Economics 101



Econ 1110 - INTRODUCTORY MICROECONOMICSPRELIM #1 – Wissink – Spring 2020 – March 3________________________________________ ____________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId:_________________ Your 7-digit Student Number:________________________________One more time, please…Econ 1110 - INTRO MICRO - PRELIM #1 – Wissink – Spring 2020 – March 3________________________________________ ____________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId:_____________________ Your 7-digit Student Number:__________________________left512712 Jisu Hwang Sal Lanci Siguang Li(was Derek)Bin ZhaoLilac Zhao 020000 Jisu Hwang Sal Lanci Siguang Li(was Derek)Bin ZhaoLilac Zhao Please circle a TA name – you will pick up your graded exam from the TA you circled during section or at his/her office hours.Instructions and Exam Taking Policy:There are two sections in this exam. Do them both. Answer all questions.Total Points = 100Total Time = 90 minutesPart I: 16 multiple choice/fill in the blank questions @ 3 points eachPart II: 2 problems @ 26 points eachNO 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.NOTE: This table is for TA grading purposes only. Your total score on this prelim will be posted on CMS once all the data is merged and processed.Problem 1Problem 22163096350Part I: Multiple Choice. ON THE COVER PAGE completely circle in the bubble to register your answer. We will ONLY USE YOUR COVER PAGE ANSWERS.020000Part I: Multiple Choice. ON THE COVER PAGE completely circle in the bubble to register your answer. We will ONLY USE YOUR COVER PAGE ANSWERS.. Which one of the following is primarily a normative statement?The increase in the cost of health care has outpaced inflation over the past decade.An increase in the price of a movie ticket will lead to a decrease movie attendance.The US should do more to combat climate change.Recent data has shown a decrease in life expectancy for adults living in the US.The US is a major exporter of agricultural products.. Mike and Louis work at a coffee shop. Their time can be divided between making lattes or ringing up customers at the cash register. Mike can make 30 lattes per hour, or he can ring up 50 customers per hour, or any linear combination of both. Louis is a new employee and so he can only make 15 lattes per hour or in an hour he can only ring up 30 customers, or any linear combination of both. Which one of the following statements is definitely false?Mike has an absolute advantage in both making lattes and ringing up customers.Louis has a comparative advantage in ringing up customers.Mike has a comparative advantage in making lattes.It is possible for Mike and Louis together to ring up 20 customers and make 40 lattes in one hour.It is possible for Mike and Louis together to ring up 30 customers and make 30 lattes in one hour.Number per hour:LattesRing UpsMike3050Louis1530Anne4040Stephanie2030. Suppose Mike and Louis from above have two other coworkers, Anne and Stephanie. The table shows how many lattes each worker can make and how many customers they can ring up per hour. Each of them can work any linear combination of making lattes or ringing up customers, provided they do not run out of time. The group decides to split the tasks efficiently between themselves. Suppose they need to ring up 55 customers and make 75 lattes in one hour. Given that information, which one of the following statements is false?Someone will have time for a short break.Louis is only ringing up customers.Anne is only making lattes.Stephanie is only making lattes.Mike both makes lattes and rings up customers.DollsRobotsAmyPoint A124Point B106BertPoint C44Point D63. Amy and Bert use their time each week to make dolls and robots. Suppose their individual production possibilities frontiers (PPFs) are linear. The table shows two particular production points on Amy’s PPF and two particular points on Bert’s PPF. Based on the data in the table, which statement below is definitely correct?Bert has a comparative advantage in making dolls.Amy has an absolute advantage in making dolls, but Bert has an absolute advantage in making robots.Amy has a comparative advantage in making dolls.Bert’s marginal opportunity cost of making a doll is 2 robots.None of the aboveLabor Input RequiredFor each poundof WheatFor each yardof FabricChina12.5 hours25 hoursSouth Korea30 hours10 hours. China and South Korea both produce wheat and fabric with labor. Labor is measured in hours, wheat is measured in pounds and fabric is measured in yards. The table shows labor hours required to produce a unit of wheat and a unit of fabric in each country. If the two countries efficiently produce together and trade with each other, which one of the following statements is true?The price of a yard of fabric might be 3 pounds of wheat.The price