rates, we could expect
A) a shortage in apartments to develop.
B) a surplus in apartments to develop.
C) equilibrium rents to fall below the rates set by rent control.
D) a building boom in new apartments to start.
Answer Key -- Micro Final vA S03
1. D Each purchaser of the good was paying as much as s/he was willing to pay and no purchaser could resell to any other buyer.
Origin: GTA Micro Questions....13
2. A externality
Origin: Chapter 5: Supply and Demand in Practice....128
3. A Government sees to it that people work for the common good until they could be relied upon to do that on their own.
Origin: Chapter 2: Economic Organization of.......147
4. D Individual income taxes and social insurance taxes and contributions.
Origin: Chapter 3: U.S. Economy in a Global.......63
5. D currencies
Origin: Chapter 3: U.S. Economy in a Global.......108
6. A a change in quantity demanded is caused by a change in price and a change in demand is caused by a change in other factors.
Origin: Chapter 4: Supply and Demand....25
7. C The long run.
Origin: Chapter 6: Describing Supply and Demand....128
8. B All of statements 1, 2 and 3 are true.
Origin: GTA Micro Questions....7
9. D lower the price sellers keep after paying the tax from $12.50 to $10.
Origin: Chapter 7: Taxation and Government.......58
10. D lower revenue in the short run but raise revenue in the long run.
Origin: Chapter 6: Describing Supply and Demand....138
11. C going to Mexico because her pleasure per dollar will be greatest.
Origin: Chapter 8: Logic of Individual Choice....61
12. D IV.
Origin: Chapter 9: Production, Cost Analysis I....113
13. D average total
Origin: Chapter 10: Production, Cost Analysis II....13
14. D education
Origin: Chapter 5: Supply and Demand in Practice....129
15. A SATC1.
Origin: Chapter 10: Production, Cost Analysis II....71
16. C shut down in the short run.
Origin: Chapter 11: Perfect Competition....76
17. B the price of the product will be $4.
Origin: Chapter 11: Perfect Competition....112
18. D $4.
Origin: Chapter 12: Monopoly....61
19. D No other answer is correct.
Origin: GTA Micro Questions....22
20. B cheating can be easily identified and firms play the same game against one another repeatedly.
Origin: Chapter 13: Monopolistic Competition.......133
21. D Statement 2) is correct and all the others are misleading or wrong.
Origin: GTA Micro Questions....20
22. D that consumers will buy more of a good if its price falls.
Origin: ACC Dept Questions....1
23. C the price of the good will fall and the quantity purchased will rise.
Origin: ACC Dept Questions....2
24. B The demand for Hondas will increase.
Origin: ACC Dept Questions....3
25. A a shortage in apartments to develop.
Origin: ACC Dept Questions....4