SPRING+2014+Midterm+1

Professor: M. Rush
ECO 2023
SPRING 2014
MIDTERM 1
Read all instructions on this page
This test is governed by UF’s academic honesty code. It is intended to have 30
multiple choice questions. Please check to be sure your copy has all 30. MAKE
CERTAIN THAT YOU LOOK AT BOTH SIDES OF THE LAST PAGE!! Choose
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 correct—do 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 3 POINTS!

TURN OFF ALL CELL PHONES AND OTHER
COMMUNICATION DEVICES
You may not use a cell phone 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 don’t like this policy, but it seems the fairest policy.
Do not ask questions of me or the TA’s; 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. 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.
E CO 2023 MI DTE R M 1 S P RI NG 2014
An answer key will be posted on the class web page tomorrow
afternoon.
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
[email protected] 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 [email protected] If you email me about your test
score, I will not forward the email nor respond to you—you 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.

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1) When an economy is producing at a production efficient point on the PPF, then
i. that production point must be an allocatively efficient point.
ii. there must be an opportunity cost if the production of a good is increased.
A) Only i is correct.
B) Only ii is correct.
C) Both i and ii are correct.
D) Neither i nor ii is correct.
2) Summer is vacation time and people drive more than in the winter. In addition,
gasoline in the summer has more expensive ingredients than in the winter.
Consequently, the price of gasoline in the summer ____ the price in the winter and
the quantity of gasoline in the summer ____ the quantity in the winter.
A) is less than; might be more than, less than, or equal to
B) is higher than; is more than
C) is less than; is more than
D) might be higher than, less than, or equal to; less than
E) is higher than; might be more than, less than, or equal to
3) In the market for oranges, the demand and supply of oranges decrease by the same
amount. The equilibrium price will ____ and the equilibrium quantity will ____.
A) fall; not change
B) fall; decrease
C) remain the same; either increase, decrease, or not change
D) remain the same; decrease
E) either fall, rise, or not change; decrease
4) Suppose that the quantity of root beer demanded declines from 103,000 gallons per
week to 97,000 gallons per week as a consequence of a 10 percent increase in the
price of root beer. The price elasticity of demand is
A) 0.60.
B) 1.40.
C) 1.67.
D) 6.00.
E) None of the above answers are correct.
5) Starting at the top of a straight-line downward sloping demand curve, as the price
falls, the total revenue collected by sellers of the good will
A) initially increase and then decrease.
B) initially decrease and then increase.
C) increase along the entire demand curve.
D) decrease along the entire demand curve.
E) None of the above answers are correct.
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Point
Production
chocolate bars
Production
cans of cola
A 0 100
B 10 90
C 20 70
D 30 40
E 40 0
6) The above table shows production points on a nation’s production possibilities
frontier. What is the opportunity cost of one can of cola if production moves from
point C to point B?
A) 20 cans of cola
B) 2 chocolate bars
C) ½ of a chocolate bar
D) 10 chocolate bars
E) 20 chocolate bars
7) If the marginal social benefit from the last taco produced is greater than the
marginal social cost of producing the taco, then the resources will be used more
efficiently if ____ tacos are produced and ____ other goods are produced.
A) less; fewer
B) more; fewer
C) less; more
D) Additional information is needed to answer the question.
8) Currently Mexico exports tomatoes to the United States. These exports ____ the
consumer surplus of Mexican tomato consumers, ____ the producer surplus of
Mexican tomato producers, and ____ Mexican total surplus.
A) increase; increase; increase
B) increase; decrease; decrease
C) decrease; increase; increase
D) increase; decrease; decrease
E) increase; decrease; increase
9) The price elasticity of demand for tennis balls is 2.0 and the price of tennis balls falls
by 6%. The quantity of tennis balls demanded increases by ____.
A) 2%
B) 3%
C) 6%
D) 8%
E) 12%
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10) If the efficient quantity of catnip is 10,000 tons per year, then of the following
amounts, when is the deadweight loss the largest? (Hint: The demand and supply
curves do not need to be straight lines.)
A) When 11,000 tons per year is produced.
B) When 9,000 tons per year is produced.
C) When 8,000 tons per year is produced.
D) More information is needed to determine if the deadweight loss is largest when 11,000
tons or when 9,000 tons per year is produced.
E) More information is needed to determine if the deadweight loss is largest when 11,000
tons or when 8,000 tons per year is produced.
11) Macaroni and cheese is an inferior good and people’s incomes rise. As a result, the
efficient quantity of macaroni and cheese ____ and the equilibrium quantity ____.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; decreases
12) When the efficient quantity of salt is produced, the consumer surplus of salt ____
the producer surplus of salt.
A) must be more than
B) must be equal to
C) must be less than
D) might be more than, equal to, or less than
13) In 2008 the government issued new regulations that increased the amount of
ethanol that had to be added to gasoline. These new regulations ____ the
equilibrium price of ethanol and ____ the equilibrium quantity of ethanol.
A) raised; increased
B) raised; decreased
C) lowered; decreased
D) lowered; increased
E) None of the above answers are correct.
14) Production efficiency occurs when production is ____.
A) at a point beyond the production possibilities frontier
B) on the production possibilities frontier or inside it
C) at any attainable point
D) on the production possibilities frontier.
15) New technology is developed for producing noodles. As a result, the equilibrium
price of a pound of noodles ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
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16) If the price elasticity of demand for salt is ____ than the price elasticity of supply of
salt, then ____ pay most of any tax levied on salt.
A) larger; sellers
B) smaller; sellers
C) larger; buyers
D) Both answers B and C are correct.
E) None of the above answers are correct.
17) If the minimum wage is set below the equilibrium wage, then employment ____
and a deadweight loss ____ created.
A) decreases; is
B) decreases; is not
C) increases; is
D) increases; is not
E) None of the above answers are correct.
18) An increase in the nation’s capital stock will
A) shift the PPF outward.
B) not shift the PPF but will cause a movement along the PPF upward and leftward.
C) not shift the PPF but cause a movement along the PPF, however the direction of the
movement is not certain.
D) not shift the PPF but will move the nation from producing within the PPF to producing
at a point closer to the PPF.

