Exam 1 Quiz Answers - Assignment Essays

question

A firm is more likely to increase its total revenue by decreasing the price of its product if:

answer

there are many close substitutes for its product.

question

A firm is most likely to monopolize a market whenever:

answer

economies of scale are large relative to market demand.

question

A key economic objection to unregulated, profit-maximizing monopoly is that in the short run monopolists:

answer

restrict output to levels at which their products are valued more than the marginal cost of producing them.

question

A recent hurricane destroyed half of the orange crop. Consumers are responding to an increase in the price of oranges by buying more apples. This change is expected to increase the price and quantity of apples sold. In terms of basic supply and demand analysis, there has been a:

answer

movement along the demand curve for oranges and a shift in the demand curve for apples.

question

A state legislature increased the tax on gasoline sold in the state from $.20 to $.30 per gallon. A supporter said the tax would "make the distribution of after-tax income in the state more equal." This statement would be true only if it could be shown that, after the tax is increased:

answer

people with high incomes tend to spend a larger proportion of their incomes on gasoline than people with low incomes.

question

As a firm increases its output level in the short run, the costs of producing additional units of output eventually increase because of:

answer

diminishing marginal returns.

question

At the profit-maximizing level of output, a perfectly competitive firm will:

answer

*produce the quantity of output at which marginal cost equals price

question

Government decisions that are more likely to suffer from the influence of special interest groups are typically ones that yield:

answer

large benefits for each individual in a small group and small losses for each individual in a large group.

question

If all of the firms in a competitive industry are legally required to meet new regulations that increase their costs of production:

answer

supply of the product will decrease.

question

If the exchange rate between dollars ($) and yen (¥) changes from $1 = ¥200 to $1 =¥100, and domestic prices in both countries stay the same, has the dollar appreciated or depreciated, and would U.S. imports from Japan become less expensive or more expensive?In the choices below the first item refers to the VALUE OF THE DOLLAR while the second refers to IMPORTS FROM JAPAN

answer

Depreciated More expensive

question

In a country where only two goods are produced and consumed, the production and consumption of Good X results in external benefits, while the production and consumption of Good Y results in external costs. Would unregulated markets produce too much or too little of Good X and Good Y, compared to the efficient output levels for these products?In the choices below the first item refers to GOOD X and the second refers to GOOD Y.

answer

Too little Too much

question

In an economy where heating oil is the primary source of heat for most households, new supplies of natural gas, a substitute for heating oil, are discovered. Natural gas provides heat at a much lower cost. What is the most likely effect of these discoveries on the market price and quantity of heating oil produced?For each of the choices below, the first item refers to the PRICE and the second item refers to the QUANTITY.

answer

Decrease Decrease

question

In Sunshine City, one local ice cream company operates in a competitive labor market and product market. It can hire workers for $45 a day and sell ice cream cones for $1.00 each. The table below shows the relationship between the number of workers hired and the number of ice cream cones produced and sold.As long as the company stays in business, how many workers will it hire to maximize profits or minimize losses?

answer

question

Many U.S. interstate highways are crowded with traffic, but tolls are not collected even when the highways are crowded. Which of the following is true about this no-toll policy?

answer

It is inefficient because each person's use of the interstate adds to the congestion.

question

One way in which monopolistic competition and oligopoly are similar is that, typically, in both kinds of industries:

answer

resources are underallocated to the production of goods and services produced by these firms at their profit-maximizing level of output.

question

Public goods are generally provided by government rather than private firms because:

answer

public goods can be used by one person without reducing the amount that is available to others.

question

Suppose a city facing a shortage of rental apartments eliminates rent controls. Which of the following is most likely to occur?

answer

an increase in rents and an increase in the number of apartment units supplied

question

Suppose the only two cola companies (Acola and Bcola) in a nation are deciding whether to charge high or low prices for their colas. The companies' price strategies are shown in the table below. The four pairs of payoff values show what each company expects toearn or lose in millions of dollars, depending on what the other company does.If both companies believe that most consumers are soon going to quit drinking colas, and switch to other products, what is the equilibrium outcome?

answer

Both Acola and Bcola will charge a low price.

question

The demand for a factor of production will usually be more elastic when:

answer

demand for the product the factor produces is highly elastic.

