Professor: M.

Rush
ECO 2023
Spring 2012
MIDTERM 1
Read all instructions on this page
This test is governed by UFs academic honesty code. It is intended to have 33
multiple choice questions and one extra credit question. Please check to be sure
your copy has all 33. Chose the best answer for each question.
The next is important: Unless you are specifically told otherwise, on this test do
not assume that demand or supply is either perfectly elastic or perfectly inelastic.
On the bubble sheet, please enter:
1. Your name and initials
2. Your UF ID number
3. Form code: A
4. Sign your name on the bubble sheet.
Check that the form code and UF ID number you bubbled-in are correct now. Also check
to be sure your name is correctdo it now. I have heard a rumor that the ability to
correctly record these had been mastered by a few students at FSU as well as a couple of
accounting and journalism students. I will investigate these rumors but in the
meanwhile,
CHECK YOUR FORM CODE AND UF ID NUMBER. IF YOU GET EITHER OF
THESE WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED,
YOU WILL LOSE 6 POINTS (which equals about 2 questions)!

TURN OFF ALL CELL PHONES AND OTHER
COMMUNICATION DEVICES
You may not use a cell phone, a Blackberry, or any other sort of device that allows for
communication as your calculator.
I have become increasingly concerned that some students are at a real disadvantage
because they are unwilling to ask questions during the exam while others ask a lot of
questions. Hence, to level the playing field, I have decided to eliminate all questions
during the test. I dont like this policy, but it seems the fairest policy.
Do not ask questions of me or the TAs; in the interest of fairness I
have instructed them not to answer any questions during the exam.
You will have one hour (60 minutes) to complete the exam and bubble in all your
answers and answer the extra credit question. When the TAs say that time is up, you
must hand in your exam. We will not give extra time to finish bubbling in the answers, so
be sure you are done when the 60 minutes are up. Of course, you may hand in your test
at any time before the 60 minutes are up.
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An answer key will be posted on the class web page later this
evening at about 10:00 PM.
The test scores will be on class web page within a few days.
Once you see the answer key, you might have a question about why one answer
is right and another is wrong. For these questions, email me at
mark.rush@warrington.ufl.edu Do NOT email the grader about these questions!
After the scores are posted, if you think your posted score is incorrect, then email
the grader at eco2023.grader@warrington.ufl.edu If you email me about your test
score, I will not forward the email nor respond to youyou MUST email the
grader. You have one week after the curved score is posted to request a grade
check. After a week, the score will not be changed. If the web reports what you
bubbled in for each question and you ask the grader to check an answer because
you believe you bubbled in something other than what is reported and the
reported answer on the web is correct, you will lose 1 additional question.
EXTRA CREDIT QUESTION INSTRUCTIONS
There is an extra credit question on the last page. You can earn up to 3 points
added to your exam test score. If you choose to answer the extra credit question,
be sure to follow all the instructions on the page with the extra credit question
and provide all the required information. DO IT LEGIBLY IF WE CANNOT
READ YOUR NAME AND/OR UF ID, YOU WILL NOT GET ANY EXTRA
CREDIT! When you hand in your test, you must hand in the extra credit page
even if you have not answered the question. You may copy your answer to the
extra credit question in the space below. I will announce in class when the extra
credit questions are graded and will post the grades on the class page but it will
take several weeks. Do not email me or the grader for questions about when the
extra credit will graded. I will announce this in class. THERE IS NO APPEAL
ABOUT THE SCORE ON THE EXTRA CREDITIT IS WHAT IT IS.


