EC1010 Introduction to Micro Economics (Econ 6003)

Size: px
Start display at page:

Download "EC1010 Introduction to Micro Economics (Econ 6003)"

Transcription

1 Cork Institute of Technology (Institiuid Teicneolaiochta Chorcai) Alternative Semester 1 Examination 2007/2008 (Winter 2007) EC1010 Introduction to Micro Economics (Econ 6003) (Time: 2 Hours) External Examiner: Dr. N Timoney. Internal Examiners: Mr. K Crilly, Name: Class Group: College ID Number: Lecturer: Instructions Please read carefully! Sections Numbers of Questions to be attempted Percentage of Total Marks Available A B 3 60 C 1 20 Section A: Section B: Section C: Red Ink: For each question in this section, you should circle the letter opposite the answer that you consider to be correct. In the event of there appearing to be more than one correct answer, you should circle the letter opposite the particular answer that you consider to be most correct. There is no negative marking for incorrect answers in this section. The answer to each question in this section must be answered in the space(s) provided within each question. This question must be answered on the lined pages attached at the end of this question paper. You may not use red ink. Non-compliance with the above instructions will result in some of your answers not being graded.

2 Section A A1. Which of the following will not cause a shift in the supply curve for good A? A change in the price of the good A itself; A change in the prices of inputs used to produce good A; A change in the rate of sales tax charged on good to A; None of the above. A2. An increase in supply accompanied by a decrease in demand, other things being equal, will cause: Price to increase, with effect on quantity uncertain; Both price and quantity to decrease; Both price and quantity to increase; Price to decrease with the effect on quantity uncertain. A3. If the prices of close complements for beer should rise dramatically and nothing else changes, then: The demand for beer will increase; The supply of beer will increase; The demand for beer will fall; The demand for, and supply of, the close substitutes will fall. A4. The price of wine will tend to increase if: There is a surplus at the prevailing price; The current price is below the equilibrium price; Quantity demanded is greater than the quantity supplied at current prices; Both and above will cause the price of wine to increase. A5. If at the same time as input prices fall the government lowers the rate of VAT charged on a product then the supply will tend to: Decrease; Increase; Have no affect on the supply as one will cancel out the other; Either rise or fall depending on which is the greater change.

3 A6. Two goods are defined as being substitute products if: Their respective PEDs are both greater than one; Their respective YEDs are both equal; Their respective PEDs and YEDs are negative; Their XPED is positive. A7. Economists define superior products as: Goods that are non-defective; Goods with a minute positive income effect; Goods with a negative income effect; Goods for which YED is greater than one. A8. The price elasticity of supply is defined as: % change in quantity supplied divided by the % change in income; % change in price divided by the % change in quantity supplied; % change in quantity supplied divided by the % change in price; % change in income divided by the % change in quantity supplied. A9. If a segment of a demand curve is elastic then: The elasticity coefficient is equal to infinity; The demand curve for the good is vertical; The elasticity coefficient, in absolute terms, is greater than 1; Both and above are correct. A10. Demand is likely to be less elastic due to all but one of the following: There are many close substitutes for the product available; Consumers spend a very small proportion of their income on the product; Consumers have a short period of time to adjust to the new prices; The product is an intermediate product rather than a final product.

4 A11. Economists use the term marginal cost to mean: The value of a product before it has been advertised; The contribution that a good or service makes to social cost; The satisfaction that a producer obtains from selling a good or service; None of the above. A12. A consumer should buy less of a good if the value of the good s: TU is less than price; MU is less than price; MU is greater than price; TU is greater than price. A13. If a household s money income is decreased, all other things being the same: The budget line is not affected; The budget line will swivel at the vertical axis intercept; The budget line will shift inwards in a parallel fashion; The budget line will shift outwards in a parallel fashion. A14. To calculate the marginal utility one should use the formula: TUn TUn-i; VUn VUn-i; TU VU; Either or could be used. A15. Which of the following is the odd one out? Total revenue; The cost of producing the next unit of output; The extra output produced by one additional unit of labour; The reduction in revenue that results from a cut in sales of one unit.

5 A16. The mainstream orthodox treatment of the firm is based on the assumption of: Sales maximization; Revenue maximization; Cost minimization; None of the above. A17. In the short run: All of the firm s costs are fixed costs; All of the firm s costs are variable costs; Some costs are fixed and some are variable; None of the above. A18. In a production process when all inputs are doubled the resulting output is more than doubled. This means that the firm is experiencing: Decreasing returns to scale; Constant returns to scale; Increasing returns to scale; Either increasing or decreasing returns to scale. A19. Which of the following statements about the Euro in its trading with Sterling and the Dollar is true? The Euro is below parity with Sterling and above with the Dollar; The Euro is below parity with the Dollar and above with Sterling; The Euro is above parity with both Sterling and the Dollar; The Euro is below parity with both Sterling and the Dollar. A20. If in December = St. a good costing 54 St would cost: 39.25; 74.30; 78.49;

