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government would raise an indeterminate amount of revenue, and the number of bottles sold would be constant (d) the price of wine would rise by less than SI. die government woidd receive one million dollars in weekly revenues, and consumption woidd be constant (e) none of the above

48. \Miich of the following woidd raise the opportunity cost of carrot production? (a) more profitable opportunities for growing brussel sprouts, the farmers next best opportunit) (b) less profitable opportunities for growing brussel sprouts (c) technical advances in die growing of carrots (d) a change in tastes ill favor of carrots (e) none of the above.

49. \ 1 11 of the following is iiicompadble with rice being an inferior good? (a) as consumers incomes increase, expenditure on rice goes down (b) as economic growth occurs, the size of the rice industry contracts (c) wealthy people prefer rice to potatoes (d) an economic recession increases the price of rice (e) consumers spend a constant fraction of their incomes on rice.

50. The cross elasticit) of demand for pens with respect to ink is -1.5. In this case: (a) an increase in ink prices of 15% leads to a fall in expenditure on pens of 10% (b) an increase in ink prices of 10% leads to a 15% increase in exp)enditure on pens (c) an increase in ink prices of 10% increases the volume of pens sold by 15% (d) an increase in ink prices of 10% reduces the volume of pens sold by 15% (e) an increase in ink prices of 15% reduces the volume of pens sold by 10%.

51. To say that demand curve "A" is more elastic than demand curve "B" nieans that: (a) any point on demand curve "A" has a greater elasdcity than every possible point on demand curve "B" (b) "A" is more elasdc when we compare elasticides at the same quantit) only (c) "A" is more elasdc when we compare elasticides at die same price only (d) die more elastic curve must be non-linear (e) none of these.

52. If two linear demand cur\es are parallel, dien at any common (non-zero) price: (a) the outer is the more elasdc (b) they are equally elastic (c) they are both unit elastic (d) the outer is less elastic (e) the outer may be more or less elastic than the inner

53. The income elasticities of goods x and and

their cross price elasticities wiih respect to good z are as follows;

Income El:isticity Cross Price Elastirirv Good X 1A + .20 ~~

Good V ,08 - .80

We would conclude diat: (a) both goods are normal good z is a onipleniem to good x, and good z is a substitute for good ) (b) good x is normal, good is inferior, good z is a SLib.suiute for good x, and good z is a complement to good \ (c) good x is inferior, good is normal, good z is a complement to good x, and good z is a .subsutuie for good (d) neither good is normal, ? good z is a complement to good x, and good z is a sub- sdiute for good (e) both goods are normal, good zt is a substitute for good x, and good z is a complemeni to good y.

54. If a rcce.ssion occurs just as the airlines simuK laneously introduce their new fleets of fuel efficien planes, we would predict: (a) air fares to increas< (b) air fares to decrease (c) decreased air trave (d) increased air travel (e) both air fares and the vol ume of air travel will increase.

55. If an improved technique for manufacturinj margarine is introduced, we would predict that il equilibrium: (a) the price of margarine will fall, tb quandty of margarine will rise, the price of butter wil rise, and the quantit) of butter will rise (b) the pri of margarine will rise, the quantity of margarine w rise, the price of butter will rise, and the quandty butter will (c) the price of margarine will rise, quamit) of margarine will fall, the price of butter rise, the quaiidn of butter will fall (d) the price margarine will fall, the quantity of margarine will rii the price of butter will, the quantit)- of butter W fall (e) the price of margarine will fall, the quanul of margarine will rise, the price of bntier will fall, I quantit)- of butter will fall.

56. .According lo a recent ardcle in the Nex approxiniarelv three times as many students apply f< student housmg in the Universtv-owiied Santa Yn Apartments a.s can be accommodated. This mea that: (a) the Universit) charges than the mart clearing price for Santa Ynez .Apartments (b) ixio! Universin housing should be built (c) the Universij is over-enrolled (d) the demand for Lniversit) ho ing is increa.sing (e) tenants in Isla \ista are explo ed by landlords.

