Introductory Microeconomics ECON 1110
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This 12 page Class Notes was uploaded by Dr. Shawn Emmerich on Saturday September 26, 2015. The Class Notes belongs to ECON 1110 at Cornell University taught by J. Wissink in Fall. Since its upload, it has received 23 views. For similar materials see /class/214348/econ-1110-cornell-university in Economcs at Cornell University.
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Date Created: 09/26/15
H1110 microexams 509e1710175097OVdoc Econ 1110 Wissink S09 PRELIM 1 J WISSINK February 26 2009 YOUR NAME Your CU Netid YOUR CU STUDENT NUMBER Check YOUR TA s NAME JinYoung Tuesdays am Qingqing Thursdays am Jonathan Tuesdays pm JingXian Thursdays pm Lee Fridays INSTRUCTIONS There are three sections in this exam 0 Part1 13 multiple choice questions 3 points each 0 Palt II 2 problems 205 points each 0 Palt III 2 problems 10 points each ANSWER ALL QUESTIONS TOTAL POINTS 100 TOTAL TIME 90 minutes HINTS o Read all questions carefully 0 Write legibly and remember to label all graphs and axes in diagrams NO QUESTIONS CAN BE ASKED DURING THE EXAM If you need to use the restroom quietly bring your exam papers up to the TA proctoring and they will hold your materials while you are out at the restroom NO CELL PHONES NO GRAPHING CALCULATORS NO BOOKS NO NOTES NO HELP SHEET S NO TALKING TO EACH OTHER NO ASKING THE PROCTORS ANY QUESTIONS GOOD LUCK H1110 microexams 509e1710175097OVdoc Part 1 Multiple Choice Circle the best answer Do them ALL 1 Which one of the events below is most likely to cause a shift in the demand curve for Diet Coke A An increase in the price of the sweetener used to make Diet Coke B A new study that shows the adverse health effects of consuming soft drinks like Diet Coke C The producers of Diet Coke purchase new computer software that makes Diet Coke production a lot more efficient D A new company learns the secret formula for Diet Coke and starts producing it E The government imposes a binding price oor on Diet Coke 2 Which one of the following will unambiguously occur in a market when there is a simultaneous increase in demand and an increase in supply A A decrease in equilibrium price B A decrease in equilibrium quantity C An increase in equilibrium price D An increase in equilibrium quantity E An increase in both equilibrium quantity and equilibrium price 3 The chart below gives maximum production levels for three people Abe Betty and Charlie who can produce only two goods pens and rings Each person can produce the indicated maximum level or any combination that lies on a straight line between the two maximum levels Each person has 1000 hours of labor Suppose these three are practicing efficient production in a minieconomy and that among themselves they are making 200 pens in total If production is efficient how many pens are produced by Abe output by person A 100 B 50 C 0 D 90 E 75 H1110 microexams 509e1710175097OVdoc 4 The data points below re ect three possible combinations of corn and rice that can be produced by using a given set of resources that is they represent three different points on the production possibilities frontier If the PPF has its usual bowedout shape then will be in thousands of bushels Corn 0 50 Rice 100 50 0 A 100 bushels of corn B More than 100 bushels of corn C Less than 100 bushels of corn D 150 bushels of corn E Cannot be determined from the data 5 Suppose that the demand function for cans of tennis balls is typical and is written as follows QD 400 2F 3J 4G Which one of the following statements is most true A J could be the price ofa can oftennis balls B J could be the price ofa baseball C J could be the price of a tennis racquet D F could be the price of rubber used to make tennis balls E F could be the average income level of people between the ages of 14 and 65 6 When the supply curve is a horizontal line supply is said to be A perfectly inelastic B unitelastic C relatively elastic D perfectly elastic E crosselastic 7 Four buyers are in the market for new cars Suppose Abe is willing to pay 20000 Betty is willing to pay 56000 Charlie is willing to pay 34000 and Daniel is willing to pay 18000 If the current market price for new cars is 25000 what is the total consumers surplus in this situation A 12000 B 28000 C 40000 D 90000 E 0 H1110 microexams 50961710 isOQ OVdoc Market for Coffee Supply Demand Quantity 8 Using the graph for the Coffee Market above at the market equilibrium the consumers surplus plus the producers surplus in the coffee market is A 8 B 18 C 36 D 54 E The answer cannot be determined from the information given 9 Suppose you are given that the demand function for sunglasses is QD 165 2P5g 051 4P11 where Q is the quantity of sunglasses Psig is the price of sunglasses I is income and Ph is the price of a baseball hat Suppose Psg5 I100 Ph10 From this information the crossprice elasticity of demand is A 005 B 005 C 0025 D 02 E 40 H1110 microexams 509e1710175097OVdoc 10 Which one of the following statements is true A If the income elasticity of demand for laptops is 2 then laptops are considered to be a normal good B If coffee and tea are substitutes in consumption then a rise in the price of tea will cause a fall in the demand for coffee C A rise in the price of inputs to make pizza pies causes nothing more than a movement along the pizza supply curve D The higher the number of good substitutes available in consumption the higher is the ownprice elasticity of demand for a particular good E The atter the demand curve for widgets the less price elastic widget demand is 11 The supply function for shamrocks is QS 5 4F 1G If this is a valid supply function obeying the law of supply then most likely A F the price