6 Section B B1. The table below describes the supply and demand conditions for product A. Price ( ) Qs Qd Required: Sketch the supply and demand curves and identify the equilibrium price and quantity. (5 marks) Explain the market outcome if the initial price is 50. (5 marks) What would the government have to do if they wish to maintain the price of 50 as a minimum (floor) price? (5 marks) If the level of sales tax is reduced by 10 per unit for this product, how will this affect the answer you have given in above? 5 marks)

7 B2. Define and explain Income Elasticity of Demand (YED): (6 marks) Interpret what a value of YED = 2.5 means: (5 marks) What is the connection between the very heavy sales taxation of alcohol, tobacco and petroleum products and the PED concept? (5 marks) If the price of one good increases by 5% and the quantity demanded of a second good reacts by falling 10%, the two product should be classified into which category of XPED? (4 marks)

8 B3. The table below sets out the levels of total utility (TU) for each of three products depending on the quantity purchased and consumed. The table also gives the prices for the 3 products. The consumer has a budget of 200 to spend and wishes to maximize utility. There is no utility to be derived by saving any of the budget. CVs LSs MO P = 10 P = 20 P = 30 Q TU MU MU/P TU MU MU/P TU MU MU/P Complete the table by filling in the values for MU and MU/P for each good; (12 marks) Identify from the completed table, the combination of the 3 products that yield the maximum level of total utility (TU), calculating as part of your answer the level of maximum TU and the cost of achieving this level of TU; (8 marks)

9 B4. The following table shows values for total cost (TC), variable cost (VC) and average revenue (AR=P), corresponding to various levels of output (TPP): TPP TC VC AR ATC AVC AFC MC TR MR Complete the above table. (15 marks) Calculate the maximum level of profit and the level of output (TPP) at which the maximum profit is earned. (5 marks)

10 Section C C1. Study the following table and then answer the questions below: Labour costs of production (hours) 1 unit of wine 1 unit of cloth Portugal 6 8 England (e) (f) Use the information above to construct a table showing the quantities of both goods that could be produced in the two countries per 120 hour time period. Which country has the absolute advantage in wine? Explain. What is the opportunity cost of a unit of wine in Portugal? Explain. What is the opportunity cost of a unit of cloth in England? Explain. Which country has the comparative advantage in wine? Explain. At what international trade price(s) would both countries stand to gain from specialization and exchange? C2. Explain how the equilibrium price and quantity are determined in a competitive market and what happens to this equilibrium if the supply should increase, all other things being unchanged? What, if anything, would be different in your answer in above were the demand to be more or less elastic (i.e. less or more steep) than the one you have used? C3. Explain each of the following: The difference between Marginal Cost (MC) and Marginal Revenue (MR). Economies and diseconomies of scale. A Floating exchange rate?

11 Solutions Terminal Semester 1 Exam (EC1010): MCQs: 1 a 11 d 2 d 12 b 3 c 13 c 4 d 14 a 5 b 15 a 6 d 16 d 7 d 17 c 8 c 18 a 9 c 19 c 10 a 20 b

12 B1. This is the standard Supply and Demand graph with price on the vertical axis, and the quantity on the horizontal axis. If drawn correctly the two lines should intersect at P = 40 and Q = 60. Thus Pe is equal to 40 and Qe is equal to 60 units per period of time. This is also directly visible in the table. If the initial price is 50 the market outcome will be that at that price the consumers would wish to buy and consume 50 units per period of time. However, the suppliers will wish to offer 75 units at that same price with the result that there is an excess supply of 25 units. If this is a free, or competitive, market the price and quantity will adjust towards their equilibrium values. To cope with the excess supply and stop the price falling government will have to introduce some device to eliminate the excess demand. It could buy up the surplus, or as an alternative, seek to stimulate demand with subsidies. It could seek to export the good in sufficient quantities to offset the excess demand.. The best, and easiest, way to deal with this new situation is to shift the supply curve downwards by the amount of the tax cut as this is easier than other ways of arriving at the answer. The suppliers will be able to charge 10 less at each and every price as the tax cut of 10 is, effectively, a decrease in production costs from their perspective, hence shifting the Supply curve downwards by 10. If you do this you can now read from the graph that the curves intersect at a new price of 34 and the new quantity is 66. Thus Pe = 34 and Qe = 66.

13 B2. Income Elasticity of Demand is defined as YED = % Q/% Y and it measures how sensitive the demand for a good is to changes in income. The value of YED can be positive, negative or zero. If YED > 0 we say the good is a normal good, if YED > 1 we say the good is a superior good and if YED < 0 we say the good is an inferior good. You should also consult below for more information If YED = 2.5 the good is a superior good. If income changes by 1% the quantity demanded will react by changing by 2.5%, i.e. if income goes up by 1% the Qd increases by 2.5% and vice-versa. The three products are each highly in-elastically demanded, i.e. PED << 1. When Demand is inelastic an increase in price yields more sales revenue. This is due to the extra revenue created by the higher price exceeding the revenue that is lost due to the smaller quantity now being bought. The governments tend to tax such goods much more heavily because of this revenue implication. Food is another good that has a low PED value but a government that taxes food rarely gets re-elected to government. XPED = % Qa/% Pb = -10%/5% = -2 and because this value is a negative result the goods should be classified as complements.

