Economics Midterm Exam
Name: ___________________________________
First Midterm Examination
Economics 101
October 13, 2010
This exam has 33 questions.
Unless a question explicitly says otherwise, assume that all demand curves slope downward, all supply curves slope upward, and there are no externalities.
True/False.
Mark box A for True and box B for False.
Each blank answer gives you 1 point.
Each correct answer adds 2 points to your score.
1. In the presence of a negative externality in the market for a good, a tax reduces both consumer and producer surplus in that market.
2. A company in a competitive market can increase its producer surplus by selling below the equilibrium price.
3. If there are risks associated with drilling for oil in the Gulf, …show more content…
C) If there is an increase in the production of Guns, less Butter can be produced.
D) The sacrifice of Butter necessary to produce another Gun is always the same.
E) As more Guns are produced, the sacrifice of Butter necessary to produce another
Gun is greater.
Version 1
Page 10
25. Late-night TV advertisements are an input in the production of Snuggies. An increase in the price of late-night TV advertisements causes the equilibrium price and quantity of
Snuggies to change. If demand is price elastic at both the original and new equilibrium, then which of the following (comparing the new equilibrium outcome to the original) MUST be correct?
A) Total revenue from Snuggies sales has increased
B) The market price has fallen
C) Producer surplus has increased
D) Late-night advertising has increased
E) Consumer expenditure on Snuggies has fallen
26. The demand for meatball subs is price inelastic when the price falls from $4 to $2. At a price of $4, the quantity demanded is 40 meatball subs. At a price of $2, which of the following quantities of meatball subs could be demanded?
A) 80 subs
B) 160 subs
C) 60 subs
D) 120 …show more content…
E) (A), (B), and (C) are all statements defining market efficiency.
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Page 14
32. Beer drinkers like to drink beer. When they drink, they sing cheesy ‘80s songs that keep their neighbors up all night. The graph below shows the marginal private benefit curve and the marginal social cost curve for the beer market. The price of a bottle of beer is $3. If a new tax increases the price that consumers pay for a bottle of beer to
$4, then which of the following areas represent the deadweight loss eliminated by this tax? A)
B)
C)
D)
E)
F+G
C+D
A+B+I
C+D+E+F+G+H
E+F+G+H
33. When we discussed the demand curve in lecture, an example that we highlighted was:
A) the effect of violence in Mexico on tourism.
B) expansion of trade with China and the effect on pirated software prices.
C) the effect of recent airline mergers on holiday airfares.
D) the effect of the recession on the demand for diamond engagement rings.
E) the effect of the recession and higher prices in the market for movies.
Version 1
Page 15
Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
First Midterm Examination
Economics 101
October 13, 2010
This exam has 33 questions.
Unless a question explicitly says otherwise, assume that all demand curves slope downward, all supply curves slope upward, and there are no externalities.
True/False.
Mark box A for True and box B for False.
Each blank answer gives you 1 point.
Each correct answer adds 2 points to your score.
1. In the presence of a negative externality in the market for a good, a tax reduces both consumer and producer surplus in that market.
2. A company in a competitive market can increase its producer surplus by selling below the equilibrium price.
3. If there are risks associated with drilling for oil in the Gulf, …show more content…
C) If there is an increase in the production of Guns, less Butter can be produced.
D) The sacrifice of Butter necessary to produce another Gun is always the same.
E) As more Guns are produced, the sacrifice of Butter necessary to produce another
Gun is greater.
Version 1
Page 10
25. Late-night TV advertisements are an input in the production of Snuggies. An increase in the price of late-night TV advertisements causes the equilibrium price and quantity of
Snuggies to change. If demand is price elastic at both the original and new equilibrium, then which of the following (comparing the new equilibrium outcome to the original) MUST be correct?
A) Total revenue from Snuggies sales has increased
B) The market price has fallen
C) Producer surplus has increased
D) Late-night advertising has increased
E) Consumer expenditure on Snuggies has fallen
26. The demand for meatball subs is price inelastic when the price falls from $4 to $2. At a price of $4, the quantity demanded is 40 meatball subs. At a price of $2, which of the following quantities of meatball subs could be demanded?
A) 80 subs
B) 160 subs
C) 60 subs
D) 120 …show more content…
E) (A), (B), and (C) are all statements defining market efficiency.
Version 1
Page 14
32. Beer drinkers like to drink beer. When they drink, they sing cheesy ‘80s songs that keep their neighbors up all night. The graph below shows the marginal private benefit curve and the marginal social cost curve for the beer market. The price of a bottle of beer is $3. If a new tax increases the price that consumers pay for a bottle of beer to
$4, then which of the following areas represent the deadweight loss eliminated by this tax? A)
B)
C)
D)
E)
F+G
C+D
A+B+I
C+D+E+F+G+H
E+F+G+H
33. When we discussed the demand curve in lecture, an example that we highlighted was:
A) the effect of violence in Mexico on tourism.
B) expansion of trade with China and the effect on pirated software prices.
C) the effect of recent airline mergers on holiday airfares.
D) the effect of the recession on the demand for diamond engagement rings.
E) the effect of the recession and higher prices in the market for movies.
Version 1
Page 15
Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.