question

The demand for coffee increases and coffee producers begin earning economic profits.Assume the coffee industry is perfectly competitive. Compared to this new situation, in the long run how are the price of coffee and economic profits for coffee producers most likely to changeFor each of the choices below, the first item refers to the PRICEand the second item refers to ECONOMIC PROFITS.

answer

Decrease Decrease

question

"The effect of an excise tax on the products of pollution-producing industries will be a cutback in production. If the tax was levied directly on the amount of pollution generated, the long-run cutbacks in production would be much smaller." This statement is most likely to be:

answer

true, because firms would have a greater incentive to adopt new technology that causes less pollution.

question

The market demand for a product has increased if:

answer

more of the product can be sold at all possible prices.

question

The opportunity cost of being a full-time student at a university instead of working full- time at a job includes all of the following EXCEPT:

answer

payments for meals.

question

The table below shows the tons of rice and corn that can be produced in Country X andCountry Y in one year, using the same amount of productive resources.According to the theory of comparative advantage, what should firms in Country X do?

answer

export corn to Country Y and import rice

question

"Ticket prices for professional team sports are high because the team owners just pass the costs of the athletes' high salaries on to ticket buyers." Is this statement generally correct or incorrect? Why?

answer

Incorrect. High sports salaries contain "economic rent" and would not be so high if the public were unwilling to buy tickets at the high prices.

question

"To correct our balance of trade deficit, we should increase tariffs on imported goods." If tariffs are increased, the long-run effect is most likely to be:

answer

a decrease in both U.S. imports and exports.

question

"Water is essential to life, but inexpensive to buy." Which of the following best explains this observation?

answer

Water has a high total utility, but a low marginal utility.

question

Which of the following correctly describes an external benefit resulting from an individual's purchase of flu shots from a doctor?

answer

Flu shots reduce the likelihood of others catching the flu.

question

Which of the following is true for this profit-maximizing firm at price P in the graph above?

answer

It is currently earning short-run economic profits.

question

Which of the following statements is correct regarding profit-maximizing firms in the long run?

answer

In monopolistic competition, firms produce less than the output at which average total cost is minimized.

question

A consumer's utility defined over apples x is U(x)=x0.5. What is the expression for her/his/... marginal utility (MU) of apples?

answer

MU = 0.5 x-0.5

question

Consider the following function V=xy2z3. The partial derivative with respect to z is:

answer

3xy2z2

question

If utility is given by , then the person's MRS at the point x=5, y=2 is given by:

answer

0.4

question

Deriving the first-order conditions (FOCs) of an optimization problem is the same as "taking first-order derivatives of an objective function and setting those equal to zero".

answer

True

question

Theoretical and empirical models are one and the same.

answer

False

question

The Lagrange technique is used to convert unconstrained optimization problems into constrained optimization problems.

answer

False

question

In any given maximization problem, as long as the first-order conditions (FOCs) are met, we must be at a maximum. For example, as long as the FOCs for utility maximization are met, the consumer must be at the highest possible utility level.

answer

False

question

The Lagrange multiplier is just a clever mathematical trick. It has no economic interpretation/content.

answer

False

question

The reason why panel data is superior to either cross-section or time series is because it combines the two.

answer

True

question

Which of the following are examples of panel data?

answer

All of the above

question

Indifference curves:

answer

are convex if the utility function is quasi-concave

question

Which of these utility functions represent the same preferences as ?

answer

All of the above

question

If an individual's utility function is quasi-concave, MRS will:

answer

diminish as x is substituted for y

question

If utility is given by then the bundle (3,2) provides the same utility as the bundle:

answer

(4,1)

question

Quasilinear utility is a typical example of homothetic preferences.

answer

False

question

If A> B and B>C , then it must be that C>A .

answer

False

question

Quasiconcavity of the utility function is the same as convexity of indifference curves, which is also the same as diminishing MRS.

answer

True

question

"If an individual is to maximize the utility received from consumption, he or she should spend all available income. . . ." This statement assumes:

answer

that saving is impossible.

question

Suppose an individual's MRS (of steak for beer) is 2:1. That is, at the current consumption choices he or she is willing to give up 2 beers to get an extra steak. Suppose also that the price of a steak is $1 and a beer is $4. Then in order to increase utility the individual should:

answer

buy more beer and less steak.

