Question;PRINCIPLES OF MICROECONOMIC ECON-202-01 EXAMINATION NO. 1 SUMMER 2013PRINCIPLES OF MICROECONOMIC ?;ECON-202-01;EXAMINATION NO. 1;SUMMER 2013;Name;Instructions;You will be;given until Monday, July 19th at noon to complete this examination.;Please print;out the test and write directly in test booklet.;Please load your responses into Blackboard.;I have;read and understand the policies relating to cheating in the classroom and on;exams. I understand that if caught;cheating I will automatically receive a zero for this assignment. I also;understand if my cell phone is on, then I will be disqualified from this exam;and will receive a zero for this assignment.;Signature;Part;I. Short Answer (5 Points Each) ________ Points;Carefully define, explain the usage, and an example of the following;concepts;1.;Distinguish between demand and quantity demanded. Do;the same for supply and quantity supplied.;The difference;between demand 633;2.;Describe the field of economics known as microeconomics.;3. What is the cost-benefit principle?;Part II. Fully Explain in Essay Format (20 Points);Points;Graphically prove;or disprove the following statement.;Explain your reasoning. After;last year?s strike, baseball has experienced a severe drop in attendance even;though the owners have reduced ticket prices and have held special events. Similarly players have made themselves more;available in the hopes of boosting attendance.;So far nothing has worked. In;economic terms the law of demand does not hold since attendance at the major;league parks has dropped while at the same time ticket prices have fallen.;Part;III. Matching (30 Points).;Points;Market Demand;Graphs;Negative;Positive;Supply Side;Vertical;Variable;Resources;Opportunity Cost;Necessity;A. The _________________curve shows the;relationship between the price and the quantity demanded by all consumers, everything;else being equal.;B. On the __________________ of a market;producers indicate to consumers what they are willing to sell, in what quantity;and at what price.;C. Inputs in;production processes are called Economic ______________.;D. Toothpaste;is likely to be a ____________ product.;E. A line that falls from left to right has a;slope.;F. In the Marshallian diagram, the;axis denotes Price.;G. The ________________________ of any;decision is the forgone value of the next best alternative that is not chosen.;H. There is a ___________________ relationship;between two variables if they move in the same direction.;I. _________________ are valuable because they;facilitate interpretation of data.;J. A _______________ measures something that;can take on different values.;Part IV. Complete the;following (20 Points);Suppose;the total demand for alfalfa and the total supply of alfalfa per month in the;Dallas grain market are as follows;Thousands Thousands Amount of Surplus (+);of Bushels Price;per of Bushels or;Demanded Bushel Supplied Shortage (-);85 $3.40 72;80;3.70 73;75;4.00 75;70;4.30 77;65;4.60 79;60;4.90 81;(a) What will be the market equilibrium;price? What is the equilibrium;quantity? Using the surplus-shortage;column, explain in words why your answer is valid.;(b) What is the surplus or shortage at the;price of $3.40? What is the surplus or;shortage at the price $4.90.;Part V. Assume that the demand for a commodity is represented;by the equation P=10-.2Qd and supply by the equation P=2+.2Qs;where Qd and Qs are the quantity demanded and quantity;supplied, respectively, and P is the price.;Using the equilibrium condition Qs=Qd. (Hint Set;two equations equal to Each other and solve.) (15 Points);(a) Solve the equations simultaneously to;determine the equilibrium price. Replace;the equilibrium price back into either of the two equations and determine;equilibrium quantity.;(b) Describe the graph the two equations;including equilibrium price and quantity, to substantiate your answer.;Part;VI. Multiple Choice (5 Points Each);Exhibit 5-2;1. Refer to Exhibit 5-2. The market for good X;is initially in equilibrium at $5. The government then places a tax on the;producers of good X-in effect, taxing them on each unit of good X they sell. As;a result, the supply curve;a.;shifts (down and) rightward from S2;to S1.;b.;shifts (up and) leftward from S1;to S2.;c.;does not shift from S1.;d.;There is not enough information to