of a yard of fabric might be ? a pound of wheat.The price of a yard of fabric might be 1 pound of wheat.The price of a pound of wheat might be 4 yards of fabric.Only one of the countries can benefit from trade.. Which one of the following does not cause the supply curve for ice cream to shift?A change in the number of ice cream manufacturersA change in the price of ice creamA change in the price of cream used to make ice creamA change in the production method for making ice creamA change in opportunity cost ice cream makers face for the value of their time. Suppose the demand function for PlayStation consoles is typically shaped and written as follows: QD = 900 – 8L + 2M – 4N. PlayStation consoles are always normal goods. Which one of the following is most true?Variable M could represent the price of PlayStation consoles.Variable M could represent the price of PlayStation game CDs, which are complements to PlayStation consoles.Variable N could represent the income of consumers.Variable L could represent the price of Xbox consoles, which are substitutes for PlayStation consoles.Variable M could represent the price of Nintendo Switch consoles, which are substitutes for PlayStation consoles.. Last week, buying a pound of strawberries cost $6 for Ethan in a perfectly competitive market. This week, one of the local grocery stores had to shut down, decreasing the number of sellers in the market. When Ethan went to buy strawberries, he found that the price for strawberries was now $4 per pound. Which event below could reasonably explain this?At the same time, demand for strawberries decreased more than supply decreased.At the same time, demand for strawberries decreased less than supply decreased.At the same time, demand for strawberries increased a lot.At the same time, the cost of strawberry fertilizer increased.At the same time, the government imposed a quantity quota on the strawberry market.. Suppose the market for maple syrup in New York is perfectly competitive with typically shaped supply and demand curves. Suppose a technological innovation makes it easier and faster to make and bottle syrup. Simultaneously suppose that medical experts convince consumers that maple syrup is far too sugary to be healthy. At the new market equilibrium, which one of the statements below is correct?Both quantity and price will increase, and so total expenditures must also increase.Both price and quantity will decrease, and so total expenditures must also decrease.Total expenditure will remain the same, but the changes to price and quantity cannot be determined from these events.Quantity will decrease, while changes to price and total expenditures cannot be determined from these events.The price will decrease, while the changes to quantity and total expenditures cannot be determined from these events.NameWillingness to Pay ($)Eric16Sakura12Mateo14Damond11Shasha9Mikko10. The table reports on six consumers and how much each one of them would be willing to pay for an hour-long guitar lesson. Added over these six people, what is the value of consumers’ surplus if the current market price for a guitar lesson is $10 per hour?$72$12$13$0$6038176209842500. The figure shows the market demand and supply for taxi rides with the price in $/mile and quantity in miles. The market is initially in equilibrium at a price of $4/mile and a quantity of 500 miles. Suppose the government places a price floor of $5/mile on this market. Consider the following statements as a result on the implemented price floor:There is now a shortage in the market.The price floor has no effect. The new regulated equilibrium price is $5/mile.The new regulated equilibrium market quantity traded is 625 miles.The new regulated equilibrium market quantity traded is 400 miles.Referencing statements 1-5 above, which one of the following options is most accurate?Only statement 1 is correct.Only statement 2 is correct.Statements 1 and 3 are correct.Statements 3 and 4 are correct.Statements 3 and 5 are correct.. Consider the market for taxi rides again. Suppose the government places a quantity quota of Q = 400 on this market. This policy will result in which consequence?The market price will fall to below $4/mile.A surplus of 100 will emerge in the taxi rides market.The market price will rise to $5/mile.Demand will fall.Gains from trade will rise.PriceQuantityDemandedQuantitySupplied$1,12503,600$1,0002402,940$8755402,340$7508401,800$6251,2401,240$5001,800840$3752,340540$2502,940240$1253,6000. The table shows demand and supply information for the market for tablet computers. The government has impacted the market with a policy and consequently 540 tablets are traded. Which one of the following is correct?The government imposed a quota of 1,240 tablets.The government imposed a price ceiling of $875.The government