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Econ 1110 - INTRODUCTORY MICROECONOMICSPRELIM #1 – Wissink - S2018 - March 6________________________________________ ____________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId:_________________ Your Student Number:________________________________There are two sections in this exam. Answer all questions.Part I: 15 multiple choice/fill in the blank questions @ 3.33 points eachPart II: 2 problems @ 25 points eachTotal Points = 100, Total Time = 90 minutes.NO QUESTIONS CAN BE ASKED DURING THE EXAM ABOUT EXAM CONTENT: If there is something troubling you about a question, write us a note on the exam somewhere and we will deal with it as we are grading. If you need a pencil or scratch paper, or some other supply that we might have, raise your hand and wait for the proctor to come to you. RESTROOM USE: If you absolutely need to use the restroom raise your hand and wait for the proctor. Only one person can be out of the examination room at a time, and the proctor will hold onto your exam papers while you are out at the restroom.NO CELL PHONES, IPODS OR DEVICES WITH CALCULATOR “APPS” or large screens.NO GRAPHING CALCULATORS.NO BOOKS. NO NOTES. NO HELP SHEETS.NO TALKING TO EACH OTHER.Check the TA’s name for the section you regularly attend (that is, where you will pick up your prelim):One more time, please…_____________________________________ _________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId:_________________ Your Student Number:________________________________Max PointsYour ScorePart I50 pointsPart IIQ125 pointsQ225 points left0Part I: Multiple Choice and Fill In The Blank Questions. Do them ALL.Circle the ONE letter for your answer or fill in the answer in the blank provided.020000Part I: Multiple Choice and Fill In The Blank Questions. Do them ALL.Circle the ONE letter for your answer or fill in the answer in the blank provided.. Which one of the following statements would be considered NORMATIVE?The supply curve for coffee in Watkins Glen is upward sloping.Coffee should be subsidized so everybody can afford their morning wakeup caffine.A binding price ceiling in the coffee market will cause excess demand.The market for coffee is perfectly competitive.An increase in price from $3.50 to $5.50 decreases the quantity demanded of coffee by 60.-2362204572000. Consider the PPF for Ivyland. As resources in Ivyland are reallocated and the economy moves from point A to point Bthe marginal opportunity cost of widgets decreases. the total opportunity cost of widgets increases at a decreasing rate.the marginal opportunity cost of gadgets decreases.the economy becomes more efficient.None of the above are true.. Santa has two helpers: Buddy the elf and Rudolf the reindeer. Both are capable of making presents and pulling the sleigh. Rudolf makes 4 presents in one hour and can pull the sleigh to 2 cities in one hour. Buddy makes 5 presents in one hour and can pull the sleigh to 3 cities in one hour. Both work for eight hours per day. Which one of the following statements is TRUE?Rudolf has an absolute advantage in pulling the sleigh.Rudolf should refrain from working because he has no absolute advantage in anything.Buddy has a comparative advantage in pulling the sleigh.Buddy has a comparative advantage in making presents.Rudolf has a comparative advantage in pulling the sleigh.PersonMaximum Production RatesMagazines (per/w)Bread (per/w)Tony126George66Paul28Jacques612. The country of Lowlandia is inhabited by four individuals: Tony, George, Paul, and Jacques. Residents of Lowlandia can produce two goods, magazines and loaves of bread. The table shows the maximum amounts of each output they each can produce per week. Their individual PPF’s are linear between these amounts. If the desired level of bread production is 12, how should the inhabitants specialize?Tony and George in bread, Paul and Jacques in magazines.Tony in bread, George and Jacques in magazines, and Paul in both goods.Paul in bread, Jacques and George in magazines, and Tony in both goods.Jacques in bread, Tony, George and Paul in magazines.Paul in bread, Tony and George in magazines, and Jacques in both.. A careless research assistant has presented her professor with the following unlabeled equation representing the market for tea bags: Q = 600 - 7K + 3R - 4Y. The professor then spends numerous hours trying to figure out what the equation represents. Which one of the following is a plausible best guess?It is a supply function where K represents the price of tea bags.It is a supply function where R represents the cost of the tea leaves.It is a demand function where Y represents the price of coffee, a substitute in consumption for tea.It is a demand function where K represents consumer income and tea bags are a normal good.It is a demand function where R represents the number of people in the market.. Assume that the rental housing market in Corning, NY is perfectly competitive with typically shaped demand and supply curves. It is announced that a new college, Chemung University, will open in two years bringing with it an arrival of new students. In anticipation of students moving to Corning to attend Chemung University, construction of new rental units increases. Assuming no other changes to the rental housing market, what would good economists predict will happen to the equilibrium price and quantity of rental housing units in that market once Chemung University opens?Quantity must decrease, and price must increase.Quantity must decrease, and price must decrease.Quantity must increase, and price must increase.Quantity must increase, and price must decrease.There is not enough information for good economists to answer this question.PriceQuantityDemandedQuantitySupplied$112 0424$100 20364$87 50314$75 80270$62 120220$50 180180$37 230150$25 290120$12 360100. The table shows demand and supply information for the market for Bowtrunkles, a magical creature known for being able to pick locks. The Magical Congress of the USA (MACUSA) is concerned about the number of Bowtrunkles in the country and would like to restrict supply of Bowtrunkles. Answer the following in the space below:What is the equilibrium price of Bowtrunkles if there is no government intervention in this market? Ans:What is the quantity traded in the market if MACUSA imposes a price ceiling at $87?Ans:. What is the likely effect on the domestically produced lumber market of imposing quotas on the import of lumber cut and milled in Canada?The demand curve for domestic