Homework Set #1 is due in the lab no later than Wednesday, September 19. You must use a NCS Pearson Scantron, form #229633, available in the ASU Bookstore. Answer sheets must be marked in pencil and contain your name and 10 digit ASU Identification Number. Failure to enter your 10 digit Identification Number correctly on your scantron will result in a loss of points.
1. The city of Austin can buy roads or light rail. If 5 miles of roads cost $1 million and 2 miles of light rail cost $10 million, the city’s cost of 100 miles of roads is [A] $500 million
[B] 4 miles of light rail.
[C] 50 miles of light rail.
[D] $5 million
[E] Both [B] and [D] are correct.
2. If society begins by producing 3 units of X and 4 units of Y, and then alters production so that it is now producing 3 units of X and 5 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then [A] resources were being efficiently utilized at 3 units of X and 4 units [B] 3 units of X and 4 units of Y are a combination best represented by a point inside the PPC. [C] 3 units of X and 4 units of Y are a combination best represented by a point outside the PPC. [D] it is not possible to produce 3 units of X and 5 units of Y. [E] society has moved along the PPC.
3. Which of the following will not result in an outward shift of the production possibilities curve? [A] An increase in the quantity of resources
[B] The work force becomes more literate
[C] Resources are used more efficiently.
[D] An increase in population.
[E] A technological breakthrough
4. Assume the demand for watermelons is downward sloping. A decrease in price from $3 per pound to $2 per pound [A] could have been caused by an increase in supply.
[B] will cause an increase in supply.
[C] will cause a smaller quantity of watermelons to be demanded. [D] will cause demand to decrease.
[E] will cause demand to increase.
5. If the equilibrium price decreases and the equilibrium output decreases then what must have happened. A) Demand increased
B) Demand decreased
C) Supply increased
D) Supply decreased
E) None of the above because a decrease in output would not happen if price decreases.
6. Suppose the demand curve is: P = 300 – 2QD and the supply curve is: P = 100 + 3QS. What is consumer and producer surplus in the market at the equilibrium price and quantity? A) $3200
E) Cannot be determined from the information given.
7.The figure above is the market for soda pop drinks in ounces. What is the total consumer and producer surplus at equilibrium? a.$2
e. Can not be determined from the information given.
8. Now assume in the figure above that the government decides that only 16 oz. drinks can be sold. What is the loss in consumer and producer surplus in this market from the government mandate? a. $64
e. The price will increase to $3.00 so producers will not lose anything.
9. Refer to the table above. If the market is originally in equilibrium and a price ceiling of $50 is imposed, which of the following is incorrect? [A] Net surplus in the economy will decrease.
[B] Producer surplus will decrease.
[C] Demand will increase.
[D] Consumers will purchase less than they would at the equilibrium price. [E] Producers will sell less than they would at the equilibrium price.
10. Assume that at the current market price of $4 per unit of a good, you are willing and able to buy 20 units. Last year at a price of $4 per unit, you would have purchased 30 units. What has most likely happened over the last year?...