question

Suppose that at current consumption levels an individual's marginal utility of consuming an extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2. Then the MRS (of soft drinks for hot dogs)—that is, the number of hot dogs the individual is willing to give up to get one more soft drink—is:

answer

1/5

question

If an individual's indifference curve map does not obey the assumption of a diminishing MRS, then:

answer

tangencies of indifference curves to the budget constraint may not be points of utility maximization

question

An increase in an individual's income without changing relative prices will:

answer

shift the budget constraint outward in a parallel way.

question

If an individual's utility function for coffee (x) and cream (y) is given by U(x,y)=min(x,5y), the demand function for coffee is given by:

answer

x = I/(px+0.2py)

question

Suppose a person has a quasi-linear utility function of the form U(x,y)= x+2lny. If px=1, py=2, I=10, what is the utility maximizing commodity bundle?

answer

(8,1)

question

The Y-intercept of Y=3X+8 is

answer

question

The slope of a nonlinear function at some particular point

answer

is the slope of the straight line that is tangent to the function at that point

question

Given Y = f(x,z) which of the following are necessarily true?

answer

A contour line of this function would keep Y constant

question

For the equation Y=X^2+Z^2, which of the following points lie on the Y=25 contour line?

answer

x=4 z=3

question

If bundle A lies on an indifference curve and bundle B lies to the right of the curve, the individual

answer

prefers bundle B to bundle A

question

If the price of X falls, the budget constraint

answer

rotates outward about the Y-intercept

question

Suppose a little girl likes peanut butter and jelly sandwiches with exactly 2T of jelly and 1T of peanut butter. Suppose further that her mom agrees to make sandwiches to those exact specifications and the price of peanut butter is $.25/T and the price of jelly is $.10/T. If she has $1.80 to spend on peanut butter and jelly ingredients (ignore the bread) in a week, how many sandwiches will she make?

answer

question

If a person's indifference curves can be represented as a straight line, the person views the goods as

answer

perfect substitutes

question

Suppose a person has $20 and likes both rap music (R) and country music (C) with a set of preferences so that . Suppose that the iTunes price of a rap music song is and the price of a country music song is . What is the lowest level of utility that is unaffordable?

answer

question

Suppose an individual's MRS (of steak for beer) is 2:1. That is, at the current consumption choices he or she is willing to give up 2 beers to get an extra steak. Suppose also that the price of a steak is $1 and a beer is 25¢. Then in order to increase utility the individual should

answer

buy more beer and less steak.

question

answer

1/5

question

If an individual's indifference curve map does not obey the assumption of a diminishing MRS, then

answer

tangencies of indifference curves to the budget constraint may not be points of utility maximization

question

Let Qd=-5P+54 and Qs=P-6. Here equilibrium price and quantity are

answer

Q=4, P=10

question

The point of tangency between a consumer's budget constraint and his or her indifference curve represents

answer

constrained utility maximization for the consumer

question

Suppose a cup of coffee at the campus coffee shop is $2.50 and a cup of hot tea is $1.25 and that a student's beverage budget is $20 per week. If you were going to write an algebraic expression of this budget line of the form Coffee = A+BTea. B would be

answer

-1/2

question

If people like their goods in fixed proportions, the two goods are

answer

perfect complements

question

A major problem that may occur with models that predict the values of economic variables in the future is that

answer

the model may fail to acknowledge that economic actors will change their behavior in response to changing situations

question

If Y=X^2+Z^2 , the contour lines

answer

are concentric circles

question

If the prices of all goods increase by the same proportion as income, the quantity demanded of good x will:

answer

remain unchanged.

question

Demand functions are "homogeneous of degree zero in all prices and income." This means:

answer

a proportional increase in all prices and income will leave quantities demanded unchanged.

question

Consider the two following statements:

I. x is an inferior good.II. x exhibits Giffen's Paradox.
Which of the following is true?

answer

II implies I, but I does not necessarily imply II.

question

Which of the following will not cause a demand curve to shift position?