14 B3. Goods A B C Quantity Price = 8 Price = 4 Price = 2 TU MU MU/P TU MU MU/P TU MU MU/P * * * Consumer should buy: 2A + 3B + 4C Because: MUA/PA = MUB/PB = MUC/PC = 2 Total Utility = = 452 Expenditure = 200 (i.e. + +

15 B4. TPP TC VC AR ATC AVC AFC MC TR MR (2) (6) Profit (10) (21) The maximum profit occurs at an output level of 6 units and equals 17.

16 C1. Production Possibilities: Wine Cloth Portugal England Portugal, in actual fact, has the absolute advantage in both products. In the case of wine it requires only 6 hours of labour per unit produced whereas England requires 12 hours of labour per unit of wine produced. Opportunity Costs: Wine Cloth Portugal 0.75* 1.3 England * In Portugal the opportunity cost of wine is 0.75 as each unit of wine requires 6 labour hours and those same 6 labour hours could be used to produce 0.75 units of cloth. In England each unit of cloth requires 10 labour hours, which as an alternative could be used to produce 0.83 units of wine. Hence the opportunity cost of cloth in England is 0.83 units of wine. (e) Portugal has the comparative advantage in wine because it need only sacrifice 0.75 units of cloth per unit of wine produced. England has a greater sacrifice of 1.2 units of cloth per unit of wine produced. (f) Portugal will gain if it can purchase cloth through trade for less than 1.3 units of wine, this being its domestic price. England benefits if it can purchase more than 0.83 wine for each unit of cloth paid, this being England s domestic price. Thus a trade price of 1.3C 1W 0.83C will mutually benefit both. Similarly, which is the same thing but stated in terms of the trade price for cloth both gain from the trade if: 1.2W 1C 0,75W

FEEDBACK TUTORIAL LETTER

FEEDBACK TUTORIAL LETTER FEEDBACK TUTORIAL LETTER 1 ST SEMESTER 2017 ASSIGNMENT 1 [] MAY 2017 1 COURSE: COURSE CODE: TUTORIAL LETTER: 01/2017 DATE: 03/ 2017 Dear Student Thank you for submitting your first assignment on time.

More information

AP Microeconomics Review With Answers

AP Microeconomics Review With Answers AP Microeconomics Review With Answers 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry (which means show

More information

(per day) Pizzas. Figure 1

(per day) Pizzas. Figure 1 ECONOMICS 10-008 Dr. John Stewart Sept. 25, 2001 Exam 1 Detailed solution for one Form of the Midterm: The general question are the same for all forms but some questions differ in details so correct answer

More information

Exam 1. Pizzas. (per day) Figure 1

Exam 1. Pizzas. (per day) Figure 1 ECONOMICS 10-008 Dr. John Stewart Sept. 30, 2003 Exam 1 Instructions: Mark the letter for your chosen answer for each question on the computer readable answer sheet using a No.2 pencil. Note a)=1, b)=2

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2 Economics 2 Spring 2016 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. Recall that the price elasticity of supply is the percentage change in quantity supplied divided

More information

Practice Exam 3: S201 Walker Fall with answers to MC

Practice Exam 3: S201 Walker Fall with answers to MC Practice Exam 3: S201 Walker Fall 2007 - with answers to MC Print Your Name: I. Multiple Choice (3 points each) 1. If marginal utility is falling then A. total utility must be falling. B. marginal utility

More information

MICRO EXAM REVIEW SHEET

MICRO EXAM REVIEW SHEET MICRO EXAM REVIEW SHEET 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

More information

Multiple choice questions 1-60 ( 1.5 points each)

Multiple choice questions 1-60 ( 1.5 points each) NAME: STUDENT ID: Final Exam ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your exam

More information

ECO 211 Microeconomics Yellow Pages ANSWERS. Unit 2

ECO 211 Microeconomics Yellow Pages ANSWERS. Unit 2 Fall 2012 ECO 211 Microeconomics Yellow Pages ANSWERS Unit 2 Mark Healy William Rainey Harper College E-Mail: mhealy@harpercollege.edu Office: J-262 Phone: 847-925-6352 Price Elasticity of Demand Calculate

More information

FEEDBACK TUTORIAL LETTER. 1st SEMESTER 2018 ASSIGNMENT 1 INTERMEDIATE MICRO ECONOMICS IMI611S

FEEDBACK TUTORIAL LETTER. 1st SEMESTER 2018 ASSIGNMENT 1 INTERMEDIATE MICRO ECONOMICS IMI611S FEEDBACK TUTORIAL LETTER 1st SEMESTER 2018 ASSIGNMENT 1 INTERMEDIATE MICRO ECONOMICS IMI611S 1 Course Name: Course Code: Department: Course Duration: INTERMEDIATE MICROECONOMICS IMI611S ACCOUNTING, ECONOMICS

More information

Pledge (sign) I did not copy another student s answers

Pledge (sign) I did not copy another student s answers Economics 4020 Dr. Rupp Test #1 Fri. Sept 23 rd, 2011 20 Multiple Choice questions (2.5 points each) Pledge (sign) I did not copy another student s answers 1. The profit maximization rule for a firm is

More information

Graded exercise questions. Level (I, ii, iii)

Graded exercise questions. Level (I, ii, iii) Graded exercise questions Level (I, ii, iii) 248 MICRO ECONOMICS LEVEL 1 GRADED EXERCISE QUESTIONS (LEVEL I, II, III) INTRODUCTION 1. Why does an economic problem arise? 2. What is economics about? 3.