57. The City of San Jose, which has, uniil recently, been paying the going market wage for secretaries, has decided to pay a higher wage.based upon the "more equitable" concept of comparable worth. AAithoui specifying the definition of comparable worth, we can predict: (a) San Jose will want to hire more secretaries

(b) excess supply of secretaries will emerge (c) the total amount of money spent on secretaries will rise

(d) excess demand for secretaries will emerge

(e) excess demand for typewriters will emerge.

58. A new technique which decreases the cost of making home video cameras will: (a) increase tbe demand for such cameras (b) raise the price of film for 8mm home movie cameras (c) shift the supply curve of home video cameras upward and to the left (d) increase the total revenue received b\- sellers of home video tape regardless of supply elasticity (e) have no predictable effects upon the number of video cameras sold.

59. The Great Mancini has nodced that attendance to his sideshow had fallen. You, his chief financial adviser, tell him that the price elasdcity of demand for his show is about 1.6. He says, "so what?" You tell him that he could increase his total revenue if he would only: (a) raise the price because demand is elasdc (b) lower the price because demand is elastic

(c) raise the price because demand is inelastic

(d) lower the price because demand is inelastic

(e) none of the above.

. 60. The City of Los Angeles has asked tbe federal government for money with which to build a new subway linking the San Fernando Valley with downtown. . Based upon a review of the economic literature, you find that subway rides are inferior goods and are price L inelasdc. Which of the following are implications of your findings? (a) the amount of ridership will probably fall over time if incomes continue to rise (b) a subsidized fares system will not cause a verv large percentage increase in ridership (c) ridership will tend to be greater in poorer parts of the city, than richer ones (d) a 1 % increase in price will mean a than 1% decrease in ridership (e) all of the above.

61. The country of East Hebejebee can produce at most 1200 voodoo dolls or 600 magic potions, while West Hebejebee can produce at most 1500 voodoo dolls or 300 magic podons. Which of the following trades on East Hebejcbces part would make both countries better off, assuming constant opportunity

costs in both? (a) 100 voodoo dolls for 4U0 magic potions (b) 100 magic podons for 400 voodoo dolls (c) 100 magic podons for 500 voodoo dolls (d) 100 voodoo dolls for 500 magic potions (e) 200 magic potions for 400 voodoo dolls.

62. In a recent prize winning journal article UCSB sociologist Richard Applebaum concludes that "the free approach" to housing problems essentially fails because empirical evidence shows that "rents (tended) to be higher in places that had experienced a large volume of housing construction." Wc would conclude: (a) the finding (if correct) consii-tutes empirical evidence against the supply and demand model (b) his interpretation is false because the association of high rents and a high volume of construction would be a normal consequence of an increase in rental housing demand ceteris paribus (c) his interpretation is false because an in bousing supply takes time to bring housing prices down (d) his interpretation is false because an increase in housing supply is perfectly inelastic (e) bis interpretation is false because both demand and supply become more inelastic with time.

63. If goods A and are complements, then we would expect that: (a) both the price and quantity sold of would rise following ah increase in the price of A (b) the price of A would rise and the qiiaiitin-would fall after an increase in the price of ( ) consumers expenditure on A would fall following an increase in the price of (d) the price of A would rise after an increase in the price of (e) none of the above.

64. If a tariff on Japanese tennis rackets is repealed just as the publics taste independenth changes in favor of tennis, we would predict: (a) the price of tennis rackets to rise (b) the price of tennis rackets to fall (c) the quantity of tennis rackets sold to rise (d) the price of tennis rackets sold to fall and the quantity sold to rise (e) none of the above.