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1) In the figure above, the opportunity cost of producing another computer is
A) higher at A than at B.
B) higher at B than at A.
C) the same at all points on the PPF.
D) different at most points along the frontier but equal at points A and B because they are
equally distant from the axes.
2) When petroleum is refined, the products of the refining include both gasoline and
heating oil fuel. Suppose the price of heating oil rises. Based on these points, the
equilibrium price of a gallon of gasoline ____ and the quantity of gasoline ____.
A) falls; decreases
B) falls; increases
C) falls; does not change
D) rises; does not change
E) rises; increases
3) If the marginal benefit from the last taco produced and consumed is less than the
marginal cost of producing the taco, then tacos are ____ the efficient quantity and
there ____ a deadweight loss.
A) overproduced compared to; is
B) overproduced compared to; is not
C) underproduced compared to; is
D) underproduced compared to; is not
E) equal to; is not
4) (This is an out-of-the-book question from Chapter 5.) A tax is imposed on the sellers
of a product. The consumers will pay the full amount of the tax if
A) demand is elastic.
B) demand is inelastic.
C) demand is perfectly elastic.
D) demand is perfectly inelastic.
E) None of the above are correct because the tax is imposed on the seller so sellers pay the
tax.
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5) The above figure shows the market for pizza. Which panel shows the effect
of a decrease in income if pizza is a normal good?
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D
6) Thailand has been hit with massive floods that destroyed or damaged many
factories that produce hard drives for computers. As a result, the equilibrium price
of a hard drive ____ and the equilibrium quantity ____.
A) falls; decreases
B) rises; increases
C) falls; does not change
D) rises; decreases
E) None of the above are correct.
7) Vera Bradley makes a specific style of cloth purses. The elasticity of demand for a
Vera Bradley purse likely is ____ the elasticity of demand for purses in general.
A) larger than
B) the same as
C) smaller than
D) not comparable to
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8) In the above figure, before the tax was imposed, the price per CD paid by
consumers was ____ and after the tax is imposed, the price (including the tax) paid
by consumers is ____.
A) $20; $20
B) $10; $30
C) $10; $20
D) $20; $10
E) $20; $30
9) In the above figure, the consumer surplus before the tax is imposed is ____ and the
consumer surplus after the tax is imposed is ___.
A) $800 million; $200 million
B) $800 million; $400 million
C) $400 million; $100 million
D) impossible to determine; $100 million
E) None of the above answers are correct.
10) Plywood is used to construct houses. Suppose the price of plywood falls. As a
result, the equilibrium price of a house ____ and the equilibrium quantity ____.
A) rises; decreases
B) rises; increases
C) falls; decreases
D) falls; increases
11) From 8:30 to 9:20 a.m., Fred can sleep in, go to his economics lecture, or play tennis.
Suppose that Fred decides to go to the lecture but thinks that, if he hadnt, he would
otherwise have slept in. The opportunity cost of attending the lecture is
A) sleeping in and playing tennis.
B) playing tennis.
C) sleeping in.
D) one hour of time.
E) the lecture.
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12) Boxed macaroni and cheese is an inferior good and peoples incomes rise. At the
same time, the cheese used to produce the macaroni and cheese rises in price. As a
result, the equilibrium price of macaroni and cheese ____ and the equilibrium
quantity ____.
A) probably changes but more information is needed to determine if the price rises, falls,
or does not change; increases
B) falls; decreases
C) falls; probably changes but more information is needed to determine if the quantity
rises, falls, or does not change
D) probably changes but more information is needed to determine if the price rises, falls,
or does not change; decreases
E) None of the above are correct.
Possibility Robots Pizza
A 0 40
B 1 39
C 2 37
D 3 34
E 4 30
F 5 20
G 6 0
13) The table above shows a nations production possibilities frontier. If the nation
chooses to increase the production of robots from 2 to 3, the opportunity cost is
A) 37 pizzas
B) 34 pizzas
C) 3 pizzas
D) 1 robot
E) None of the above answers is correct.
14) The price elasticity of demand for insulin is zero. As a result, if the cost of producing
insulin rises, then the equilibrium price ____ and the equilibrium quantity ____.
A) rises; increases
B) probably changes but more information is needed to determine if the price rises, falls,
or does not change; decreases
C) rises; decreases
D) rises; probably changes but more information is needed to determine if the quantity
increases, decreases, or does not change
E) rises; does not change
15) Tennis rackets and golf clubs are substitutes for consumers. The price of a tennis
racket falls. As a result, the equilibrium price of a golf club ____ and the equilibrium
quantity ____.
A) rises; increases
B) probably changes but more information is needed to determine if the price rises, falls,
or does not change; decreases
C) rises; decreases
D) falls; increases
E) falls; decreases
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16) Snowboards are sold in a competitive market. What area in the above figure equals
the producer surplus when the efficient quantity of snowboards are produced in a
competitive market?
A) A +B +C.
B) A +B +C +D +E +F.
C) C +E.
D) D +E +F.
E) Zero; that is, there is no producer surplus
17) The income elasticity of demand is
A) always positive.
B) always negative.
C) negative for a normal good and positive for an inferior good.
D) positive for a normal good and negative for an inferior good.
E) None of the above answers are correct.
18) (This is an out-of-the-book question from Chapter 6.) The fair results view of