More information

Figure 4 1 Price Quantity Quantity Per Pair Demanded Supplied $ $ $ $ $10 2 8

Figure 4 1 Price Quantity Quantity Per Pair Demanded Supplied $ $ $ $ $10 2 8 Econ 101 Summer 2005 In class Assignment 2 Please select the correct answer from the ones given Figure 4 1 Price Quantity Quantity Per Pair Demanded Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8

More information

Chapter 3 Quantitative Demand Analysis

Chapter 3 Quantitative Demand Analysis Chapter 3 Quantitative Demand Analysis EX1: Suppose a 10 percent price decrease causes consumers to increase their purchases by 30%. What s the price elasticity? EX2: Suppose the 10 percent decrease in

More information

Chapter 7 Consumer/Producers and Market Efficiency

Chapter 7 Consumer/Producers and Market Efficiency Midterm #2 Exam Study uestions: (A subset of these questions/concepts will be on the exam) Chapter 5 - Elasticity Define rice elasticity of demand. What does it mean to say demand is highly elastic? What

More information

ECON 251 Exam 2 Pink. Fall 2012

ECON 251 Exam 2 Pink. Fall 2012 ECON 251 Exam 2 Pink Use the table below to answer the following four questions The table below shows Harry s total utility from consuming beer and wine. The price of beer is $2 per bottle. The price of

More information

ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions

ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions www.liontutors.com ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions 1. A A large number of firms will be able to operate in the industry because you only need to produce a small amount

More information

Commerce 295 Midterm Answers

Commerce 295 Midterm Answers Commerce 295 Midterm Answers October 27, 2010 PART I MULTIPLE CHOICE QUESTIONS Each question has one correct response. Please circle the letter in front of the correct response for each question. There

More information

1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3

1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3 1 Chapter 1 1.1. Scarcity, Choice, Opportunity Cost Definition of Economics: Resources versus Wants Wants: more and better unlimited Versus Needs: essential limited Versus Demand: ability to pay + want

More information

PICK ONLY ONE BEST ANSWER FOR EACH BINARY CHOICE OR MULTIPLE CHOICE QUESTION.

PICK ONLY ONE BEST ANSWER FOR EACH BINARY CHOICE OR MULTIPLE CHOICE QUESTION. Econ 101 Summer 2015 Answers to Second Mid-term Date: June 15, 2015 Student Name Version 1 READ THESE INSTRUCTIONS CAREFULLY. DO NOT BEGIN WORKING UNTIL THE PROCTOR TELLS YOU TO DO SO You have 75 minutes

More information

Monopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials

Monopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials LESSON 5 Monopoly Introduction and Description Lesson 5 extends the theory of the firm to the model of a Students will see that the profit-maximization rules for the monopoly are the same as they were

More information

Exam 3 Practice Questions

Exam 3 Practice Questions Exam 3 Practice Questions 1. The price elasticity of demand is a measure of: a) how quickly a particular market reaches equilibrium. b) the change in supply associated with lower prices. c) the percent

More information

Bremen School District 228 Social Studies Common Assessment 2: Midterm

Bremen School District 228 Social Studies Common Assessment 2: Midterm Bremen School District 228 Social Studies Common Assessment 2: Midterm AP Microeconomics 55 Minutes 60 Questions Directions: Each of the questions or incomplete statements in this exam is followed by five

More information

Chapter 2: The Basic Theory Using Demand and Supply. Multiple Choice Questions

Chapter 2: The Basic Theory Using Demand and Supply. Multiple Choice Questions Chapter 2: The Basic Theory Using Demand and Supply Multiple Choice Questions 1. If an individual consumes more of good X when his/her income doubles, we can infer that a. the individual is highly sensitive

More information

Perfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product.

Perfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product. Perfect Competition In this section of work and the next one we derive the equilibrium positions of firms in order to determine whether or not it is profitable for a firm to produce and, if so, what quantities

More information

Supply and Demand. Objective 8.04

Supply and Demand. Objective 8.04 Supply and Demand Objective 8.04 Supply and Demand Pages 258-259 259 copy bold terms and give a definition or description of each. Page 261 Copy the questions Worksheet A-2A 1. Surplus When the amount

More information

2) All combinations of capital and labor along a given isoquant cost the same amount.