answer

A doubling of the good's price

question

Consider the following three concepts:
I. Marshall Demand [x=x(px,py,I)].II. Indirect Utility [V=V(px,py,U)].III. Compensated Demand [x=x^c(px,py,U)].
Which of these functions is necessarily homogeneous of degree zero in all its argument?

answer

Only I

question

If a rise in the price x causes less y to be demanded:

answer

x and y are gross complements

question

With only two goods, x and y, if x and y are gross substitutes, a rise in px must necessarily:

answer

increase spending in y

question

With the Cobb-Douglas utility function U=(xy)^1/2, x and y are:

answer

net substitutes and neither gross substitutes or complements

question

In the Slutsky equation for partial x/partial py, the income effect is given by:

answer

y * partial x/I

question

"Hicks' Third Law of Demand" states that "most" goods must be:

answer

net substitutes.

question

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where. Px=Py

answer

U=X+Y

question

With only two goods, if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is

answer

inferior but not Giffen

question

If a good is normal and its price increases,

answer

the income effect will be negative and the substitution effect will be negative.

question

Suppose U=min(X,Y) and the price of X is 1, the price of Y is 1 and income is $12. If the price of X increases to 2, the income effect (in terms of units of X bought) is

answer

-2

question

An individual's demand curve

answer

all of the above.

question

A decrease in demand is represented by

answer

a shift inward of the entire demand curve.

question

Suppose demand can be written as PQ=1000. The price elasticity of demand is

answer

constant regardless of prices and unit elastic.

question

In the picture above the point A2 is half way between the origin and the quantity intercept of the demand curve. The price elasticity at point "2" is

answer

-1

question

If the income elasticity of demand is 2, the good is

answer

a luxury

question

In Homogenia everyone is the same. Demand for apples is P=A-Bq for each of its 1 million citizens. Market demand for apples in Homogenia is given by the equation

answer

P=A-Bq/1,000,000

question

Suppose the "poor" and "rich" have identical demand functions for good X but only differ in income (I): qx=1000+I-50px-20py At a given price of X, the price elasticity of their individual demand curves is such that

answer

the poor person's demand is more elastic than the rich person's

question

If demand is elastic, a decrease in quantity will cause the total spending (PxQ) to

answer

fall

question

The price elasticity of demand for any good must be less than or equal to zero unless

answer

the good is a Giffen good

question

If goods X and Y are complements, then the cross price elasticity of demand between them will be

answer

negative

question

Suppose two goods coffee and creamer provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield

answer

an income effect but no substitution effect

1 of 97

question

A firm is more likely to increase its total revenue by decreasing the price of its product if:

answer

there are many close substitutes for its product.

question

A firm is most likely to monopolize a market whenever:

answer

economies of scale are large relative to market demand.

question

A key economic objection to unregulated, profit-maximizing monopoly is that in the short run monopolists:

answer

restrict output to levels at which their products are valued more than the marginal cost of producing them.

question

answer

movement along the demand curve for oranges and a shift in the demand curve for apples.

question

answer

people with high incomes tend to spend a larger proportion of their incomes on gasoline than people with low incomes.

question

As a firm increases its output level in the short run, the costs of producing additional units of output eventually increase because of:

answer

diminishing marginal returns.

question

At the profit-maximizing level of output, a perfectly competitive firm will:

answer

*produce the quantity of output at which marginal cost equals price

question

Government decisions that are more likely to suffer from the influence of special interest groups are typically ones that yield:

answer

large benefits for each individual in a small group and small losses for each individual in a large group.

question

If all of the firms in a competitive industry are legally required to meet new regulations that increase their costs of production:

answer

supply of the product will decrease.

question

answer

Depreciated More expensive

question

answer

Too little Too much

question

answer

Decrease Decrease

question

answer

question

Many U.S. interstate highways are crowded with traffic, but tolls are not collected even when the highways are crowded. Which of the following is true about this no-toll policy?

answer

It is inefficient because each person's use of the interstate adds to the congestion.

question

One way in which monopolistic competition and oligopoly are similar is that, typically, in both kinds of industries:

answer

resources are underallocated to the production of goods and services produced by these firms at their profit-maximizing level of output.

question

Public goods are generally provided by government rather than private firms because:

answer

public goods can be used by one person without reducing the amount that is available to others.