of shamrocks and G the number of shamrock producers B F the wage rate of leprechauns who make the shamrocks and G the price of shamrocks C F the price of shamrocks and G the wage rate of leprechauns who make the shamrocks D F the wage rate of leprechauns who make the shamrocks and G the price of land to grow the shamrocks E F the price of shamrocks and G tastes and preferences 12 The market for scooters is unregulated and is presently characterized by excess supply You accurately predict that the A price of scooters will increase the quantity supplied will fall and the quantity demanded will rise B price of scooters will increase the quantity supplied will rise and the quantity demanded will fall C price of scooters will decrease the quantity supplied will fall and the quantity demanded will rise D price of scooters will decrease the quantity supplied will rise and the quantity demanded will fall E price of scooters will decrease the supply will fall and demand will rise 13 Consider the table of data below From this data we can conclude that the crossprice elasticity of demand between oranges demanded and the price of apples can be calculated using Date 1 and Date 2 OR Date 2 and Date 3 can be calculated using Date 1 and Date 3 can be calculated using Date 1 and Date 2 only will be a negative number will be zero FUDGE quantity of oranges H1110 microexams 509e1710175097OVdoc YOUR NAME Your CU Netid YOUR CU STUDENT NUMBER Check YOUR TA s NAME JinYoung Tuesdays am Qingqing Thursdays am Jonathan Tuesdays pm JingXian Thursdays pm Lee Fridays Part 11 Problems 1 and 2 Let s model the market for digital cameras and assume the market is perfectly competitive and is best described using the typical demand and supply model Suppose the market demand for digital cameras is given by QD 100000 40P Suppose the market supply for digital cameras is given by QS 77500 50F 32 V Carefully graph and label the supply and demand curves 6 V Find the equilibrium quantity Q and price P values in the digital camera market and indicate them on your graph H1110 microexams 50961710175097OVd0C 0 Suppose there is a drop in digital camera supply because internal memory becomes much more expensive for camera manufacturers to buy Assume the supply is now QS 73000 50P Find the new equilibrium quantity Q and price P values in the digital camera market and indicate them on your grap d Suppose the government thinks this price the new equilibrium price is way too high and decides to step in and put a price ceiling of 280 on the sale of digital cameras What will be the effect of this price ceiling on the digital camera market Be speci c with numbers and show on your graph e Without doing all the calculations and with reference to the original OR the new supply curve suppose the government imposes a taX of 10 per unit on digital cameras traded Whom do you predict will bear relatively more of the economic price incidence of this taX demanders or suppliers Brie y defend your position Note DO NOT fully solve for all the values but defend your conclusion with as few words and computations as possible Be convincing but at the same time brief H1110 microexams 50961710175097OVd0C 2 Abe and Betty are the only producersconsumers in a small sports loving economy Abe and Betty produce and consume only two things Olympic logo Tshirts and pins Given 60 hours of work in a week Abe can produce a maximum of 3 Tshirts or 15 pins or any combination along a straight line PPF between the two Given 60 hours of work in a week Betty can produce a maXimum of 5 Tshirts or 20 pins or any combination along a straight line PPF between the two Fill in the missing numbers in the table below 32 V 6 V Who has the comparative advantage in Tshirt production Who has the comparative advantage in pin production Who has the absolute advantage in Tshirt production Assume that Abe and Betty have not taken Econ 1110 and hence don t know the wonders of trade That is they insist on selfproducing everything they consume If Abe wants to consume 2 Tshirts how many pins at most can Abe have per week If Betty wants to consume 16 pins how many Tshirts at most can she consume per week H1110 microexams 50961710175097OVd0C c Putting PINS ON THE HORIZONTAL and TSIHRTS ON THE VERTICAL illustrate the ef cient combined production possibility frontier d If Abe and Betty specialize and trade with each other what would be the bounds of an international exchange rate between Tshirts and Pins H1110 microexams 509e1710175097OVdoc YOUR NAME Your CU Netid YOUR CU STUDENT NUMBER Check YOUR TA s NAME JinYoung Tuesdays am Qingqing Thursdays am Jonathan Tuesdays pm JingXian Thursdays pm Lee Fridays Part III Problems 3 and 4 3 The laws of supply and demand may hold for most product markets but they de nitely do not for premium coffee and personal lap top computers here in Ithaca Analyzing market data it is easy to see that prices of premium coffee have been skyrocketing but people are buying more coffee than ever And even though computer lap top prices have been falling manufacturers are producing more and more Do you agree or disagree Defend your position Hint use a separate diagram for each market H1110 microexams 50961710175097OVd0C 4 Several years ago the New York City Opera cut its ticket prices in an attempt to increase operating revenues At almost the same time the New York City water board raised water prices in an attempt to increase their operating revenues An editorial writer for the New York Observer comments quot Obviously the water board and the opera company can t both be right Somebody goofedquot Do you agree or disagree Defend your position H1110 microexams 50961710175097OVd0C SCRAP PAGE
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