lumber shifts to the left.The supply curve for domestic lumber shifts to the right.The supply curve for domestic lumber shifts to the left.The demand curve for domestic lumber shifts to the right.Both the demand and the supply curves for domestic lumber shift to the left.380673460416. Consider the global market for paper on the right. Suppose that the government levies a tax of $2 per sheet on suppliers in this market. Which one of the following statements about the post-tax equilibrium is true?More paper will be traded.No one bears the economic price incidence of the tax.Demanders bear the complete economic price incidence of the tax.The supply curve is perfectly inelastic.None of the above are true.. Which one of the following will result in an increase in quantity demanded with no shift in the demand curve?An increase in income.An increase in the good’s desirability.An increase in the price of a substitute in consumption.An increase in the price of a complement in consumption.A shift in the supply curve to the right.45143051389740. Consider the regional market for prunes on the right. Suppose that the government grants a subsidy of $1 per pint of prunes to demanders in this market. Which one of the following statements about the post-subsidy equilibrium is true?The final demand price PD is now higher.The government will collect several dollars in revenue from the sale of prunes.The value of net social surplus in now higher than it was before.More prunes will be traded and both demanders and suppliers will be better off.More prunes will be traded but only demanders will be better off.PD=MB QuantityDemandedPS=MCQuantitySupplied$221$21$182$42$153$63$124$84$105$105$86$126$67$147$48$168$29$189$110$2010. For this question, use the table showing supply and demand. What is the value of consumers’ surplus at the market equilibrium?Ans:. The demand curve for yoga mats is given by Qd = 150 – 2P and the supply curve is given by Qs = 1P. At the market equilibrium, use the POINT formula to calculate the exact own price elasticity of demand at the market equilibrium.After taking the absolute value, the own price elasticity of demand is:Ans: . Suppose that the quantity demanded of sirloin beef at Ithaca’s local butcher increased from 4 to 8 pounds per month when the price fell from $12.00 per pound to $10.00 per pound. Using the (midpoint) arc formula, calculate the own price elasticity of demand using this information.After taking the absolute value, the own price elasticity of demand is______________________ and demand would be said to beprice _________________________.. Suppose the perfectly competitive market for white rice has typical supply and completely elastic demand. At the market equilibrium, consumers’ surplus equals producers’ surplus.there is dead weight loss.consumers’ surplus is zero and producers’ surplus is social surplus is social surplus equals consumers’ surplus.left0Part II: Make sure you read and do ALL parts of each question. Show as much work as possible. TRY to get started on every question. Show us something. Write legibly and remember to label all graphs and axes in diagrams.020000Part II: Make sure you read and do ALL parts of each question. Show as much work as possible. TRY to get started on every question. Show us something. Write legibly and remember to label all graphs and axes in diagrams.Consider a week. SEQ CHAPTER \h \r 1Luke and Leia are stranded on a planet. They can produce only two things: food rations (R) and light sabers (S) using their time.Given 40 hours of work in a week, Luke can produce a maximum of 4 food rations or 10 light sabers, or any combination along a straight line PPF between the two.Given 40 hours of work in a week, Leia can produce a maximum of 5 food rations or 20 light sabers, or any combination along a straight line PPF between the two.Who has the absolute advantage in food ration production? Who has the comparative advantage in food ration production? Who has the comparative advantage in light sabers?Putting FOOD RATIONS (R) ON THE HORIZONTAL and LIGHT SABERS (S) ON THE VERTICAL graph Luke’s and Leia’s individual production possibility frontiers.Assume that Luke and Leia have not taken Econ 1110, and hence don’t know the wonders of trade. That is, they insist on self-producing everything. If Luke wants to make 2 food rations, how many light sabers, at most, can he make per week? If Leia wants to make 16 light sabers, how many food rations, at most, can she make per week? Show these points on each individual’s PPF.Putting FOOD RATIONS (R) ON THE HORIZONTAL and LIGHT SABERS (S) ON THE VERTICAL illustrate the efficient combined production possibility frontier for these two. For full credit make sure to label numerical values at endpoint on the joint PPF and at any kink spots on the joint PPF. Also label the steepness of any segments on your joint PPF.Suppose Luke and Leia continue to produce the output bundles you found in (c). Label this combined production point in your efficient PPF diagram from (d). Is this point efficient? Why or why not? ANSWERSANSWERSCTB bagels are sold in a perfectly competitive market by the dozen (or any fractional unit thereof).The “true” (as we called them in class) supply and demand curves for bagels are characterized by:QD = 210 - 10P (demand)QS = 5P (supply) where Q is measured in dozens and P is price per dozenCarefully graph the supply and demand curves for bagels. Be sure to label both axes and both curves and label the intercept values.What are the equations for the inverse demand and inverse supply curves you just drew?What are the equilibrium price and quantity in this market? On your graph illustrate and label these values as P* = ## and Q* = ##.Suppose that the major of Ithaca needs to raise revenue for a new social program and decides to do so by taxing bagels. Suppose that a tax of $6 per dozen is levied on bagel transactions and is collected from suppliers.Briefly explain why the market supply for bagels is now QS = -30 + 5P and draw this into your graph.What the new equilibrium quantity traded after the tax? Indicate this on your graph.What is the after tax demand price? And the after tax supply price? Indicate these on your graph.How much tax revenue is collected? Indicate this on your graph.Who will bear relatively more of the economic price incidence of the tax, and why?What is the value of the deadweight loss created by the tax? Indicate this on your graph.ANSWERSANSWERSANSWERS ................
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