fairness concludes that a minimum wage ____ and the fair rules view of fairness
concludes that a minimum wage ____.
A) is fair; is fair
B) is fair; is not fair
C) is not fair; is fair
D) is not fair; is not fair
E) is fair; might be fair
19) If the demand for pizza increases, then the producer surplus from pizza ____.
A) increases
B) does not change
C) decreases
D) More information is needed to determine the answer.
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20) How a sales tax is divided between buyers and sellers is determined by
A) the governments choice of whom to tax.
B) who the law says must pay the tax.
C) the elasticities of supply and demand.
D) the revenue needs of government
21) The wage rate paid to workers in fast food restaurants rises. As a result the
equilibrium price of fast food ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
22) Americans spend a smaller fraction of their income on food than do people living in
Bangladesh. As a result, it is likely that the ____ for food is larger in ____.
A) price elasticity of demand; the United States
B) price elasticity of supply; the United States
C) price elasticity of demand; Bangladesh
D) income elasticity of demand; the United States
E) price elasticity of supply; Bangladesh
23) The elasticity of demand for gasoline is 0.4. If the price of gasoline rises by 10
percent, the quantity demanded decreases by
A) 0.04 percent.
B) 0.25 percent.
C) 0.4 percent.
D 2.5 percent.
E) 4.0 percent.
24) A price ceiling set above the equilibrium price results in
A) a surplus.
B) a shortage.
C) a rightward shift of the demand curve.
D) a rightward shift of the supply curve.
E) None of the above.
25) Suppose Cox Communications decreases the price it charges for cable television
service and its total revenue decreases. What can we conclude?
A) demand is elastic
B) demand is unit elastic
C) demand is inelastic
D) supply is elastic
E) supply is inelastic
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26) Which of the following increases the equilibrium price of a used car and also
increases the equilibrium quantity purchased?
i. A fall in income if used cars are an inferior good.
ii. An increase in the wage rate paid to used car salespeople.
A) i only.
B) ii only.
C) Both i and ii..
D) Neither of the above because the question describes a violation of the law of demand.
27) The government is deciding whether to tax either Good A or Good B. The
equilibrium quantity and price of both is currently the same and whatever tax is
imposed will be the same. The elasticity of supply for each good is identical.
However the elasticity of demand for Good A is 0.8 while the elasticity of demand
for Good B is 1.5. In order to generate the most tax revenues, the government
should impose the tax on ____ because its demand is ____.
A) Good A; less elastic
B) Good A; more elastic
C) Good B; less elastic
D) Good B; more elastic
E) More information is needed to answer the question.
28) Resource use is allocatively efficient when
A) marginal social benefit exceeds marginal social cost.
B) marginal social cost is decreasing if more units are produced.
C) marginal social benefit equals marginal social cost.
D) marginal social benefit is increasing if more units are produced.
E) marginal social benefit exceeds marginal social cost by as much as possible.
29) More people decide that eating fried chicken at a fast food restaurant (such as KFC)
is healthy. Simultaneously, the price of chickens increases. As a result, the
equilibrium price of fried chicken ____ and the equilibrium quantity ____.
A) might rise, fall, or not change; does not change
B) falls; increases
C) rises; increases
D) might rise, fall, or not change; might increase, decrease, or not change
E) rises; might increase, decrease, or not change
30) (This is an out-of-the book question from Chapter 6.) If the government outlaws
buying pizza but leaves selling pizza legal, then the equilibrium price of a pizza will
____ and the equilibrium quantity will ____.
A) rise; decrease
B) not change; decrease
C) fall; decrease
D) fall; not change
E) None of the above answers are correct.
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31) Taco Bell discovers that when it sets a price of $1.40 for a burrito, it sells 21 million
burritos per day. If it sets a price of $1.80 for a burrito, it sells 19 million burritos per
day. The price elasticity of demand equals
A) 2.0.
B) 1.25.
C) 0.8.
D) 0.5.
E) None of the above are correct.
32) Which of the following shifts the nations PPF curve outward?
i. An increase in the nations capital stock
ii. A decrease in the nations unemployment rate.
iii. An advance in the nations technology.
A) i only.
B) i and ii only.
C) i and iii only.
D) iii only.
E) i, ii, and iii.
33) After the scores are posted, if you have a question about your test score, email the
grader at ECO2023.Grader@cba.ufl.edu and the director is so stupid that (HINT: Be
SURE to answer this question because youll get credit for any answer.)
A) she tried to get a job at the M&M factory as a proofreader.
B) she killed her toy poodle by putting batteries in it.
C) if she spoke her mind, she would be speechless.
D) she cant make ice cubes because she lost the recipe.










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EXTRA CREDIT QUESTION


_____________________________ ___________________________
(Name) (UF ID)

PRINT your name and UF ID in the spaces above. When you have answered
the question, hand in this page and ONLY THIS PAGE. Keep the rest of the test
to help you study for the final exam.

1. The market for corn is a worldwide market. I found the following comment
on the Internet: Every country that can plant more corn has done so, said
Alex Bos, the manager of agricultural commodities at Macquarie Group
Ltd. in New York.
Draw a diagram to illustrate the impact of more countries growing corn has
on the price and quantity of corn. Be sure to LEGIBILY label the axes, label
all curves, label the initial equilibrium, the new equilibrium, and tell what
happens to the price and quantity.