2) All combinations of capital and labor along a given isoquant cost the same amount. Micro Problem Set III WCC Fall 2014 A=True / B=False 15 Points 1) If MC is greater than AVC, AVC must be rising. 2) All combinations of capital and labor along a given isoquant cost the same amount. 3)

More information

Ch. 7 outline. 5 principles that underlie consumer behavior

Ch. 7 outline. 5 principles that underlie consumer behavior Ch. 7 outline The Fundamentals of Consumer Choice The focus of this chapter is on how consumers allocate (distribute) their income. Prices of goods, relative to one another, have an important role in how

More information

23 Perfect Competition

23 Perfect Competition 23 Perfect Competition Learning Objectives After you have studied this chapter, you should be able to 1. define price taker, total revenues, marginal revenue, short-run shutdown price, short-run breakeven

More information

Multiple Choice Part II, A Part II, B Part III Total

Multiple Choice Part II, A Part II, B Part III Total SIMON FRASER UNIVERSITY ECON 103 (2007-2) MIDTERM EXAM NAME Student # Tutorial # Multiple Choice Part II, A Part II, B Part III Total PART I. MULTIPLE CHOICE (56%, 1.75 points each). Answer on the bubble

More information

UNIT 2 CONSUMER'S BEHAVIOUR & THEORY OF DEMAND POINTS TO REMEMBER Consumer : is an economic agent who consumes final goods and services. Total utility : It is the sum of satisfaction from consumption of

More information

Unit 4: Consumer choice

Unit 4: Consumer choice Unit 4: Consumer choice In accordance with the APT programme the objective of the lecture is to help You to: gain an understanding of the basic postulates underlying consumer choice: utility, the law of

More information

Short-Run Costs and Output Decisions

Short-Run Costs and Output Decisions Semester-I Course: 01 (Introductory Microeconomics) Unit IV - The Firm and Perfect Market Structure Lesson: Short-Run Costs and Output Decisions Lesson Developer: Jasmin Jawaharlal Nehru University Institute

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2 Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose

More information

Answers to RSPL/2. Section - A

Answers to RSPL/2. Section - A Answers to RSL/2 1. (a) Section - A 2. Returns to a factor refers to a change in total output when only one input is changed, keeping other inputs unchanged. 3. (c) 4. Negative 5. While analysing the impact

More information

1. T F The resources that are available to meet society s needs are scarce.

1. T F The resources that are available to meet society s needs are scarce. 1. T F The resources that are available to meet society s needs are scarce. 2. T F The marginal rate of substitution is the rate of exchange of pairs of consumption goods or services to increase utility

More information

I enjoy teaching this class. Good luck and have a nice Holiday!!

I enjoy teaching this class. Good luck and have a nice Holiday!! ECON 202-501 Fall 2008 Xiaoyong Cao Final Exam Form A Instructions: The exam consists of 2 parts. Part I has 35 multiple choice problems. You need to fill the answers in the table given in Part II of the

More information

Chapter 6. Elasticity

Chapter 6. Elasticity Chapter 6 Elasticity Both the elasticity coefficient and the total revenue test for measuring price elasticity of demand are presented in this chapter. The text discusses the major determinants of price

More information

Lesson-9. Elasticity of Supply and Demand

Lesson-9. Elasticity of Supply and Demand Lesson-9 Elasticity of Supply and Demand Price Elasticity Businesses know that they face demand curves, but rarely do they know what these curves look like. Yet sometimes a business needs to have a good

More information

Practice Midterm Exam Microeconomics: Professor Owen Zidar

Practice Midterm Exam Microeconomics: Professor Owen Zidar Practice Midterm Exam Microeconomics: 33001 Professor Owen Zidar This exam is comprised of 3 questions. The exam is scheduled for 1 hour and 30 minutes. This is a closed-book, closed-note exam. There is

More information

Elasticity. Shape of the Demand Curve

Elasticity. Shape of the Demand Curve Lecture 4 Elasticity Eric Doviak Principles of Microeconomics Shape of the Demand Curve When prices change, change in quantity demanded depends on shape of demand curve Consumer 1 has a very elastic demand

More information

Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply

Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply 1 The Price Elasticity of Demand and Its Measurement We define price elasticity of demand and understand how to measure it. Although

More information

Homework 4 Economics

Homework 4 Economics Homework 4 Economics 501.01 Manisha Goel Due: Tuesday, March 1, 011 (beginning of class). Draw and label all graphs clearly. Show all work. Explain. Question 1. Governments often regulate the price of

More information

1. Fill in the missing blanks ( XXXXXXXXXXX means that there is nothing to fill in this spot):

1. Fill in the missing blanks ( XXXXXXXXXXX means that there is nothing to fill in this spot): 1. Fill in the missing blanks ( XXXXXXXXXXX means that there is nothing to fill in this spot): Quantity Total utility Marginal utility 0 0 XXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXX 200 0 = 200 1 200 XXXXXXXXXXX

More information

Question Paper Business Economics I (MB1B3): January 2009

Question Paper Business Economics I (MB1B3): January 2009 Question Paper Business Economics I (MB1B3): January 2009 Answer all 78 questions. Marks are indicated against each question. 1. Which of the following is not responsible for an increase in demand for

More information

ECON 251 Practice Exam 2 Questions from Fall 2013 Exams

ECON 251 Practice Exam 2 Questions from Fall 2013 Exams ECON 251 Practice Exam 2 Questions from Exams Gordon spends all his income on spatulas and mixing bowls. Spatulas cost $4 and mixing bowls cost $12. Gordon has $60 of income and considers both spatulas

More information

CLEP Microeconomics Practice Test

CLEP Microeconomics Practice Test Practice Test Time 90 Minutes 80 Questions For each of the questions below, choose the best answer from the choices given. 1. In economics, the opportunity cost of an item or entity is (A) the out-of-pocket

