Microeconomics Exam 2: Auburn, Bannerjee

The demand curve for wool (in lbs) is Qd=300-2P, and the supply curve of wool (in lbs) is given as Qs=P-30

1. What impact would a price floor of &79.50 have in the same market for wool above? P4
a. There would be a shortage of wool
b. There would be a surplus of wool
c. There would be no impact, as the price floor is ineffective
d. The producer will reduce the quantity of wool supplied

Consider the table for demand and supply in the market.
P 0 10 20 30 40 50 60
Qd 600 500 400 300 200 100 0
Qs 0 200 250 300 350 400 450

2. If the gov't sets a price ceiling of $10 in the flashlight market, which of the following would you expect to see? P4
a. A shortage of 300 flashlights.
b. A surplus of 300 flashlights.
c. A surplus of 200 flashlights.
d. This price ceiling is ineffective, so none of the above would occur.

3. If instead of a price ceiling, the gov't institutes a quota of 200 in the same market, what price will be charged in the market? P4
a. $10
b. $20
c. $30
d. $40

4. As a result of a 200-unit quota in the flashlight market, what would the new customer surplus be? P4
a. $2,000
b. $4,000
c. $8,000
d. $6,000

5. Deadweight loss as a result of the 200-unit quota in the flashlight market will be equal to ___ P4
a. $1,000
b. $1,500
c. $2,500
d. $3,000

6. If the demand elasticity for good X is 1.33, and the supply elasticity for X is 0.42, who will pay a greater share of a tax imposed in the market? P4
a. producers
b. consumers
c. The tax will be shared equally between consumers and producers
d. the government

7. In the market for Basketball game tickets graphed above, what is the deadweight loss resulting from $2 excise tax imposed in the market? P4
a. $2
b. $10
c. $10.50
d.$11.50

8. The current equilibrium price in the market for handheld GDP units is $229. The gov't is considering placing a tax of $2 per unit in the market. If the price elasticity of demand is 3.6, and the price elasticity of supply is 1.8, which of the following might you expect to see as a result of the $2 tax? P4
a. The price consumers pay rises to $231
b. The price consumers pay rises to $230
c. The price consumers pay rises to $229.67
d. The price consumers pay rises to $230.50

1. The market demand for Widgets is given by P=-2Qd+40. The market supply for Widgets is given by P=1/2Qs+10. The equilibrium price of Widgets is ___, and the equilibrium quantity of Widgets is ___. P5
a. $16, 16
b. $12, 5
c. $16, 12
d. $40, 10

2. Given market demand and supply in the market for Widgets above, in the equilibrium the consumer surplus is ___ and the producer surplus is ___? P5
a. $110, $56
b. $144, $36
c. $288, $70
d. $40, $76

3. Phillip can consumer Pizza or Beer. The table below gives combinations of Pizzas and Beers that are on his budget line. If the price of a Pizza is $8, then his income is ___ and the price of beer is ___. P5

Possibility A B C D
Pizzas/month 5 4 1 0
Beer/month 0 1 4 5

a. $40, $5
b. $40, $8
c. $32, $8
d. $8, $60

4. Maggie has a weekly income of $50 to spend on books and CDs. If the price of a book is $10 and that of a CD is $5, what is Maggie's budget constraint? Let B= # books and C= # CDs P5
a. 5C+50B=10
b. 10B+5C=50
c. 10B+50C=10
d. B/10+C/5=50

Frank has a weekly income of $100 to spend on Beers and Donuts. The price of a Beer is $5 and that of a Donut is $2.

5. If Frank's income increases his budget line: P5
a. shifts to the right
b. shifts to the left
c. Does not change
d. Changes slope

6. Chris has $80 a week that he spends on widgets and gadgets. A widget costs $5 and a gadget costs $8. One week, Chris spent all of his income and found that the marginal utility from the last widget was 30 and the marginal utility from the last gadget was 24. Chris knows that he is not maximizing his total utility. To increase his utility, what should Chris do?
a. Chris should buy more of both widgets and gadgets
b. Chris should buy fewer widgets and gadgets
c. Chris should buy more widgets and fewer gadgets
d. Chris should buy fewer widgets and more gadgets

7. The decrease in marginal utility as the quantity of the good consumed increases is called:
a. The principle of increasing marginal utility
b. The principle of decreasing marginal utility
c. The law of supply
d. The law of diminishing diminishing returns

8. Ann has a weekly income of $60 to spend in magazines and lattes. The price of a magazine is Pm=$12 and the price of a latte is Pl=$6.
The table below shows Ann's consumption possibilities and her Marginal Utility from magazines and lattes.
Consump. Pos. B C D E
Qm 1 2 3 4
MUm 100 76 66 58
Ql 8 6 4 2
MUl 34 38 56 84

If Ann maximizes her utility she consumes: P5
a. 1 magazine, 8 lattes
b. 2 magazines, 6 lattes
c. 3 magazines, 4 lattes
d. 4 magazines, 2 lattes

9. When the price of a good increases the marginal utility per dollar P5
a. increases and the quantity demanded increases
b. decreases and the quantity demanded decreases
c. decreases and demand increases
d. increases and the quantity demanded decreases

10. Which of the following statements about an individual's indifference curves an ordinary goods is true? P5
a. they have a constant slope
b. they represent the combinations of goods which a household can afford given its income and the goods' prices
c. they can intersect
d. they cannot intersect