answer;the question.;Exhibit 5-4;2. Refer to Exhibit 5-4. As a consequence of;the depicted change in the supply of X, the demand curve for Y shifted from D1;to D2. It follows that;a.;X and Y are substitutes.;b.;X and Y are complements.;c.;X and Y are inferior goods.;d.;demand for Y is price elastic.;Exhibit 4-2;3. Refer to Exhibit 4-2, which shows supply;and demand for freeway space at both 8 a.m. and 11 p.m. At a zero money price;there is a ________ of freeway space at 8 a.m. and ________ at 11 p.m.;a.;shortage, a surplus;b.;surplus, a shortage;c.;surplus, equilibrium;d.;shortage, equilibrium;Exhibit 4-4;4. Refer to Exhibit 4-4. At a wage of $7;there will be a __________ of unskilled workers equal to __________ thousand.;a.;shortage, 10;b.;surplus, 20;c.;surplus, 10;d.;shortage, 20;e.;none of the above;5. Refer to Exhibit 4-4. Suppose the minimum;wage is set at $5. The result will be;a.;unemployment.;b.;labor shortage.;c.;no effect on the labor market.;d.;none of the above;6. If variable X goes up as variable Y goes;down, then X and Y are;a.;directly related.;b.;inversely related.;c.;independent.;d.;positively related.;7. The concept that relates how much one;variable changes as another variable changes is;a.;slope.;b.;line.;c.;curve.;d.;graph.;8. The coordinates of point 1 are 50 units of;X and 40 units of Y. The coordinates of point 2 are 60 units of X and 45 units;of Y. The slope of the line between points 1 and 2 is;a.;+ 2.00;b.;+ 0.50;c.;- 0.25;d.;- 0.50;e.;none of the above;9.;When the price of a product;increases, a consumer is able to buy less of it with a given money income. This;describes;A. the cost effect.;B. the inflationary effect.;C. the income effect.;D. the substitution effect.;10.;When product prices change;consumers are inclined to purchase larger amounts of the now cheaper products;and less of the now more expensive products. This describes;A. the cost effect.;B. the price effect.;C. the income effect.;D. the substitution effect.;Table 2;QD;= 189 - 2.25P;QS;= 124 + 1.5P;11.;Using;Table 2, the equilibrium price is;a. $84;b. $82.67;c. $17.33;d. 150;12.;Using Table 2, the equilibrium;quantity sold is;a. 65;b. 150;c. 313;d. 84;e. 0;13.;Economic efficiency would be;primarily discussed in response to which of the fundamental questions about a;competitive market economy?;A. What goods and services will be produced?;B. How will the goods and services be produced?;C. How will the system promote progress?;D. Who will get the goods and services?;14.;In the circular flow model, households;A. buy products and resources.;B. sell products and resources.;C. buy products and sell resources.;D. sell products and buy resources.;15.;The basic economic problem is essentially one;of deciding how to make the best use of;A. limited resources to satisfy limited economic wants.;B. limited resources to satisfy unlimited economic wants.;C. unlimited resources to satisfy unlimited economic wants.;D. unlimited resources to satisfy limited economic wants.;16.;From an economic perspective, when a student;decides to attend another year of college, the student has concluded that the;marginal;A. costs of attending college has decreased that year.;B. benefits of attending college has increased that year.;C. benefits of attending college are greater than the marginal costs.;D. costs of attending college will be subsidized by someone else such as;parents or the government.;17. If both demand and supply increase, the;equilibrium quantity;a. increases;and the price falls.;b. decreases;and the effect on price is indeterminate.;c. decreases;and the price rises.;d. increases;and the effect on price is indeterminate.;18.;The price ratio of the two products is;the;A. marginal rate of substitution.;B. slope of the budget line.;C. point of tangency for equilibrium.;D. demand for the two products.;Use the graph below to complete the following;question(s).;19.;Refer to;the above graph. The total opportunity cost of nine drill presses is;A. 1 unit of bread.;B. 2 units of bread.;C. 3 units of bread.;D. 4 units of bread.;20.;Refer to;the above graph. The marginal opportunity cost of the fourth unit of bread;is;A. 1 unit of drill presses.;B. 2 units of drill presses.;C. 3 units of drill presses.;D. 4 units of drill presses.
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