More information

Perfect Competition CHAPTER 14. Alfred P. Sloan. There s no resting place for an enterprise in a competitive economy. Perfect Competition 14

Perfect Competition CHAPTER 14. Alfred P. Sloan. There s no resting place for an enterprise in a competitive economy. Perfect Competition 14 CHATER 14 erfect Competition There s no resting place for an enterprise in a competitive economy. Alfred. Sloan McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

More information

Chapter 4: Understanding Demand

Chapter 4: Understanding Demand SCHS SOCIAL STUDIES What you need to know UNIT TWO 1. What a competitive market is and how it is described by the supply and demand model 2. What a supply curve shows 3. The difference between a movement

More information

Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011

Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011 Instructions: Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011 This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is correct? A) Consumers have the ability to buy everything

More information

1 of 14 5/1/2014 4:56 PM

1 of 14 5/1/2014 4:56 PM 1 of 14 5/1/2014 4:56 PM Any point on the budget constraint Gives the consumer the highest level of utility. Represent a combination of two goods that are affordable. Represents combinations of two goods

More information

What is Economics? Economics is the study of how we the people engage ourselves in production, distribution and consumption of goods and services in a society. Normative economics: Normative economics

More information

ECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION. 4. Is free medicine given to patients in Govt. Hospital a scarce commodity?

ECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION. 4. Is free medicine given to patients in Govt. Hospital a scarce commodity? ECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION 1. What is the Slope of PPC? What does it show? 2. When can PPC be a straight line? 3. Do all attainable combination of two goods that

More information

MONOPOLY. Characteristics

MONOPOLY. Characteristics OBJECTIVES Explain how managers should set price and output when they have market power With monopoly power, the firm s demand curve is the market demand curve. A monopolist is the only seller of a product

More information

Chapter 6 Elasticity: The Responsiveness of Demand and Supply

Chapter 6 Elasticity: The Responsiveness of Demand and Supply hapter 6 Elasticity: The Responsiveness of emand and Supply 1 Price elasticity of demand measures: how responsive to price changes suppliers are. how responsive sales are to changes in the price of a related

More information

Instructions: must Repeat this answer on lines 37, 38 and 39. Questions:

Instructions: must Repeat this answer on lines 37, 38 and 39. Questions: Final Exam Student Name: Microeconomics, several versions Early May, 2011 Instructions: I) On your Scantron card you must print three things: 1) Full name clearly; 2) Day and time of your section (for

More information

COST OF PRODUCTION & THEORY OF THE FIRM

COST OF PRODUCTION & THEORY OF THE FIRM MICROECONOMICS: UNIT III COST OF PRODUCTION & THEORY OF THE FIRM One of the concepts mentioned in both Units I and II was and its components, total cost and total revenue. In this unit, costs and revenue

More information

SUBJ SCORE # Version D: Page 1 of 9. (signature) 2. Please write your name and GU ID carefully and legibly at the top of this page.

SUBJ SCORE # Version D: Page 1 of 9. (signature) 2. Please write your name and GU ID carefully and legibly at the top of this page. SUBJ SCORE # Version D: Page 1 of 9 Economics 001 NAME Professor Levinson GU ID # Midterm #2 November 12, 2012 DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SO. READ THESE INSTRUCTIONS FIRST.

More information

CHAPTER 2: DEMAND AND SUPPLY

CHAPTER 2: DEMAND AND SUPPLY 2.3 THE MARKET CHAPTER 2: DEMAND AND SUPPLY CIA4U Ms. Schirk A market can be: A physical place where goods are bought and sold A collective reference to all the buyers and sellers of a particular good

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 3

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 3 Economics 2 Spring 2017 Professor Christina Romer Professor David Romer SUGGESTED ANSWERS TO PROBLEM SET 3 1.a. Both the consumption and production of higher education are likely to generate benefits for

More information

Chapter Summary and Learning Objectives

Chapter Summary and Learning Objectives CHAPTER 11 Firms in Perfectly Competitive Markets Chapter Summary and Learning Objectives 11.1 Perfectly Competitive Markets (pages 369 371) Explain what a perfectly competitive market is and why a perfect

More information

Introduction. Learning Objectives. Chapter 24. Perfect Competition

Introduction. Learning Objectives. Chapter 24. Perfect Competition Chapter 24 Perfect Competition Introduction Estimates indicate that since 2003, the total amount of stored digital data on planet Earth has increased from 5 exabytes to more than 200 exabytes. Accompanying

More information

1.2.3 Price, Income and Cross Elasticities of Demand

1.2.3 Price, Income and Cross Elasticities of Demand 1.2.3 Price, Income and Cross Elasticities of Demand Price elasticity of demand The price elasticity of demand is the responsiveness of a change in demand to a change in price. The formula for this is:

More information

Unit 5. Producer theory: revenues and costs

Unit 5. Producer theory: revenues and costs Unit 5. Producer theory: revenues and costs Learning objectives to understand the concept of the short-run production function, describing the relationship between the quantity of inputs and the quantity

More information

2007 Thomson South-Western

2007 Thomson South-Western WHAT IS A COMPETITIVE MARKET? A competitive market has many buyers and sellers trading identical products so that each buyer and seller is a price taker. Buyers and sellers must accept the price determined

More information

Production and Cost Analysis I

Production and Cost Analysis I CHAPTER 12 Production and Cost Analysis I Production is not the application of tools to materials, but logic to work. Peter Drucker McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All

More information

Supply in a Competitive Market

Supply in a Competitive Market Supply in a Competitive Market 8 Introduction 8 Chapter Outline 8.1 Market Structures and Perfect Competition in the Short Run 8.2 Profit Maximization in a Perfectly Competitive Market 8.3 Perfect Competition

More information

2010 Pearson Education Canada

2010 Pearson Education Canada What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have

More information

Title: Micro In the market below, what would be true at a price of $6?