imposed a price floor of $875.The government imposed a quota of 240 tablets.The government imposed a floor of $375.. Consider the market graphs for X, Y and Z as illustrated. The government plans to place a tax of $t/unit on one of these markets. In which market would this tax generate the most revenue for the government?We do not have enough information to know.The same amount of revenue is generated in each market.Market XMarket YMarket Z. Consider the market graphs for X, Y and Z again. At the market equilibrium without any taxes, which one of the following statements is true?There is no net social surplus created in the market for Z.There is no consumers’ surplus generated in market Y.There is more producers’ surplus in market X than in market social surplus is evenly split between demanders and suppliers in all three markets.Market Z creates the least amount of consumers’ surplus.24623666270100. The graph shows the perfectly competitive market for coffee mugs. Suppose the demand for mugs increases so that the new equilibrium quantity is 60 mugs. What is the resulting change in producers’ surplus?+$180+$150+$130-$150-$120left-74295Part II: Make sure you read and do ALL parts of each question. Show as much work as possible. TRY to get started on every question. Show us something. Write legibly and remember to label all graphs and axes in diagrams.020000Part II: Make sure you read and do ALL parts of each question. Show as much work as possible. TRY to get started on every question. Show us something. Write legibly and remember to label all graphs and axes in diagrams.1. Consider the market for bus ridership in Ithaca, New York. Suppose that the supply and demand curves are given by: QD = 120 - 10P and QS = 5P. Suppose that the market is perfectly competitive, that prices are in U.S. dollars ($) per mile ridden on the bus, and output is measured in miles ridden on the bus. Fractional answers are allowed.Carefully graph the demand and supply curves as we have done in class. Make sure to label both axes, both curves and indicate values where demand and supply intersect the vertical and horizontal axes.Determine the equilibrium price and quantity in this market. Label the equilibrium price and quantity on your graph. Include their numerical values on your graph.Suppose the local government (in the interest of being more “green”) wants to increase the number of miles ridden on its buses. It believes that the price per mile is just too high for people to bother to use the bus. Therefore, the government enacts a price ceiling of $3 per mile. Analyze the consequence of this policy on the market. Be as thorough as you can be with respect to the after policy price, quantity and consequences. Make sure you illustrate your analysis in your graph.Does this policy create any deadweight loss, and if so, what is its value and where is this concept illustrated in your graph?If you were hired as a consultant, would you endorse this policy? Offer a policy suggestion that improves on the outcome of the price ceiling. Briefly defend/explain.Answer Space:Answer Space:2. Suppose Abe and Betty are in a team doing a group project in a math class. There are two tasks they need to do for the project: type the written report and solve quadratic equations. The following table shows how many units of each task each person can do with each hour he or she devotes to that task. Assume that each person will devote a total of 20 hours to the project’s tasks.PersonNumber of words typed in each hourNumber of equations solved in each hourAbe100 words200 equationsBetty200 words100 equationsPutting equations (E) on the horizontal and words (W) on the vertical draw Abe’s and Betty’s production possibility frontiers (PPF). Make sure to place numerical values at each endpoint and at any kink points.Who has the comparative advantage in each task? Explain why.Assume the two decide to get tasks done cooperatively and efficiently. Draw their combined PPF and remember to label each endpoint and any kink points with numerical values. Indicate who specializes in the production of what task on each line segment of this PPF.What are the values for the marginal opportunity cost of solving equations along each segment of their combined PPF? For full credit make sure you indicate units of measurement.Suppose Abe tires after spending 10 hours solving equations and once he tires, he can only solve 25 equations in an hour. Re-draw your combined PPF to reflect this reality wrinkle. Label each endpoint and kink point with numerical values. Indicate who is doing what as the team moves along the joint PPF from making only words to only solving equations.What production point along the combined PPF is best?Answer Space:Answer Space: ................
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