19) The figure above shows the market for blouses when the government imposes a tax.
The consumer surplus before the tax is ____ and the consumer surplus after the tax
is imposed is ____.
A) $9.0 million; $4.5 million
B) $4.5 million; $2.0 million
C) $2.0 million; $4.5 million
D) $4.5 million; $0
E) None of the above answers are correct.
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20) Suppose the government imposes a 10¢ per gallon tax on gasoline. The demand for
gasoline is not perfectly elastic or perfectly inelastic and the supply of gasoline is
not perfectly elastic or perfectly inelastic. The price, including the tax, paid by a
consumer ____ 10¢ a gallon.
A) rises by
B) rises by less than
C) rises by more than
D) falls by less than
21) More companies start to produce memory chips. As a result, the equilibrium price
of a memory chip ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
22) When the United States imports a good, U.S. consumer surplus ____, U.S. producer
surplus ____, and U.S. total surplus ____.
A) decreases; decreases; decreases
B) increases; decreases; decreases
C) decreases; increases; increases
D) increases; decreases; increases
E) None of the above answers are correct.

23) The figure above shows the U.S. demand and the U.S. supply of shirts. If the world
price of shirts is $36 per shirt and the United States trades with the world, ____
shirts are produced in the United States and the United States ____ shirts per year.
A) 48 million; imports 32 million
B) 16 million; imports 24 million
C) 24 million; exports 8 million
D) 48 million; exports 16 million
E) None of the above.
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24) Apps are complements to tablets. So a fall in the price of a tablet causes the demand
curve for apps to ____ and the supply curve of apps to ____.
A) shift rightward; shift rightward
B) shift leftward; shift leftward
C) not shift; shift rightward
D) shift rightward; not shift
E) None of the above answers are correct.
25) Automobiles are a normal good and people’s incomes increase. Simultaneously,
auto manufacturers must pay more for their workers’ health insurance. As a result,
the equilibrium price of an automobile ____ and the equilibrium quantity ____.
A) rises; decreases
B) does not change; increases
C) rises; might increase, decrease, or not change
D) might rise, fall, or not change; decreases
E) None of the above answers are correct.
26) Suppose the price elasticity of teenager’s demand for cigarettes is 2.0. If the
government imposes a tax on cigarettes that raises the price by 10 percent, by how
much will it reduce the quantity of cigarettes demanded by teenagers?
A) By 5 percent
B) By 10 percent
C) By 15 percent
D) By 20 percent
E) By 50 percent.
27) There is a drought in the cattle grazing areas so that farmers must buy more
expensive food for their cattle. The drought will shift
A) only the supply curve for cattle rightward.
B) only the supply curve for cattle leftward.
C) only the demand curve for cattle rightward.
D) only the demand curve for cattle leftward.
E) both the demand and supply curve of cattle leftward.
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28) The above figure shows the market for pizza. Which panel shows the effect of a fall
in income if pizza is a normal good?
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D
E) Either Figure A or Figure D depending on whether the effect on the demand or the
supply is larger.
29) Who is harmed by an import quota on a good?
A) Domestic consumers of the good
B) Domestic producers of the good
C) Foreign governments
D) Importers of the good
E) Both answers B and D are correct.
30) After the scores are posted, if you have a question about your test score, email the
grader at [email protected] and the director is so stupid (HINT:
Be SURE to answer this question because you’ll get credit for any answer.)
A) he returns bowling balls because they've got holes in them.
B) he got an AM radio and it took him months to figure out he could use it at night.
C) he tried to drown a fish.
D) he tried to kill a bird by throwing it off a cliff.
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