question

Suppose a city facing a shortage of rental apartments eliminates rent controls. Which of the following is most likely to occur?

answer

an increase in rents and an increase in the number of apartment units supplied

question

answer

Both Acola and Bcola will charge a low price.

question

The demand for a factor of production will usually be more elastic when:

answer

demand for the product the factor produces is highly elastic.

question

answer

Decrease Decrease

question

answer

true, because firms would have a greater incentive to adopt new technology that causes less pollution.

question

The market demand for a product has increased if:

answer

more of the product can be sold at all possible prices.

question

The opportunity cost of being a full-time student at a university instead of working full- time at a job includes all of the following EXCEPT:

answer

payments for meals.

question

answer

export corn to Country Y and import rice

question

answer

Incorrect. High sports salaries contain "economic rent" and would not be so high if the public were unwilling to buy tickets at the high prices.

question

"To correct our balance of trade deficit, we should increase tariffs on imported goods." If tariffs are increased, the long-run effect is most likely to be:

answer

a decrease in both U.S. imports and exports.

question

"Water is essential to life, but inexpensive to buy." Which of the following best explains this observation?

answer

Water has a high total utility, but a low marginal utility.

question

Which of the following correctly describes an external benefit resulting from an individual's purchase of flu shots from a doctor?

answer

Flu shots reduce the likelihood of others catching the flu.

question

Which of the following is true for this profit-maximizing firm at price P in the graph above?

answer

It is currently earning short-run economic profits.

question

Which of the following statements is correct regarding profit-maximizing firms in the long run?

answer

In monopolistic competition, firms produce less than the output at which average total cost is minimized.

question

A consumer's utility defined over apples x is U(x)=x0.5. What is the expression for her/his/... marginal utility (MU) of apples?

answer

MU = 0.5 x-0.5

question

Consider the following function V=xy2z3. The partial derivative with respect to z is:

answer

3xy2z2

question

If utility is given by , then the person's MRS at the point x=5, y=2 is given by:

answer

0.4

question

Deriving the first-order conditions (FOCs) of an optimization problem is the same as "taking first-order derivatives of an objective function and setting those equal to zero".

answer

True

question

Theoretical and empirical models are one and the same.

answer

False

question

The Lagrange technique is used to convert unconstrained optimization problems into constrained optimization problems.

answer

False

question

answer

False

question

The Lagrange multiplier is just a clever mathematical trick. It has no economic interpretation/content.

answer

False

question

The reason why panel data is superior to either cross-section or time series is because it combines the two.

answer

True

question

Which of the following are examples of panel data?

answer

All of the above

question

Indifference curves:

answer

are convex if the utility function is quasi-concave

question

Which of these utility functions represent the same preferences as ?

answer

All of the above

question

If an individual's utility function is quasi-concave, MRS will:

answer

diminish as x is substituted for y

question

If utility is given by then the bundle (3,2) provides the same utility as the bundle:

answer

(4,1)

question

Quasilinear utility is a typical example of homothetic preferences.

answer

False

question

If A> B and B>C , then it must be that C>A .

answer

False

question

Quasiconcavity of the utility function is the same as convexity of indifference curves, which is also the same as diminishing MRS.

answer

True

question

"If an individual is to maximize the utility received from consumption, he or she should spend all available income. . . ." This statement assumes:

answer

that saving is impossible.

question

answer

buy more beer and less steak.

question

answer

1/5

question

If an individual's indifference curve map does not obey the assumption of a diminishing MRS, then:

answer

tangencies of indifference curves to the budget constraint may not be points of utility maximization

question

An increase in an individual's income without changing relative prices will:

answer

shift the budget constraint outward in a parallel way.

question

If an individual's utility function for coffee (x) and cream (y) is given by U(x,y)=min(x,5y), the demand function for coffee is given by:

answer

x = I/(px+0.2py)

question

Suppose a person has a quasi-linear utility function of the form U(x,y)= x+2lny. If px=1, py=2, I=10, what is the utility maximizing commodity bundle?

answer

(8,1)

question

The Y-intercept of Y=3X+8 is

answer

question

The slope of a nonlinear function at some particular point

answer

is the slope of the straight line that is tangent to the function at that point

question

Given Y = f(x,z) which of the following are necessarily true?