65. In 1992 truckers threatened a major snike over the Clinton administrations proposed 5c per gallon fuel tax. Truckers would bear no part of the burden of this tax if: (a) the supply of fuel is perfecth elastic (b) the demand for fuel is perfectly inelasdc (c) the demand for fuel is unit inelastic (d) the demand elasticity is 0 (e) the demand is perfecth elastic.


66. A pamphlet published by the student economics association at Berkeley concludes that rent controls in that citv will surely benefit students because the supph of rental housing there is perfectly inelasdc. Given their elasticity a.ssinnption, their conclusion is:

(a) incorrect because non-price competition for housing will increase (b) incorrect because the incentive to maintain the housing stock will decline (c) incorrect because landlords will have greater incentives to rent to non-students (d) incorrect for all ofthe above reasons (e) correct because in this special case, rent controls will not affect the quantity of housing offered.

67. As Ration L. Mann drinks more beer: (a) his total utility increases and his marginal utility increases

(b) his total luilit) and his marginal utility decreases (c) his total utilitv increases and his marginal utilitv decreases (d) his total udlity decreases and his marginal - increases (e) none of the above.

68. In Spring Quarter 1992, we priced Scantron sheets at oO, t)pically selling 20 sheets per midterm. The next quarter the price was increased to $1 and only 5 were sold. This suggests that (a) the supply of Scantron sheets is unit elastic (b) the supply is infinitely elastic (c) the demand is unit elastic (d) the demand curve is clastic (e) the demand has increased.

69. Which of the following would not be expected to both decrease the price and increase the quandty of new cars sold? (a) the invention of better assembly techniques (b) a decrease in the salaries of autoworkers (c) an increase in the price of bus, train, and plane trips (d) the entry of new firms into the car business (e) a decrease in the price of steel.

70. New York Gin- formerly supplied unmetered water to homes and apartments. After metering and water charges were imposed, we would expect: (a) the marginal utility of the last gallon of vater consumed rose (b) the total utility from water rose

(c) the consumer surplus from water rose (d) the amount of water used rose (e) all of the above.

71. A bad soybean han-est raises the price of margarine. As a result the price of butter rises by 4% and die quantit) of buuer sold rises by 12%. Then: (a) the cross elasticity of demand for butter with respect to margarine is +3.0 (b) the cross elasticity of

butter with respect to margarine is +1/3 (-j 3 ticity of supply of butter is +3.0 (d) the elastidt demand for margarine is +3.0 (e) none of the at

72. If the cross price elasdcity of A with respect is negative and the price of decreases, then- (j the demand for A will decline and demand for increase (b) the demand for A will increase and q tity demanded for will increase (c) the amount chased of will increase and demand curve A will the same (d) the demand curves for both A and shift left (e) the demand curves for both A and remain stable.

73. If the demand for liquor is highly inelastic the supply is highly elastic, the burden ofan excise (such as a so-called sin tax) on liquor will (a) borne primarily by sellers of the liquor (b) primarily by buyers of the liquor (c) shared equally buyers and sellers of liquor (d) borne by those supply the inputs for manufacturing liquor (e) b by the government that imposes the tax.

74. Ulysses likes to go to the Rocks, a local du where his favorite female group, the Sirens, sing. > weekly demand schedule is as follows:

Cover Charge $20.00 $16.00 $12.00



Visits per Week 1 2 3 4 5

If the cover charge is $8, Ulysses consumer su lus w be: (a) $32 (b) $20 (c) $12 (d) $8 (e) $24.

75. Kevin and John are TAs for Econ I. Part their responsibilities involve writing exam questio for the midterm. The ammount of time it takes to write various types of problems is as follows:


1 CA Problem 15 min. 1 MU Problem 6 min.

John 10 min. 12 min.

The opportunity cost of MU problems for Kevin anq John is respectively: (a) 5/2 and 5/6 CA probler (b) 2/3 and 1/3 CA problems (c) 2/5 and 6/5 problems (d) 1/3 and 2/3 CA problems (e) non of the above.

76. Kevin and John usually spend I hour apic<

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