Title: Micro In the market below, what would be true at a price of $6? Title: Micro 1.1 1. In the market below, what would be true at a price of $6? a. There is excess demand (a shortage) of 10 units. b. The market is in equilibrium. *c. There is excess supply (a surplus)

More information

Monopoly CHAPTER. Goals. Outcomes

Monopoly CHAPTER. Goals. Outcomes CHAPTER 15 Monopoly Goals in this chapter you will Learn why some markets have only one seller Analyze how a monopoly determines the quantity to produce and the price to charge See how the monopoly s decisions

More information

Midterm Exam Solution Sketch

Midterm Exam Solution Sketch University of California, Santa Cruz Economics 1 Winter 2002 Professor Kletzer The exam has a total of 63 points. Midterm Exam Solution Sketch Part I. True/False/Uncertain and Explain. 5 points each. (Your

More information

Econ 2113: Principles of Microeconomics. Spring 2009 ECU

Econ 2113: Principles of Microeconomics. Spring 2009 ECU Econ 2113: Principles of Microeconomics Spring 2009 ECU Chapter 12 Monopoly Market Power Market power is the ability to influence the market, and in particular the market price, by influencing the total

More information

AP Microeconomics Review Session #3 Key Terms & Concepts

AP Microeconomics Review Session #3 Key Terms & Concepts The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Short-run vs. long-run decisions 3. Fixed inputs vs. variable inputs 4. Short-run production measures: be able to calculate/graph

More information

GOVERNMENT OF KARNATAKA SCHEME OF VALUATION. Subject Code : 22 ENGLISH VERSION Subject : ECONOMICS

GOVERNMENT OF KARNATAKA SCHEME OF VALUATION. Subject Code : 22 ENGLISH VERSION Subject : ECONOMICS GOVERNMENT OF KARNATAKA KARNATAKA STATE PRE-UNIVERSITY EUDCATION EXAMINATION BOARD II YEAR PUC EXAMINATION MARCH 27 SCHEME OF VALUATION Subject Code : 22 ENGLISH VERSION Subject : ECONOMICS Qn.No PART

More information

Chapter 8 Profit Maximization and Competitive Supply. Read Pindyck and Rubinfeld (2013), Chapter 8

Chapter 8 Profit Maximization and Competitive Supply. Read Pindyck and Rubinfeld (2013), Chapter 8 Chapter 8 Profit Maximization and Competitive Supply Read Pindyck and Rubinfeld (2013), Chapter 8 1/29/2017 CHAPTER 8 OUTLINE 8.1 Perfectly Competitive Market 8.2 Profit Maximization 8.3 Marginal Revenue,

More information

EC101 DD/EE PRACTICE Midterm 1 October 3, 2017 Version 09

EC101 DD/EE PRACTICE Midterm 1 October 3, 2017 Version 09 EC101 DD/EE PRACTICE Midterm 1 October 3, 2017 Version 09 Name (last, first): Student ID: U - - Discussion Section: Signature EC101 DD/EE Practice Midterm 1 F17 INSTRUCTIONS (***Read Carefully***): ON

More information

Chapter 28 The Labor Market: Demand, Supply, and Outsourcing

Chapter 28 The Labor Market: Demand, Supply, and Outsourcing Chapter 28 The Labor Market: Demand, Supply, and Outsourcing Learning Objectives After you have studied this chapter, you should be able to 1. define marginal factor cost, marginal physical product of

More information

Copyright 2010 Pearson Education Canada

Copyright 2010 Pearson Education Canada What are the effects of a high gas price on buying plans? You can see some of the biggest effects at car dealers lots, where SUVs remain unsold while sub-compacts sell in greater quantities. But how big

More information

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1 1 Name Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1 There is only ONE best, correct answer per question. Place your answer on the attached sheet.

More information

ECON 311 MICROECONOMICS THEORY I

ECON 311 MICROECONOMICS THEORY I ECON 311 MICROECONOMICS THEORY I Profit Maximisation & Perfect Competition (Short-Run) Dr. F. Kwame Agyire-Tettey Department of Economics Contact Information: fagyire-tettey@ug.edu.gh Session Overview

More information

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2016 First Hour Exam Version 1

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2016 First Hour Exam Version 1 1 Name Introduction to Agricultural Economics Agricultural Economics 105 Spring 2016 First Hour Exam Version 1 There is only ONE best, correct answer per question. Place your answer on the attached sheet.