answer

A contour line of this function would keep Y constant

question

For the equation Y=X^2+Z^2, which of the following points lie on the Y=25 contour line?

answer

x=4 z=3

question

If bundle A lies on an indifference curve and bundle B lies to the right of the curve, the individual

answer

prefers bundle B to bundle A

question

If the price of X falls, the budget constraint

answer

rotates outward about the Y-intercept

question

answer

question

If a person's indifference curves can be represented as a straight line, the person views the goods as

answer

perfect substitutes

question

answer

question

Suppose an individual's MRS (of steak for beer) is 2:1. That is, at the current consumption choices he or she is willing to give up 2 beers to get an extra steak. Suppose also that the price of a steak is $1 and a beer is 25¢. Then in order to increase utility the individual should

answer

buy more beer and less steak.

question

answer

1/5

question

If an individual's indifference curve map does not obey the assumption of a diminishing MRS, then

answer

tangencies of indifference curves to the budget constraint may not be points of utility maximization

question

Let Qd=-5P+54 and Qs=P-6. Here equilibrium price and quantity are

answer

Q=4, P=10

question

The point of tangency between a consumer's budget constraint and his or her indifference curve represents

answer

constrained utility maximization for the consumer

question

answer

-1/2

question

If people like their goods in fixed proportions, the two goods are

answer

perfect complements

question

A major problem that may occur with models that predict the values of economic variables in the future is that

answer

the model may fail to acknowledge that economic actors will change their behavior in response to changing situations

question

If Y=X^2+Z^2 , the contour lines

answer

are concentric circles

question

If the prices of all goods increase by the same proportion as income, the quantity demanded of good x will:

answer

remain unchanged.

question

Demand functions are "homogeneous of degree zero in all prices and income." This means:

answer

a proportional increase in all prices and income will leave quantities demanded unchanged.

question

Consider the two following statements:

I. x is an inferior good.II. x exhibits Giffen's Paradox.
Which of the following is true?

answer

II implies I, but I does not necessarily imply II.

question

Which of the following will not cause a demand curve to shift position?

answer

A doubling of the good's price

question

answer

Only I

question

If a rise in the price x causes less y to be demanded:

answer

x and y are gross complements

question

With only two goods, x and y, if x and y are gross substitutes, a rise in px must necessarily:

answer

increase spending in y

question

With the Cobb-Douglas utility function U=(xy)^1/2, x and y are:

answer

net substitutes and neither gross substitutes or complements

question

In the Slutsky equation for partial x/partial py, the income effect is given by:

answer

y * partial x/I

question

"Hicks' Third Law of Demand" states that "most" goods must be:

answer

net substitutes.

question

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where. Px=Py

answer

U=X+Y

question

With only two goods, if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is

answer

inferior but not Giffen

question

If a good is normal and its price increases,

answer

the income effect will be negative and the substitution effect will be negative.

question

Suppose U=min(X,Y) and the price of X is 1, the price of Y is 1 and income is $12. If the price of X increases to 2, the income effect (in terms of units of X bought) is

answer

-2

question

An individual's demand curve

answer

all of the above.

question

A decrease in demand is represented by

answer

a shift inward of the entire demand curve.

question

Suppose demand can be written as PQ=1000. The price elasticity of demand is

answer

constant regardless of prices and unit elastic.

question

In the picture above the point A2 is half way between the origin and the quantity intercept of the demand curve. The price elasticity at point "2" is

answer

-1

question

If the income elasticity of demand is 2, the good is

answer

a luxury

question

In Homogenia everyone is the same. Demand for apples is P=A-Bq for each of its 1 million citizens. Market demand for apples in Homogenia is given by the equation

answer

P=A-Bq/1,000,000

question

answer

the poor person's demand is more elastic than the rich person's

question

If demand is elastic, a decrease in quantity will cause the total spending (PxQ) to

answer

fall

question

The price elasticity of demand for any good must be less than or equal to zero unless

answer

the good is a Giffen good

question

If goods X and Y are complements, then the cross price elasticity of demand between them will be

answer

negative

question

Suppose two goods coffee and creamer provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield

answer

an income effect but no substitution effect

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