More information

Econ 001: Midterm 2 (Dr. Stein) Answer Key Nov 13, 2007

Econ 001: Midterm 2 (Dr. Stein) Answer Key Nov 13, 2007 Instructions: Econ 001: Midterm 2 (Dr. Stein) Answer Key Nov 13, 2007 This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label

More information

Chapter 2 Market analysis

Chapter 2 Market analysis Chapter 2 Market analysis Market analysis is concerned with collecting and interpreting data about customers and the market so that businesses adopt a relevant marketing strategy. Businesses carry out

More information

ECON 251. Exam 1 Pink. Fall 2013

ECON 251. Exam 1 Pink. Fall 2013 ECON 251 1. By definition, opportunity cost is a. The value of the best alternative b. The sum of the value of all available alternatives c. The amount of money it takes to buy an item d. Always greater

More information

T ( P ( ) * FA F D A S

T ( P ( ) * FA F D A S Supply and Demand Basics Law of Supply Law of Demand Equilibrium Key Topics Demand Supply Equilibrium (shortage/surplus) Floor/Ceiling Elasticity Indifference Curves Utility Physical Product (Supply Side)

More information

Edexcel (A) Economics A-level

Edexcel (A) Economics A-level Edexcel (A) Economics A-level Theme 3: Business Behaviour & the Labour Market 3.3 Revenue Costs and Profits 3.3.2 Costs Notes Formulae to calculate types of costs Total cost: This is how much it costs

More information

1. If the per unit cost of production falls, then... A.) the supply curve shifts right (or down)

1. If the per unit cost of production falls, then... A.) the supply curve shifts right (or down) 1. If the per unit cost of production falls, then... A.) the supply curve shifts right (or down) B.) there is a downward movement along the existing supply curve which does not shift C.) the supply curve

More information

Chapter 10 Pure Monopoly

Chapter 10 Pure Monopoly Chapter 10 Pure Monopoly Multiple Choice Questions 1. Pure monopoly means: A. any market in which the demand curve to the firm is downsloping. B. a standardized product being produced by many firms. C.

More information

AGENDA Mon 10/12. Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp Q #7

AGENDA Mon 10/12. Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp Q #7 AGENDA Mon 10/12 Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp 173-176 Q #7 QOD #21: Competitive Farming A purely competitive wheat farmer can sell

More information

E.C.O.-6 Economic Theory

E.C.O.-6 Economic Theory N 1 ASSIGNMENT SOLUTIONS GUIDE (2015-2016) E.C.O.-6 Economic Theory Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the Assignments. These

More information

Law of Supply. General Economics

Law of Supply. General Economics Law of Supply General Economics Supply Willing to Offer to the Market at Various Prices during Period of Time Able to Offer to the Market at Various Prices during Period of Time General Economics: Law

More information

MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION. Professor Charles Fusi

MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION. Professor Charles Fusi MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION Professor Charles Fusi Learning Objectives Identify the characteristics of a perfectly competitive market structure Discuss the process by which a perfectly

More information

Intermediate Microeconomics Midterm

Intermediate Microeconomics Midterm Econ 201 Spring 2016 Name: Student ID: Intermediate Microeconomics Midterm Thursday April 21, 2016 Beomsoo Kim There are 7 questions and 130 possible points. There are 2 pages to this exam. Please write

More information

Econ 001: Midterm 2 (Dr. Stein) Answer Key March 31, 2008

Econ 001: Midterm 2 (Dr. Stein) Answer Key March 31, 2008 Instructions: Econ 001: Midterm 2 (Dr. Stein) Answer Key March 31, 2008 This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and

More information

Principles of Economics: Micro: Exam #1: Chapters 1-5 Page 1 of 7

Principles of Economics: Micro: Exam #1: Chapters 1-5 Page 1 of 7 Principles of Economics: Micro: Exam #1: Chapters 1-5 Page 1 of 7 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #1 must be completed within the allocated time (i.e., between

More information

Exemplar for Internal Achievement Standard. Economics Level 3

Exemplar for Internal Achievement Standard. Economics Level 3 Exemplar for Internal Achievement Standard Economics Level 3 This exemplar supports assessment against: Achievement Standard 91401 Demonstrate understanding of micro-economic concepts An annotated exemplar

More information

Chapter 11. Microeconomics. Technology, Production, and Costs. Modified by: Yun Wang Florida International University Spring 2018

Chapter 11. Microeconomics. Technology, Production, and Costs. Modified by: Yun Wang Florida International University Spring 2018 Microeconomics Modified by: Yun Wang Florida International University Spring 2018 1 Chapter 11 Technology, Production, and Costs Chapter Outline 11.1 Technology: An Economic Definition 11.2 The Short Run

More information

Introduction Question Bank

Introduction Question Bank Introduction Question Bank 1. Science of wealth is the definition given by 2. Economics is the study of mankind of the ordinary business of life given by 3. Science which tells about what it is & what

More information

a. Find MG&E s marginal revenue function. That is, write an equation for MG&E's MR function.

a. Find MG&E s marginal revenue function. That is, write an equation for MG&E's MR function. Economics 101 Spring 2015 Answers to Homework #5 Due Thursday, May 7, 2015 Directions: The homework will be collected in a box before the lecture. Please place your name on top of the homework (legibly).

More information